Loans made to third parties for amounts in excess of £1.5m: FOI review

FOI reference: FOI/18/02239
Date received: 28 September 2018  
Date responded: 11 October 2018

 

 

(1) A list of all loans made to third parties by the Scottish Government for amounts in excess of £1.5 million in the period 1 January 2016 to 17 August 2018 excluding loans made to other government agencies and;

(2) For each loan, to provide the following details: name of party; date loan granted; amount of loan; purpose of loan; interest rate charged; basis of repayment; current balance (amount owed).

 

 

In terms of part (1) of your request I have concluded that the original decision should be confirmed without modifications. I have determined that we were entitled to respond under section 25(1) of FOISA because a list of all loans is publically available on the Scottish Government website. In our reply to you of 13 September we referred you to the publication of FOI/18/02172 which included a list of loans made to third parties in excess of £100,000. In providing this list, a list of loans above £1.5 million was also provided to you. You may find it helpful to note that this list has now been provided at Annex 1 for ease of reference.

In terms of part (2) of your request, I acknowledge that we did not provide the information in the level of detail you had requested, nor did we apply an exemption to that information. As part of my review, I have gone on to consider this part of your request further. I have concluded that the original decision should be confirmed with some modifications.

In Annex 1, I have enclosed a copy of some of the information you have requested.

However, I am unable to provide the further details requested in respect of loan facilities and equity investments over £1.5 million as noted in the table because exemptions under section 38(1)(b) (personal data) section 30(c) (effective conduct of public affairs), and section 33(1)(b) (commercial interests) of FOISA apply to that information. The reasons why that exemption(s) applies are explained below.

 

 

An exemption under section 30(c) of FOISA applies to some of the information you have requested including the names of the recipients and the purposes of the loans in cases 6, 7, 8, 11 and 12. This exemption applies to information whose disclosure would, or would be likely to, prejudice substantially the effective conduct of public affairs.

It is essential for officials to be able to communicate, often in confidence, with external stakeholders on a range of issues, including issues of an operational or financial nature. The Scottish Government can only provide effective support to some loan recipients where this is provided in confidence with some degree of anonymity due to the nature in of the environment in which the loan recipient operates. It is important that the Scottish Government is able to engage effectively in discussions to ensure that any financial support or other issues are supported as robustly as possible and that sufficient research has been undertaken, sought, communicated and developed to ensure that we are engaging in work that is in the interests of best value for the people of Scotland before consideration of whether financial funding should be provided and when.

 

Disclosing the full terms of the loan in these cases is likely to undermine stakeholder trust in the Scottish Government and will substantially inhibit negotiations of this type of issue in the future. In addition, disclosing the terms on which the Scottish Government lend for specific purposes would dilute our negotiating position and make it much more difficult to negotiate with sponsors on The Scottish Government’s behalf. This would significantly harm the Government’s ability to carry out many aspects of its work, and could adversely affect its ability to gather all of the evidence it needs to make fully informed decisions.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption.
We recognise that there is a public interest in disclosing information as part of open, transparent and accountable government, and to inform public debate. We acknowledge that there is also a public interest in providing information which informs Scottish Government decisions and allows scrutiny of the appropriate use of public funds.

However, we have determined that there is a greater public interest in allowing Ministers and officials a private space within which to communicate with appropriate external stakeholders as part of the process of exploring and refining the Government’s position on the operations and financial position of loan applicants and to determine the appropriateness of continued support. Premature disclosure is likely to undermine the quality of the decision making process, which would not be in the public interest. Additionally there is also a strong public interest in protecting the Scottish Government’s ability to secure the best value, disclosing the full terms of loans provided would undermine our ability to achieve best value, because it would set a precedent and reveal out negotiating position which in turn would not be in the public interest.

 

An exemption under section 33(1)(b) of FOISA applies to some of the information you have requested including the names of the recipients and the purposes of the loans in cases 11 and 12. This exemption applies to information whose disclosure would, or would be likely to, prejudice substantially the commercial interests of the loan recipients. This exemption also applies to information whose release could hinder those companies from continuing to operate successfully in a commercial environment after the release of commercially sensitive details of their operation and the nature of support they are receiving. This exemption has been applied in cases where loan recipients are operating in commercially sensitive environments.

This exemption is subject to the ‘public interest test’. Therefore, taking account of all the circumstances of this case, we have considered if the public interest in disclosing the information outweighs the public interest in applying the exemption. We have found that, on balance, the public interest lies in favour of upholding the exemption because disclosure of the recipient and the purpose of the loan (in general terms to support economic activity) would be endangered if the details were not protected. We recognise that there is strong public interest in releasing the information because loan arrangements should be as transparent as possible. However, this is outweighed by the public interest in ensuring that the purpose for which the loan(s) is made is not undermined by releasing information which worsens the loan recipients’ commercial position and therefore threatens the continuation of economic activity from which the public benefits.