CommonSpace columnist and Common Weal director Robin McAlpine says Scotland's new national investment bank is a huge step forward - but it's now up to you to make it the best it can be
YOU campaign for something for five years, commissioning reports and putting a lot of effort into building support for it. When it gets the go ahead you put a lot of effort into engaging over its design. You get all ready for the launch, knowing that the proposals are looking in good shape. You even iron a shirt (rare activity) since 'important people' will be there. Then you wake up to impassable snow...
Oh well, I perhaps didn't get to the launch of the Scottish National Investment Bank (Snib) – but I'm still celebrating this launch. It's not that I don't have a couple of quibbles here and there about the plans (which is probably inevitable).
But there is very little between what Common Weal set out as its model for a national investment bank and what was announced yesterday. This is big stuff. In fact, one respected economic commentator told me that he considered this the first break from the dominant neoliberal model of economics in Scotland for 40 years.
The difficulty with the national investment bank isn't so much identifying how transformational it could be, it's communicating that.
Yes, this initiative could really be that important.
The difficulty with the national investment bank isn't so much identifying how transformational it could be, it's communicating that. This kind of 'big finance' is not something people think about much.
But it's behind so much of your life, often without you knowing it. If you feel somehow you're not getting as much for your council tax as you feel you should, it's in part because you are overpaying (in some cases substantially) for your local school or hospital.
And that is because they were built under the criminally wasteful, unjustifiably expensive PFI scheme. Different finance for these projects means less pressure on your council tax.
Or, if you feel that it was great to have the new school or hospital or whatever, but that somehow it feels like it's in the wrong place or it's just too small, well, that's because it was designed for financiers first, patients and pupils second. That can change now, too (especially if the next thing we do is create a national infrastructure company).
If you feel that Scotland's start-up business sector somehow just doesn't seem to pop up enough companies that go on to become bigger and stronger, it makes more sense when you understand that banks were cutting off their investment to bankrupt them so they could seize their assets on the cheap.
It need never happen again – if firms can go to a public-interest, mission-driven bank.
Perhaps you feel that the nation's investment (particularly the private investment) just isn't changing the country as it should. Surely if markets worked properly, they would be modernising the transport system, moving to low carbon and building new energy capacity as part of a coherent strategy.
But that's not what markets have done. And, unlike lots of other nations, the UK has very little scope to step in and stimulate activity which the market hasn't bothered with. But now Scotland does.
You may also feel that your house is just somehow taking up too much of your income. It is. That's because the finance industry has designed a housing business model which is about asset value appreciation and land value releasing.
We've done policy work in so many areas and again and again the project hits a financing barrier – not because the right kind of finance isn't possible, only because it doesn't exist.
And this business model has been shored up by incredibly strict limits on what the public sector can do to influence the market by building public rental housing.
I have this conversation with people in local government a lot – they want to build more houses, for crucial social need. But they've been told that the only way they can subsidise that housing is to tack it onto the back of allowing big developers to fill their boots by monopolising planning permission.
I keep pointing out that housing shouldn't need subsidy – it is a long-term asset that should more than pay for itself through rent. But that kind of mortgage-style, long-term lending for projects at scale isn't available to local authorities.
And yet we're currently working our way through a finance model which, assuming 30-year borrowing periods, means people could live in beautifully designed three or four bedroom houses built to passive house standards (so they'd be toasty warm but still have negligible heating bills) for rents at between £400 and £500 a month.
All it needs is someone to offer 30-year lending for big projects which promise safe, secure financial returns. And that 'someone' now exists.
For quite a while I kept thinking 'jeez, if only we had a national investment bank'. Scotland now has a mission-driven bank.
If you've got a moment, read this excellent piece on a town taking its entire electricity grid back into collective ownership and how it slashed their electricity bills. There's nothing in this that couldn't be replicated in Scotland – except the lack of finance. And now there is no reason for there to be a lack of finance.
Or think about risky upscaling of medium sized enterprises. We talk to a number of companies in the manufacturing and production sector. One told us they had just had a game-changing order, a big export order beyond anything they'd had before.
After long consideration, they turned it down. The reason was simple – the cost of scaling up their operation to meet the order was substantial, and there was no guarantee of a repeat order. And they weren't going to be able to get a loan which was phased to enable them to build up their capacity and order book before crippling repayments would kick in.
A mission-driven bank could create products specifically for SMEs which are scaling up, which need to invest now to grow and, with a little patience, would then be able to pay back the loan in full so long as the business model is solid and works. Scotland now has a mission-driven bank.
You may not be surprised to discover that I can go on like this for quite a while. We've done policy work in so many areas and again and again the project hits a financing barrier – not because the right kind of finance isn't possible, only because it doesn't exist.
But here's the small problem – this may all seem obscure. I did a public meeting and someone said: "Great about the national investment bank – but what is it?"
For quite a while I kept thinking 'jeez, if only we had a national investment bank'. I've mused that out loud on occasion. Once, the person at the other side of the table (a brilliant, large-scale non-profit business which has since gone from strength to strength) actually jumped out of their chair in enthusiasm.
But here's the small problem – this may all seem obscure. I did a public meeting and someone said: "Great about the national investment bank – but what is it?" I went on about long-term patient capital, market influence, weighting funding decisions for social outcomes, phased repayment schedules.
I'm not sure my questioner was really any the wiser. Finance is finance – it's boring when its not confusing.
So now, this is my new plea. The Scottish Government has thrown its weight behind this idea. The proposals announced yesterday are as strong as they are because the government demanded ambition.
And Benny Higgins and his team took them at their word. They have created a powerful foundation for really, really doing things in Scotland.
So now, this is my new plea. The Scottish Government has thrown its weight behind this idea. But the success (or mediocrity) of the bank will be driven by how Scotland uses it. So that's down to us all.
Sure, much will rest on who they appoint to the 'shadow board' (a management board which will oversee the development of the bank) and there remain delicate negotiations to have with the UK Treasury.
But the success (or mediocrity) of the bank will be driven by how Scotland uses it. So that's down to us all.
We can use it to take back our energy system and cut our fuel bills. We can use it to build the houses we want to live in at prices we can afford. We can use it to grow our great business ideas, but without the fear associated with the dreaded 'bank loan'.
We can rebuild infrastructure much cheaper than how we're doing it now, reducing council tax bills, meaning more can be invested in services. We can create national strategies for energy efficiency, decarbonisation, the transition to electric vehicles, encouraging more women to start businesses...
You might be a business. You might be a community. You might be a group of local councillors. You might just be a citizen with a big idea.
We can use it to take back our energy system and cut our fuel bills. We can use it to build the houses we want to live in at prices we can afford. We can use it to grow our great business ideas.
If you do have an idea, if it has a sound business model, if what it needs is the right kind of investment, then it's up to you. Banks have become what their shareholders want them to be – money-making machines.
Scotland has a bank that will be what its customers make it. It will be not what it makes in profit but what it builds. Now that I've seen the blueprint for the bank, my fears it might be too limited are largely gone.
So now, its first limitation is going to be the power of the collective imagination of the citizens and the businesses of Scotland.
I can't believe I'm writing these words, but I mean them passionately. It's up to you. Don't let your national investment bank down by being mediocre. In Scotland, now is a damn good time to be brilliant.
Picture courtesy of Documenting Yes
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