Scottish National Investment Bank consultation: analysis of responses

1. Executive Summary

The Scottish Government’s 2017/18 Programme for Government contained a commitment to establish a Scottish National Investment Bank to provide mission led, long-term patient capital, to help companies grow and support Scotland’s economic vision.

By aligning its aims and objectives with Scotland’s Economic Strategy, the Bank has the potential to transform and grow Scotland’s economy.

Objectives and Purpose of the Consultation

It is the Scottish Government’s intention that the Bank will be operational in 2020 and an associated draft Bill is planned for introduction in early 2019. As part of this process the Scottish Government ran a public consultation during September and October 2018 to help shape the Bill. This was augmented by a series of engagements with key stakeholders.

The consultation was intended to help inform and further refine how the Bank will operate, how its relationship with Ministers and the wider population will develop, and how its strategic direction will be set by its missions. Through the consultation and key stakeholder engagements, the Scottish Government will gather different views on priorities for investment and governance of the Bank and use them to inform the proposals that will be included in legislation.

The consultation asked 16 questions which can broadly be categorised into 5 areas:

• The opportunity and the Bank’s objectives and purpose
• The focus for investment activities
• Operating model, classification and capitalisation
• Governance and relationship with Ministers
• The Bank’s staffing and employment arrangements

A wide range of views were expressed in response to the consultation which have been captured as part of this analysis.

Response

The consultation contained a mix of open and closed questions, and the analysis reflects the mix of quantitative and qualitative responses. Submissions were received through the Scottish Government’s Consultation Hub (Citizen Space), and additional responses, including the Friends of the Earth Scotland campaign response, were directed to the Bank’s dedicated mailbox.

Purpose of this paper

The Scottish Government has engaged Deloitte LLP to assist in the analysis of responses to the consultation; and this document sets out the resulting analysis of the responses and the outcomes from the above engagements with key stakeholders.

This paper has been shared with the Bank’s Programme Board who oversee the Implementation phase prior to publication. It has also been provided to the Bank’s Programme Team to inform the development of the Bill and relevant documentation which will be introduced in early 2019 and will underpin the establishment and capitalisation of the Bank.

Key Findings

The outcomes of the key areas of focus for the consultation are summarised within this section and detailed in section 5 of this document. The definition of “some”, “several”, “many” and “significant” respondents indicates:

• “some” – 5 to 9 responses
• “several” – 10 to 14 responses
• “many” – 15 to 19 responses and
• “significant” – more than 20 responses.

Full definitions are described in the Methodology section.

The opportunity and the Bank’s objectives and purpose

Respondents were asked to give their views on the proposed objectives and purposes of the Bank, and share views on the statement of the Vision for the Bank. Overall a significant number of respondents, including those who attended the stakeholder and bilateral meetings, were supportive of the creation of the Bank and its objectives and purposes.

• Many respondents supported the Bank’s potential for increasing sustainable economic growth.
• Several respondents supported the view that ethical investment should be targeted.
• Some respondents supported the view that investment needs to be targeted towards SMEs who wish to grow their businesses.
• Many respondents supported the Bank’s Vision to help move Scotland towards a low carbon economy.

The focus for investment activities

Respondents were asked to give their views and opinions around the Bank’s proposed investment activities. This includes the Bank’s mission-based approach, relationship and structures, approach to investment, and the Bank’s ethical commitment.

• Many respondents were in favour that the overall direction for the Bank should be set by Ministers through a Strategic Framework.
• Some respondents suggested that Ministers should have access to external input to inform any decisions made.
• A significant number of respondents indicated that carbon reduction should be a key mission.
• A significant number of respondents supported the Bank’s ethical approach to investment.
• Many respondents were in favour of the Bank identifying and implementing an Investment Strategy.
• Some respondents shared the view that investments should be made to either Scottish companies, companies with a substantial presence in Scotland or where a positive economic impact will be made in Scotland.

Operating model, classification and capitalisation

Respondents were asked to give views and opinions on the proposed operating model, classification and capitalisation of the Bank.

• Some respondents supported the public limited company model suggested, while a small number of respondents suggested a cooperative model could be used.
• Some respondents agreed with the method of capitalisation.
• Some respondents commented that the level of capitalisation was inadequate to deliver the transformative impact desired.
• Many responses emphasised the importance of stakeholder engagement.
• Several respondents agreed that the Bank should be operated and kept within the public sector.

Governance and relationship with Ministers

Respondents were asked to give views and opinions on the proposed governance arrangements of the Bank.

• Several respondents agreed with the proposed approach to the Bank’s governance and Board arrangements, however, there were a small number of differing views as to the recommended size of the Board. Generally most respondents suggested that the Board should be between 8 and 12 people.
• A small number of respondents were supportive of the Advisory Group, highlighting its ability to offer long-term strategic development advice. However a small number of respondents were unsupportive stating that it was unnecessary although no alternative was suggested.
• Several respondents were supportive of involving a wide range of stakeholders in the governance of the Bank; and aware of the importance of a wide representation within the governance structure particularly the Advisory Group.
• Several respondents supported the delegation of powers, generally stating the need to operate commercially and independently from Government.

The Bank’s staffing and employment arrangements

Respondents were asked to give views and opinions on the Bank’s staffing and remuneration.

• Some respondents recognised that to attract senior staff with the right skills and experience then a competitive salary would need to be offered.
• Several respondents supported the Public Sector Pay Policy across the entire institution.
• A small number of respondents commented on equality within the Bank’s pay structure, expressing the importance of the Bank acting as a living wage employer.

Differing views

While a significant number of respondents supported the creation of the Bank, a small number of respondents raised concerns over the Bank’s objectives and purpose.

• A small number of respondents provided a view that the potential services and scope of the Bank were already provided within the banking industry.
• Some respondents raised concerns over whether the proposals for capitalisation were sufficient to support the objectives of the Bank.
• A small number of respondents remarked that the Bank could be open to political pressure or manipulation through its implicit governance structure.
• Some respondents raised concerns over the Bank’s approach to remuneration.