How Scotland’s rules bend for the rich

by | 22 Nov 2021

People have focussed on the dodgy nature of the Gupta aluminium plant deal - but this ignores the terrible consequences on Scotland's economy of the way rules bend for the wealthy

The Gupta aluminium smelter affair probably strikes most people as an example of a kind of government corruption. I think that is the less important way to look at it (though not unimportant). The bigger issue is how deals like this impact on Scotland in real-world ways.

Put briefly, if one strand of the economy can bend public policy to its will while another can’t, the economy will keep reproducing itself in the image of that privileged part of the economy. We all live with the consequences of ‘governing for the privileged’.

First, a quick recap. A wealthy man backed by a venture capital firm subsequently drenched in scandal manages to secure a private dinner with a Cabinet Secretary in the Scottish Government which is never recorded as having officially happened nor minuted or noted in any way. That leads to further meetings with nine other government ministers who offer a very generous deal.

The deal is that the businessman will pay for the investment in an aluminium smelter in Scotland by ‘securitising’ (getting a loan based on and underpinned by) an agreement to guarantee a very lucrative supply chain deal to purchase electricity from another company owned by a family member of the businessman.

This is where the Scottish Government comes it – it agrees not only to this whole arrangement but agrees to underwrite the entire project to the tune of over half a billion pounds of taxpayer’s money.

The businessman needs only this guaranteed future income underwritten by a government to get a loan at ‘sovereign guilt’ rates (as in ‘as ridiculously cheaply as a government’). He borrows all the money to develop the smelter on the basis of this cosy deal which saves him the inconvenience of putting his hands in his pockets.

But it’s OK because he has promised to create 2,000 jobs, which in the Scottish Government’s view makes everything legitimate. And then once the paperwork is signed he drops his commitment to the jobs and in total only 48 jobs are created. And yet he has a phenomenally lucrative long-term money-making scheme in the bag which literally can’t go wrong for him because if it does the Scottish Government will pay him out of our pockets.

Oh, and inevitably the Scottish Government is so proud of the spotless and above-board nature of this whole sordid affair that it then spends two years desperately trying to conceal the whole affair leading to the umpteenth reprimand from Scotland’s Information Commissioner for illegitimate use of loopholes in Freedom of Information laws to hide the truth.

If one strand of the economy can bend public policy to its will while another can’t, the economy will keep reproducing itself in the image of that privileged part

This isn’t a straightforward case of my condemnation thought; the very broad approach being taken in this affair is one that I strongly support as a key tool in Scotland’s (limited) economic arsenal. Perversely, that’s why I’m so angry at this whole affair.

At Common Weal we have been arguing for many years that we need to build up Scotland’s domestic industry base, increase innovation and productivity in medium-sized enterprises and support them to transform for the economic challenges ahead.

The idea of guaranteed order books is something we’ve raised time and time again. If we want to get Scottish businesses to start making (for example) wood-based home insulation products, put out a public contract for say ten years of supply of these materials (we’re going to need a lot of insulation…), back the winning bids with investment from the Scottish National Investment Bank and build all this into an industrial strategy.

The goal is to create in Scotland exactly the kind of productive, mid-scale innovative green industries that we desperately need. They create jobs, secure economic power in Scotland (there is very little of that) and create a new generation workforce which gains new manufacturing skills and experience.

This approach is shrugged off time and again by the Scottish Government. That Government is wed to a hard-core neoliberal view of what is and is not possible. That view sees only corporations as legitimate partners – any smaller business is largely on its own. Over and over the Scottish Government cites its own procurement laws as the barrier. Actually they’re not a barrier at all, but in any case they’re bad, biased laws and should be reformed with urgency.

But they’re not reformed and they’re always interpreted to shut out small suppliers. If you doubt my statement that they’re not a barrier to creative use of supply chain guarantees, simply note that a version of this approach (much faster and much looser than the one we propose) is precisely what has happened in the Gupta case.

Indeed, it is to be noted that the senior civil servant involved in these negotiations described what was done as having “reached the very limits of what was possible”. That is almost certainly civil servant phrasing for ‘utterly inappropriate and probably past the verges of legality’. But as this is Scotland the question of propriety is neither here nor there – the government does what it wants and no-one but no-one can stop it.

It’s not the corruption that is most dispiriting, it’s the straight line that can be drawn from the neediness of Scotland’s ruling classes to the economic failures which plague the nation

The outcome of all of this is the economy we live with, inordinately foreign-owned, hopelessly unproductive, low in innovation, based on poor job quality and bereft of manufacturing. These predatory big businessmen must surely have Scotland marked down as an easy touch – ask for it and you’ll get it, no serious questions asked.

(Remember, this is a government that signed a ‘Memorandum of Understanding’ with a dodgy Chinese corporation without doing any obvious due diligence.)

Scotland has turned into a desperate, needy little country frantically trying to curry favour with anyone it believes to be powerful without taking into consideration Scotland’s real needs. When someone without the power and cache of big business asks for a small version of the same treatment, the government’s phone rings out.

Make no mistake – if the Scottish Government guaranteed you half a billion pounds you too could easily have secured a £70 million loan and so you too could now be an ‘aluminium baron’. There is no skill involved, just the right connections and that suitably needy little country to exploit.

There are two economies in Scotland – one for the powerful and one for the rest. The result is an economy with barely a single truly Scottish-owned, truly international company, woeful productivity, poor business investment in innovation and low wage, insecure work, distorted and bent to the interests of powerful vested interests with no interest in Scotland at all.

How many times does a corporation have to make extravagant claims about creating jobs to then conveniently forget its promises the second the Scottish Government has rolled over and let its belly be tickled? Are we incapable of seeing what this does to our reputation?

The Gupta deal is clearly dodgy and I think everyone can sniff that. It is right the Scottish Government is dragged over the coals on this one. But for me it’s not the corruption that is most dispiriting, it’s the straight line that can be drawn from the neediness of Scotland’s ruling classes to the economic failures which plague the nation.

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