Why transparency at SNIB is so important

by | 4 Mar 2022

The refusal to provide answers about what is going on in the Scottish National Investment Bank is not an abstract matter but one of real public interest

One of the big problems of the ever-greater involvement of the corporate and financial sector in the machinery of government in Scotland is the different expectations they bring about transparency. We can see this currently in the case of the sudden departure of the CEO of the Scottish National Investment Bank.

Eilidh Mactaggart was appointed to lead SNIB in 2020. That process was overseen by SNIB Chair Willie Watt. These are both public appointments to a body wholly-owned by the public, and yet neither was involved in any kind of pubic political scrutiny or any confirmation process during their appointment.

The argument is usually that this is ‘not how it is done in the private sector’, that the public sector must get the ‘biggest hitters’ it can and so the process must be designed not to put off the ‘big beasts’ of the finance industry.

That is a major problem here. Having been proposed and designed as a concept by Common Weal and realised after a strong campaign by Common Weal and others, the Scottish National Investment Bank was set up not to be another investor like current investors but a new investor specifically not like other investors.

It was there to address market failure in commercial bank lending, conceived at a time where the commercial banks were taking an approach to lending to business which was known in one of them as the ‘killing floor’ – deliberately destroying businesses they’re lent to where the assets of the company were more than the lending. They made money by destroying clients.

There is no question that Mactaggart had a solid track record in the investment world (there was no scrutiny in Parliament so usefully George Kerevan did it). But SNIB is not a commercial bank but a development bank. These are not the same skillsets.

Indeed while there is no hint whatsoever of improper behaviour by Mactaggert, her professional history is largely with scandal-hit bodies which were steeped in a culture of corruption. This might easily not have washed off on her – but it is reasonable to ask that this be tested for such a high-profile public appointment.

Now she has left and the manner of her departure involves even less transparency than her arrival*. This is clearly not a departure which was planned or is part of the normal run of events. Something of some description is wrong in the bank or the relationships between its senior figures.

The pretence that there is no public interest in finding out what went wrong means there is no way of learning any lessons

I have no information at all on this (as far as I’ve been able to gather from a few conversations, few do*), but let me give an example of the kind of issue that may have come up. It is potentially possible that there is a significant different of strategic view between the CEO and the Chair, that each views the purpose and strategy of the bank differently.

In part, that is what confirmation procedures are about, to explore what powerful individuals think they are doing with a public institution which will soon be playing with £2 billion of public money. The pretence that there is no public interest in finding out what went wrong means there is no way of learning any lessons.

That means the problem might simply repeat – and there are reasons to have at least mild concerns that it is. Mactaggart is being replaced on an interim basis with SNIB’s Chief Financial Officer Sarah Roughhead. Her background is in private equity audit at KPMG. As a refresher, KPMG has just withdrawn from bidding for UK Government contracts after being threatened with a ban after the revelation of corrupt practices.

(As an aside, work by the Common Weal Care Group appears to reveal that KPMG were given the contract to design the National Care Service by the Scottish Government after the Scottish Government was made aware of the UK Government’s concerns and intended actions.)

Once again, these are all very large organisations and the corruptions of KPMG should in no way lead to any assumptions about Roughead herself. But from there she moved on to be the Chief Financial Officer of Scottish Equity Partners, an equity investment partnership focussed on investment in hi-tech businesses. The Chair of SNIB Willie Watt is a member of the Advisory Board or Scottish Equity Partners.

And there is a clear risk of conflict of interests between an investment fund which explicitly co-invests with others including SNIB having such close links to SNIB itself. Yet again, while there is no suggestion this has happened, if private investors are able to co-invest with a public bank which is taking risk that others won’t (an important part of its mission), there is a risk of co-investment strategies with unequal risk allocation.

(If that didn’t make sense to you, think of it as ‘this is too risky for us to do alone but if SNIB is willing to throw some money at this and take the risk we could jump in too and leverage benefit from the investment it is making’.)

It is a public bank operating with public money but we don’t know what the vision of its last leader was or what the vision of new one is beyond what they put in bland mission statements (which cannot be cross-examined).

Not learning these lessons matters. In 2018 Steve Dunlop joined Scottish Enterprise as Chief Executive. He had a strong reputation and was well-regarded. He made little secret in private that he thought serious reform of Scottish Enterprise was necessary and people who worked with him described him as displaying frustration at meetings.

He didn’t last two years and was replaced by a Scottish Enterprise insider. Everyone believes that he either left in frustration that Scottish Enterprise is unreformable or was forced out by the internal ‘forces against change’, or some combination of the two. But no-one really knows. Scotland’s agency empire is a cartel which you don’t get to ‘rat on’ without consequences.

All of the above explains why it is that far from the private- and commercial interests-adjacent part of the public sector being right to expect less scrutiny, they require more. Too often it behaves like a closed shop of close pals doing whatever they want and feigning indignation if you ask them what they’re up to.

The Scottish National Investment Bank’s performance so far has been somewhat short of stellar (no-one can work out how it is ‘mission driven’ to give a loan to a London-based consultancy that advises big landowners on how to reforest their land). Scottish Enterprise remains a sloppy, ineffective organisation.

It is deeply concerning that those involved in these big public agencies do not believe that they should be subject to adequate scrutiny. It is much more concerning that their political overlords appear to agree.


*Addendum: after this was written a statement was made by Eilidh Mactaggart about her resignation. She claims it was for ‘personal reasons’. This seems very suspicious as if that was the case it would almost always have been given as the reason at the time of the resignation. This really does smack of political pressure to close down an embarrassing political incident for the First Minister. At First Minister’s Questions she claimed to know the basic reason but refused to mention it, even though it would not have been controversial in any way to say it was for personal reasons. Sadly, such is the state of scrutiny in Scotland that this will now probably disappear down the memory-hole with so much else and we will now never know what actually happened.

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