As Scottish economy stands on brink of recession, Common Weal renews call for National Investment Bank

SNP Conference backed a Scottish National Investment Bank in March

COMMON WEAL has renewed calls for the Scottish Government to establish a multi-billion pound Scottish National Investment Bank to kick-start the Scottish economy, in light of dire predictions of Scotland being on the brink of recession.

Laurie MacFarlane, author of Blueprint for a Scottish National Investment Bank, report by Common Weal and New Economics Foundation which found a public bank could create 50,000 jobs within a few years of being established, stated:

“With low levels of investment now pushing Scotland’s economy to the brink of recession, the need for fresh thinking is greater than ever. A new Scottish National Investment Bank would channel billions of pounds of low-cost investment to the areas of the economy most in need. In doing so, it would boost productivity, expand the business base, support the creation of thousands of new jobs and generate billions of pounds of savings for the public purse."

"If the Scottish Government is serious about revitalising its domestic agenda and staving off recession, it must embrace bold economic reforms. Tweaking round the edges of existing policy will not work. Learning from best practice around the world and establishing a fully functional National Investment Bank is a good place to start."

"If the Scottish Government is serious about revitalising its domestic agenda and staving off recession, it must embrace bold economic reforms. Tweaking round the edges of existing policy will not work. Learning from best practice around the world and establishing a fully functional National Investment Bank is a good place to start." Laurie MacFarlane

A report by the Fraser of Allander Institute released today stated that, with figures out in July, it will be “a close run thing” as to whether Scotland officially has re-entered recession.

The FAI report states that the Scottish economy is “stuck in a cycle of weak growth” with households experiencing a “lost decade” of stagnating living standards as wages remain suppressed and inflation picks up, questioning why there was so little debate on Scotland’s economy in this month’s General Election.

The economic analysis comes as First Minister Nicola Sturgeon admitted in her statement to the Scottish Parliament on Wednesday that the Scottish Government must “take stock and refresh” its domestic agenda after 10 years of SNP power at Holyrood.

Labour’s General Election Manifesto made a similar proposal for a regional bank based in Scotland as part of a new UK-wide bank.

The proposal for a Scottish National Investment Bank was backed by the SNP at its party conference in March.

[A Scottish National Investment Bank] could finance the creation of high-pay, quality jobs in the productive sectors of the future, like renewables, advanced manufacturing and zero-carbon house building. This could turbo-charge the Scottish economy and kick-start a new era of green reindustrialisation.” Ben Wray

Ben Wray, head of policy at Common Weal, said the Scottish Government could establish a bank now of similar proportionate size to the German Kreditanstalt für Wiederaufbau (KfW) which invests billions every year into productive and innovative economic development.

“The Scottish Government desperately needs a new financial mechanism to boost investment, because we know the UK Government under the Tories aren’t going to do it. A Scottish National Investment Bank is the most direct way to do this on a big, multi-billion pound scale.

“We estimate it would be possible for the Scottish Government to establish a bank of proportionate size to the German KfW, which is the fifth biggest capital issuer in the whole of Europe.

“A bank of this size could finance the creation of high-pay, quality jobs in the productive sectors of the future, like renewables, advanced manufacturing and zero-carbon house building. This could turbo-charge the Scottish economy and kick-start a new era of green reindustrialisation.”

Common Weal published a report immediately after the General Election advocating six ways the Scottish Government could refresh its domestic agenda, including setting up an investment bank, restoring Scotland’s town centres and reversing plans to cut Air Passenger Duty and spending the money instead to create a world-class childcare system.



Thu, 06/29/2017 - 22:27

The Scottish Government has already poured millions of public sector funds into renewables. Not a one of them has delivered even half as many jobs as was promised when the FM posed for the cameras. Most of them have been quietly wound up, with the Scottish taxpayer losing 100% of it its "investment". Money that would have been better spent on education.

The simple fact is our civil service and politicians have no business picking winners and losers in the marketplace. They have no particular expertise to bring to bear, but they are susceptible to all kinds of influence and pressure that runs counter to rational decision-making in such circumstances.

Ben Wray's picture

Ben Wray

Fri, 06/30/2017 - 11:51

Have a read of the proposal Maurice, especially proposed governance structure – the civil service and politicians wouldn’t be involved in specific investment choices of the bank:

In terms of your other points, the need to increase public investment in the UK economy is not an outlier point – the OECD, IMF, World Bank have all recommended doing so. Scotland has one of the lowest investment to GDP ratios in the whole of Europe. This is a proposal for how to do something about that now. You can’t increase funding for education without boosting the number of high-paying jobs in the economy, which will then increase tax revenues.


Fri, 06/30/2017 - 12:40

Well after Neil Lovatt comprehensively minced the last Common Weal's article on a Scottish Bank, one has to admire Mr McAlpine's doggedness on pursuing a subject that he has tenuous grip on. We are on the brink of a recession and Robin and his cohorts steadfastly refuse to recognise one of the principal reasons for this; the continuing wailing of the SNP for another referendum DESPITE there being no desire for one from the majority of Scottish people is harming investment and therefore growth. The recent Fraser of Allander report states: "...... has called on politicians to take urgent action, given Scotland's economy is in such a precarious position ..during such times, it will be easy for the debate about Scotland's economy to be side-tracked by constitutional wrangling....this cannot be used as a justification - from across the political spectrum - for not undertaking an urgent and frank assessment of the best policies to support the Scottish economy.”
So there we have it... this constant wrangling and uncertainty is costing Scotland dearly, but the odious Sturgeon has no consideration for anyone or anything but her constant search for a conclusion that fewer and fewer people wish and no amount of high falutin' wishy washy rhetoric about investment banks creating zillions of jobs is going to change this.
If you are interested, go and seek Neil rwbblog completely shreds McAlpine's take on setting a Scottish Investment Bank and highlights the many mistakes he makes, including somehow forgetting to factor into the equation something as basic as Scotland's share of the UKs debt which currently stands at around £12b. Read it.


Fri, 06/30/2017 - 14:10

"the civil service and politicians wouldn’t be involved in specific investment choices of the bank" - You would have to be very gullible to believe that. They will decide which of their cronies get and then keep the very well-remunerated positions with the new entity. They will still be calling all the shots.

Scotland has a enormous finance sector - it is the largest on-shore private sector employer. The idea that we need to supplement it with a bunch of amateurs helping themselves to taxpayer money is wooly-headed thinking in the extreme.

Scotland has an investment problem because the SNP likes to leave investors wondering what country it will be part of and what currency it will use.

Remove that threat from the business community and sort out the mess that has been made of the education system and the private sector will start investing again.

Peter Dow's picture

Peter Dow

Sat, 07/01/2017 - 00:07

Well actually the root problem is the MISSING FINANCE not the missing Scottish National Investment Bank. It's the missing money we don't have that matters, not the missing bank with the empty vaults that we don't have.

Scots could faff about from now until eternity experimenting with various mechanisms - banks, investment departments, etc - but without the money these would be USELESS.

Therefore the focus must turn to the rotten, unfair fiscal framework and to the utter stupidity of First Minister Sturgeon who was and is the First Minister who AGREED and still AGREES with the rotten, unfair fiscal framework that denies the Scottish government £ billions more every year to invest in Scotland BY WHATEVER MECHANISM.

Let's not tie ourselves up in knots fussing over mechanisms.

There needs to be a mass pointing of the finger of blame at Sturgeon for AGREEING with the rotten, unfair fiscal framework.

We need to say that we as Scots promise solemnly to utterly condemn without reservation any government minister, Sturgeon especially, who continues to AGREE that rotten unfair fiscal framework.

Stop letting Sturgeon off the hook.

Only a First Minister who DISAGREES with this rotten,unfair fiscal framework is tolerable.

Sturgeon is intolerable, reprehensible, odious and despicable for agreeing that rotten, unfair fiscal framework.

Scots must begin to write and to read real words of venomous condemnation against Sturgeon for her government's failure to disagree this rotten miserly fiscal framework.
"SNP Conference backed a Scottish National Investment Bank in March"
UTTERLY AND COMPLETELY USELESS for an SNP conference to back a SNIB while also backing a First Minister who AGREED a fiscal framework which DENIES the Scottish government the borrowing powers to capitalise that SNIB or any other investment mechanism.

Nothing you can dream up here in Common Space, Common Weal, Common whatever will do the slightest bit of good while that idiot Sturgeon is First Minister taking the bad advice that she is taking such as to agree that fiscal framework.

It's a house of cards.

Call it "Common House of Cards" if you like.

Ben Wray's picture

Ben Wray

Mon, 07/03/2017 - 12:06

Maurice I think the definition of wooly-headed thinking is the idea that Scotland’s economic problems can be reduced to ‘uncertanity’ around the independence debate. The UK as a whole has a very low investment to GDP ratio, Scotland is not unique in this case. And the whole problem of Scotland’s bloated financial sector is that very little of its investment goes towards long-term, productive investment – the vast majority goes towards mortgages and asset speculation. A National Investment Bank could target areas of the economy that the commercial sector is ignoring. Again, this is all in the report if you would care to look.


Mon, 07/03/2017 - 15:15

I'm not "reducing" Scotland's economic problems to ‘uncertainty’ around the independence debate. I'm telling you that is now demonstrable that the SNP are making things worse by pursuing the neverendum.

I did the read the report. It pretends that Scottish Enterprise doesn't exist so that it doesn't have to address its many demonstrated failures and attempt to explain why they aren't going to happen again with this wheeze.

This "national investment bank" will be just like SE, only it will be "off balance sheet" and therefore even more opaque and unaccountable than SE. The people who work for it will be paid handsomely (look at the salaries for SE and Scottish Water) and the FM will use every new "loan" for press releases and photo ops. When that "loan" doesn't pan out and the Scottish taxpayer has to absorb the loss, there will be silence.

Stop searching for magic wands that can be waived. They don't exist. If you've seen to the FoA report out today, you will see that the revaluation of sterling has been a great opportunity for Scottish businesses. But, it is being largely squandered in Scotland as opposed to the rUK because of the FM's boneheadedness.


Tue, 07/04/2017 - 09:48

So what are you waiting for, Maurice? go ahead, please. Prove to all of us how exactly the SNP is making things worse by giving the people of Scotland the democratic opportunity to stopping a UK gov elected by England, that helped itself to 1.5 bn from the taxpayers' coffers without the consent of its owners so it could cling onto power for a few weeks longer.

Please prove to us all how is the SNP making things worse by giving the people of Scotland the democratic option of stopping a UK gov elected by another country overriding Scotland's democracy by dragging Scotland out of the EU and out the biggest single market in the world against Scotland's democratic will.

Please explain to us all how is it 'making things worse' attempting to prevent the potential loss of up to 80,000 jobs on the back of an advisory only referendum, when less than a 40% of the total electorate of the UK voted to leave the EU and when 2 of the 4 nations that form the UK voted to remain in the EU, so the tory party can keep a bunch of fatcat donors sweet?

Please explain to us all how it is 'making things worse' to give the people of Scotland the opportunity to stop the damage that the UK government is going to do to Scotland's agriculture and farming by taking away the subsides from the EU.

Please explain to us all how it is 'making things worse' to give the people of Scotland the opportunity to stop the privatisation of the NHS that is indeed coming judging by what the tories are doing and planning to do to the NHS in England. Naylor report? Sadly, for as long as Scotland remains under the heel of English MPs, whatever is done to England will in the long term be done in Scotland too by depriving Scotland of funds.

Please explain to us all how it is 'making things worse' to give the people of Scotland the opportunity to stop paying billions for a cold war relic that is a money pit and that has been parked by London in our waters, denying the economic development of that area, because, of course, it is politically too hot to having it close to their big voting bases in England.

Please explain to us all how it is 'making things worse' to give the people of Scotland the opportunity to stop having to help funding the neoliberal and imperialistic wars that USA drags the UK into and that the tories and labour seem too happy to run into.

I for one am very glad that we have the SNP in power and not the self serving, spineless hypocrites of SLabour, LibDems and Stories, who have proved time and time again with their neverending flip-flops that their loyalty is to the HQ of their parties down south and not the people of Scotland they are meant to represent. No, they have proved that they will not fight for Scotland, but against Scotland at every turn, because their instructions are that the idea of a prosperous Scotland has to be suffocated in order for their beloved union to survive: it is the McCrone report all over again, isn't it?

So please go ahead and explain to us all how is it that Tories and even Labour perceive Scotland's independence referendum as creating more uncertainty and disruption than the EU referendum, when now we have the data to prove this wrong by comparing the monumental impact on Sterling that the EU referendum and its result has had compared with next to no impact from the Scottish referendum.

Please explain how giving the people of Scotland the democratic option to remain in the EU and protect Scotland's economy, social fabric and democracy causes more uncertainty than that alleged new EU referendum they LibDems were predicating.

Please explain to us all how is it that Scotland's independence and Scotland remaining in the EU is going to create more disruption than the UK leaving the EU, having to potentially start from scratch negotiating for every single trade agreement, potentially reverting to WTO rules due to the incompetence of a UK Gov whose arrogance and self-importance have prevented it from preparing a serious plan after an entire year, risking the loss of passport rights for the City, risking the loss of foreign manufacturing, risking the stability of sterling, risking the entire wealth of the UK and having to redefine over 10,000 laws, including those related to human rights, workers' rights, environment and health and safety.

Please explain to us all how is it that Scotland's independence and Scotland taking control over ALL its resources and assets is going to generate more uncertainty for Scotland than having a UK gov, elected by England and for the benefit of England, mismanaging those resources and using them as bargaining chips for the benefit of the south rather than for he benefit of its rightful owners: the people of Scotland. We all know that Scotland's independence is going to generate much more uncertainty for England and that black hole that is its deficit, but Scotland and not England must now be the focus of the Scottish people. England has been the focus for far too long.

I personally had enough of listening to unionist moaners that because they know that England is totally screwed without the lifeline that is Scotland, they keep attempting to fool us all by undermine and belittle Scotland.

I think enough is enough. Scotland needs FFA. Scotland needs full control over ALL its economic levers, ALL its assets and resources, immigration and its own trade agreements, because it is quite clear that Westminster has not acted and will never act on Scotland's interests: it will act in the interests of England because most of those MPs in Westminster represent English constituencies.

Only with FFA and full control then you can blame the SNP or any other Scottish government whatever the color of the rosette for the failure. Until that time and for as long as Westminster controls Scotland's purse and keeps sucking Scotland's revenues, keeps dictating rules and laws that benefit England's businesses to the detriment of the Scottish ones (Longanet is a beautiful example), keeps overruling Scotland's democracy to uphold England's one, Westminster is fully responsible for the mismanagement of Scotland's economy and of course Maurice, the relentless depopulation of Scotland.

An investment bank sounds like a great idea. Like a draft constitution it will be a step in the right direction to disengage from the toxic policies of Westminster. Scotland needs to grow and it can only do that out of the suffocating paws of Westminster that takes, takes and takes again but gives nothing but crumbs in return. It is outrageous that decade after decade it has sucked all the wealth from the oil revenues extracted from Scottish waters and it has invested it all in the South, leaving in Scotland nothing to show for it. It is outrageous that against the will of the people of Scotland, now this corrupt government helps itself to 1.5 bn of taxpayers' funds with the excuse of 'national stability', but refuses to acknowledge the devolution settlement and pay the proportional amount to Wales, Scotland and England, increasing their resentment and threatening union integrity. It is outrageous that it consents in MPs increasing their salaries twice while it refuses and increase in salary to the other public servants, condemning them to salary cuts for the last 7 years. It is beyond outrageous that for the benefit of fatcats, it overlooks fire safety regulations and as a consequence, hundreds of people were burnt alive in the middle of London, risking also the lives of firefighters and police officers to who this UK gov has the nerve to praise but insisting in cutting down their salaries.

In my opinion it is not lack of investment as you claim what will bring Scotland into a recession but the sustained attack of the tory government, added by Labour of course, on our purchasing power. Zero hour contracts and caps mean that our salaries cannot longer buy what they use to buy before and therefore this will inevitably stall the economy, as it did before, bringing many businesses down, all on the name of that tory con that is austerity.

For instance, thanks to the tory government dragging the UK out of the EU on the back of an advisory referendum, the prices of our daily shopping have increased by over a 20%. Public transport and basic clothing have increased too. None of those increases have been matched by our meagre salary increases, so, how on earth is the day to day economy going to keep moving if the buying power of the people is being reduced year after year? What does investment have to do with it? How many recessions have we had since the Tories took power in 2007? I am sorry, but this sort of mismanagement of the economy is, in my view, completely unacceptable. The tories, in their quest to siphon wealth from the working class onto the fatcats at the top, are ruining the entire union.


Tue, 07/04/2017 - 13:23


I don't have to prove it, because the Fraser of Allender Institute has done it for me.

Let me guess: your response will be another lengthy bleat about how you don't understand macroeconomics, so therefore neither does anyone else, and therefore your emotional response to things is as valid as an argument based on reason and facts.


Fri, 08/11/2017 - 16:04

Thanks for the information provided. I agree that Scottish economy needs a serious push to recover but it seems, there is not enough of resources for that. Thus, I agree that a fresh thinking is required more than ever. On the other hand, I think that it’s right to support the most needy economic areas with a help of low-cost investing. There must be solutions that could effectively back Scottish economy on feet. Of course, they can’t use tools like FindLender but I think that some of other national bank may provide their help or at least helpful advice for getting out of crisis.

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