The SNP Government has worked hard to improve Scotland’s economy; from encouraging more ambitious start-ups to provide the jobs of the future; investing in skills, innovation, research and development to boost productivity, employment and competitiveness. Continuing this progress, a new Scottish National Investment Bank has the potential to transform our economy and enable Scotland to thrive.
This development comes after the SNP Government’s Council of Economic Advisers identified the importance of ‘patient capital’ in supporting economic growth, where an investor makes a financial investment with no expectation of turning a quick profit. Instead, immediate returns are foregone in anticipation of more substantial returns down the road.
Scotland’s Economic Strategy sets out a clear approach, with a core determination to continue striving towards an inclusive, fair, prosperous, innovative country which is ready and willing to embrace the future. It acknowledges that the successful economies of tomorrow will be resource efficient, low carbon and harness the power of technology, and illustrates a bold and forward-looking vision of a future-proofed, high-tech, low carbon Scottish economy.
As such, the commitment to a National Investment Bank (NIB) was based on strong international evidence that such banks can lead to a strong, positive impact on investment, innovation and long-term economic growth. Germany’s KFW bank is perhaps the most famous example of how NIBs can provide the patient finance business needs to grow. It’s been vital to supporting the growth of Germany’s green energy sector and supports innovation, exports and construction.
NIBS have grown across Europe and since the financial crash, new NIBS have been established from Portugal to Latvia, evolving over time in line with country-specific developments and challenges. Working collaboratively with their governments and other public-sector institutions, many actively create and shape new markets and help rebalance domestic economies in the face of societal challenges.
Following a commitment made in the SNP Government’s 2017/18 Programme for Government, First Minister Nicola Sturgeon MSP asked Benny Higgins, former Tesco Bank Chief Executive, to develop the case for Scotland having its own NIB. Along with an advisory group, Mr Higgins presented an implementation plan in February 2018; highlighting that the body would provide a “vision with the scope and scale to transform the Scottish economy.”
The SNP Government accepted the plans and recommendations on capitalisation included in this plan and is committed to investing £2,000 million over 10 years. That scale, which is both ambitious and achievable, will make a material difference to the supply of capital to Scotland’s economy and enable the bank to focus on investment not currently provided by the market.
Economy Secretary Keith Brown MSP reported last week that a Bill will be brought forward next year to establish and capitalise the bank, which would be set up as a public body independent of government, operating on a commercial basis, with a strong ethical focus. It will provide strategic and patient capital and finance major projects which support community regeneration, and investment in ideas, to help meet key economic, environment and social challenges; accelerating the transformation to a low carbon, high-tech, connected, globally competitive and inclusive economy.
To realise our ambitions for Scotland’s economy, innovative companies need access to a highly skilled and motivated workforce, with strategic, patient finance to grow, while the business environment must encourage young people to be our future entrepreneurs. We are at a critical juncture, with a once in a generation opportunity for Scotland to grasp the potential that comes from rapidly advancing technology. The Scottish National Investment Bank will be a cornerstone of Scotland’s economic architecture in realising these possibilities.