BILL JAMIESON: RIP – SCOTLAND’S VANISHING POP-UP BANK

BILL JAMIESON thinks Scot Buzz readers will long be familiar with a unique feature of our business landscape: the magic pop-up Now-You-See-It-Now-You-Don’t business development bank.

Much heralded, long promised, but never ever brought into being, the Scottish Business Development Bank had more trumpeted come-backs than The Majestics rock band in Tutti Frutti.

For the nine years the bank has featured as a key pillar in countless SNP economic strategy documents.

It was intended to fill a critical gap in funding for burgeoning Scottish businesses. In particular, the Scottish Government’s Programme for Government contained a commitment to create a Business Development Bank to address the gaps in the market for finance for SMEs.

Only one thing was missing… er, the bank.

Shadow economy spokesman Gavin Brown was one of the few still troubling to count the number of announcements about the arrival of the bank.

His recent tally put the number of promised unveilings at five in a period of just two years.

But today the SNP’s great Scottish Business Development Bank is no more.

Like Monty Python’s parrot, it is dead. Passed away. It has breathed its last. Shaken off its mortal coil. Keeled over. Kaput!

Its despatch by Finance Minister John Swinney was discreet to the point of invisible. Its mortal remains were shrouded in a letter of dissembling verbosity to Scottish Enterprise chief executive Lena Wilson last week, a document to baffle all but the most intrepid cryptologists.

The administration was decided to increase funding instead for the existing Scottish Investment Bank. SE has now been asked to prepare a plan “for creating the Business Development Bank services by expanding the remit of SIB” and to report before the end of the Parliamentary session this month.

Such a course might have seemed blindingly obvious years ago.

Indeed, it has puzzled senior SE figures since the idea of a separate Business Development Bank was first mooted by Alex Salmond. Why have two banks when just one would do?

Indeed, what was it exactly that a politically-created development Bank would do that would be different to or better than the plethora of private sector financial institutions, ranging from clearing banks to venture capital companies and specialist business loan providers?   What were the “gaps in the market” that a government development bank would address without cutting across and indeed discouraging private sector provision?

Might it have been simple political vanity – a specially created SNP vehicle answerable not to SE but to St Andrews House?

And did the administration really think it was easy-peasy to create a new body with the word “bank” in its title – with all the regulatory and governance hurdles that would have to be overcome and the crises that have beset the banking sector over the past eight years? In a parliamentary reply to Gavin Brown last year, Swinney said he did not want to suggest a timescale for the creation of the development bank that “does not bear any relationship to the challenges and the complexity of the issues with which we are wrestling”.

Quite. For good reason setting up an institution with the word “bank” in its title has long been one of the most demanding and complex tasks, covering funding requirements, extensive accounting and reporting arrangements – and of course, full and independent governance and compliance structures. It does not lend itself at all to the world of now-you-see-it-now-you-don’t pop-up creations of party politics.

Swinney says the challenge has been  how to establish the most appropriate investment approach, “given the UK Government accounting arrangements within which we are required to work” (aka prudential regulation of the type the SNP has been demanding).

There’s also of course the small matter of ever increasing EU banking regulation, though the Finance Minister chose not to mention this.

“The priority for Scottish businesses”, he adds, “is to ensure we offer as wide a range of help as possible, with targeted approaches to expand access to finance.”

Too right. But it is one thing to ensure that there is full and effective competition – and quite another for the government itself to enter the field as a participant.

Now Swinney has recognised that “the best approach” is to enhance the remit of the Scottish Investment Bank and for Scottish Enterprise to offer a wider range of business investment approaches, addressing some of the marketplace gaps to improve the supply of funding.”

What a blinding Eureka moment! But hasn’t that been one of the key functions of Scottish Enterprise since its inception?

Truly, there are few joys greater for a builder than to discover that the screwdriver he’s been screaming for has been in his tool bag all along?

So, let Lissome Lena dry your tears for the demise of the Scottish Business Development Bank. The memorial service will be private – and, please, no flowers by request.

 

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