Lord Smith: the Baron’s Enterprise

BARON Smith of Kelvin – a self-chosen and rather pretentious title – has been appointed by Finance Secretary Derek Mackay as chair of Scottish Enterprise, our key economic development agency. Lord Smith is truly a wunderkind. Whenever Scottish governments need someone to chair this or that quango, arts organisation or major public body, they turn to Robert Smith.

In fact, Smith is the king of quangos. He has been chair/president/regent/chancellor of Glasgow 2014 Commonwealth Games, National Museums of Scotland, Royal Highland and Agricultural Society, Royal College of Surgeons of Edinburgh, Paisley University, Strathclyde University, Broadcasting Council Scotland, and the Institute of Chartered Accountants of Scotland – not by any means an exhaustive list. Plus, he chaired the eponymous Smith Commission on devolved powers, following the 2014 independence referendum, as well as “advising” the Scottish government on youth education. Not bad for someone who dropped out of Glasgow University after failing his first-year English exams.

But it is Smith’s business career that is truly stellar. In fact, one stands amazed that the Baron could find the time to squeeze in his public roles while masterminding both Scottish capitalism and major City financial institutions. He has been chair of Scottish and Southern Electricity, Forth Ports, the Weir Group and Stakis Plc, and served as a director of MFI Furniture, Bank of Scotland and Network Rail.

Smith has cut a swathe through the City of London as an investment and private equity specialist, working for 3i, RBS, Charterhouse Development Capital, Morgan Grenfell Private Equity, Morgan Grenfell Asset Management and Deutsche Asset Management. As a result, he has been put on the key public regulatory bodies – I use the word ‘regulation’ in an ironic sense – including the Financial Services Authority (scrapped for letting the 2008 financial crisis happen) and the Financial Reporting Council, which is supposed to keep the big accounting firms honest (pause for laughter).

MORGAN GRENFELL SCANDAL

Now you might think all this justifies appointing Lord Smith to direct Scottish Enterprise. But let’s take a closer look at his CV. He joined Morgan Grenfell as a senior executive in 1989 and remained for 12 years with what was once the leading City merchant bank. However, under Lord Smith’s watch, Morgan Grenfell was engulfed in scandal to the point its owner, Deutsche Bank, was forced to change its name. Deutsche acquired MG in 1990 just after Smith joined. He was successively CEO of the Morgan Grenfell Private Equity unit, then of Morgan Grenfell Asset Management and finally Vice Chair of Deutsche Asset Management, when the MG label became too toxic to keep.

What happened in this pivotal decade? These were the years of “greed is good” and the shift to granting investment bankers huge bonuses if they made quick profits by gambling with customers’ money. Deutsche wanted results and let its London MG staff get on with it. A group of senior dealers in the Asset Management unit – considered the brightest in the City – started bending the rules by investing in liquid (and therefore very risky) unlisted companies rather than quoted ones. For years the bank was happy with the returns and the dealers earned six-figure salaries. But in 1996 the day came when the dealers eventually lost money and were found out. Result: MG had to pay what was then the largest ever fine for misconduct, plus recompense private investors to the tune of circa £400m. Board members had to resign – a very rare occurrence in the City.

The dealer centrally responsible was charged with fraud but let off on grounds of supposed insanity (he wore dresses to court). During the trial of another alleged conspirator, the judge said that Morgan Grenfell senior managers had complied “with the letter but not the spirit” of financial regulations; i.e. they had turned a blind eye to the massive irregularities because MG was coining money. The defence lawyers argued that that MG’s most senior executives were bound to have known of the prohibited dealings.

There is no suggestion that Robert Smith was personally involved in any wrongdoing at Morgan Grenfell. But it is a reasonable question to ask why the senior staff at the bank failed to notice the biggest City scam of the Nineties when it was under their noses?

However, there is an addendum to this tale. As a result of the Morgan Grenfell scandal, and as a result of the failure of the Crown to succeed in prosecuting any of the perpetrators, the incoming Labour government in 1997 reformed the system of bank regulation. Chancellor Gordon Brown set up the Financial Services Authority (FSA) as the new City watchdog. Robert Smith was a member for the first three years. It seems very strange to put a senior member of the very bank that had been most culpable of regulatory failure on the new FSA. But that, of course, was down to Gordon Brown.

GREEN FINGERS

Or consider another episode in Lord Smith’s long banking career. In 2012 he was appointed the first chair the new, publicly owned UK Green Investment Bank (GIB). At the time, Smith was also chair of the SSE energy conglomerate, which some considered a serious conflict of interest. The GIB was up with £3bn of public money to pump-prime the building of major green energy project in the UK. The HQ was located in Edinburgh, though (typically) the backroom financial stuff was really in the City of London.

The GIB proved an instant success. It started in business in the aftermath of the 2008 Crash so the fact it could think longer-term that City smash and grab outfits was a godsend to getting green infrastructure built. The GIB even went into profit. Result: Chancellor George Osborn decided to flog the GIB as part of his daft scheme to eliminate public borrowing as fast as possible. It was bought by the Australian Macquarie Bank in 2017, for £2.3bn. Macquarie is a strange hybrid of a hedge fund and an oil and gas trader. It is anything but green. It bought the GIB as a brand name to cover its tracks, and to put it in a position to bid for UK business.

What was Lord Smith doing when the GIB was being looted? Answer: not a lot. The GIB board and senior management should have resigned when Osborne said he would privatise the company. The move was about raising money for the Treasury, not about improving Britain’s renewables infrastructure. I was in Parliament at the time and fought a rearguard action to block privatisation. We were not helped by either the board or the senior management – the latter could see pound signs if they cooperated in the rape of the company.

Of course, Lord Smith makes a fetish of being a “non-political businessman”. Which is precisely why he should not be appointed to run public bodies.

 

Comments (13)

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  1. Alasdair Galloway says:

    I don’t think anyone could dispute the detail of what you write George. I am sure it is all researched to the “nth” degree. However, having worked at Paisley Uni during Smith’s tenure, and also that one of my graduates was, at the time, Operations Director of the Commonwealth Games Fed, I also know that Robert Smith has a reputation for “getting things done” and not “suffering fools gladly”. People I had known for a long time at Paisley, and who were as far up the greasy pole as they were ever going to go, admitted to fear before going into see him. One of them, I understand, was on tablets from his doctor. I know too that he ran the Organizing Committee of the Glasgow Games with a rod of iron. There is a certain person who I will not name under any circumstances, well known in Scottish sport and prominent in the Games Organizing Committee who he would not allow to chair meetings under any circumstances.
    My point? My point is that if Robert Smith is given clear instructions about what is wanted/ what to do, then there is a very strong likelihood on past form that he will deliver and allow nothing to stand in the way of delivering. Thus, it seems to me, that the onus is on Derek Mackay to make sure that he is given VERY clear instructions about what is wanted at/ from Scottish Enterprise by his political masters.
    The problem with Smith – and your discussion of MG /DAM confirms this – is that he can be trouble when left to his own devices.

  2. John B Dick says:

    I think I voted for him once, in an election where most votes are either for a particular candidate, or against one. As ICAS president the people who vote include your fellow students, tutors, bosses, assistants and client’s staff who are members.

    Amongst his other interests, he owns Inchmarnock and I am a bit miffed that we don’t get potatoes from there any more, Instead I did get a very fine steak last month, but after Brexit we will be living on potatoes because we won’t be able to afford steak anymore.

    Bella has classified him as one of the bad guys, because of his background in Finance. Any classification system obscures the potential of any other classification system.

    I expect he doesn’t disclose whether he was an Indyref1 Yes or No voter, or his expectation with regard to Indyref2. If you knew he was ‘one of us’ you might be more charitable.

    Consider this: He told a committee of the Scottish Parliament that, although there was no way devolution could be secured against the wishes of a majority at Westminster, that such a “plague of boils” would follow that no government would attempt it.

    Do you know where that arcane and uncommon metaphor comes from?

    Exodus 9.

    Do you know what better known soundbite is also there? It was sung by the Jubilee Singers to Queen Victoria and the Czar of Russia and by thousands of baritones since.

    Go on. Look it up, Exodus 9
    It will do you good.
    You will learn something.

  3. Douglas Wilson says:

    Why bother voting SNP? What is the point if an independent Scotland is going to be run along the same lines an neo-liberal England as is the case at present?

    The Quango King sounds like just another shameless, greedy, narcissistic, overpaid mediocrity on the make…

    I see no point in voting for the SNP. and I won’t do so again.

    Nicola Sturgeon and Derek MacKay, are totally indistinguishable from New Labour… careerists, full of their own self-importance who are an obstacle to transforming Scotland. And who have made false promises – that is to say, who have lied – to win votes, failing to abolish the community charge for example.

    The SNP are part of the problem. It stinks, Power in Scotland is a stitch-up, an old boys network….so much for the democratic intellect …and I personally will not validate this SNP Scotland by casting a vote for the SNP again..

    Besides, I can’t take a First Minister seriously who spends all day on Twitter….

    1. Independent Woman says:

      After Independence the SNP will be the government for a relatively short time, then we get to hold an election. I hold my nose and vote SNP because it is the only realistic path to Independence. When that is achieved I will vote for another party, still to be decided.

      1. Douglas Wilson says:

        Indie Woman, I think we need a small, very clued up Republican Left party, urgently… it doesn’t need to be a big party, it doesn’t need to stand in every seat… that was the crass, schoolboy error RISE made….

        …RISE spread itself too wide and so too thin….. you concentrate everything on winning one big seat, or one big city in local elections… that gives you a platform for Scotland’s more articulate indie voices…

        That party should include the brightest minds of the independence movement to the Left of the SNP who are fed up of this very insipid, unimaginative not to say clueless Scottish govt who haven’t actually done anything in 10 years except fend off the worst excesses of the insane government in London…

        Again, somebody jolt my memory of I am overlooking some SNP policy which is worth mentioning? And no, the Baby Box doesn’t count, and the Smoking Ban doesn’t count (it was EU inspired) and minimum pricing is nowhere near enough to tackle alcohol abuse in Scotland. That’s just exactly what Blair and Brown would do. Put up the prices and then forget about it…. it’s nowhere near enough…

        As for MacKay, does he not know that in Scotland we don’t doff our caps to the Lords? Does he know anything about Scotland at all this MacKay fellow?

        Has he not read Edwin Muir’s autobiography, and how Muir was struck by the fact that, whereas in Scotland people didn’t doff their caps to the Lords, when he went to England he saw this kowtowing, this cap doffing all the time…

        Cap doffing to some Lord is anathema to the average Scot… it was n Muir’s day and it still is now. Somebody tell Derek MacKay, who has made an appointment Brown or Darling would be proud of….

        What a disgrace of a “national party”…

  4. Douglas Wilson says:

    By the way, what is Nicola Sturgeon’s policy legacy going to be?

    I mean, when she ceases to be First Minister and we look back at her tenure, which policy is it she will be remembered for?

    As far as I can see, she doesn’t have a single policy to her name… and she seems completely at ease with that…

    The SNP…what exactly are they? They’re not a nationalist party, and they’re not a social democratic party either. They’re more like the conservative party of Scotland. Preserve and Conserve Scotland (and its vast social inequalities)…

    …these people, the SNP leadership, will never deliver independence. It is not in their chemistry, it’s not in their make-up…. they don’t have the chutzpah, they don’t have the spark… in terms of political imagination, there seems to be none at all… they have no original policies…

  5. Douglas Wilson says:

    George

    You were an SNP MP, maybe you can spill some of the beans one day and tell us why on earth a decent woman like Nicola Sturgeon, and an honest, competent politician, wouldn’t want to have a political legacy of any significance?

    I mean, you could go down in history as the FM who abolished the iniquitous, Thatcherite Community Charge and introduced a land tax. You could go down in history as the FM who revitalized Scottish culture and its languages, or transformed the power structure of the Highlands and Islands by introducing radical land reform…

    Yet, you do none of these things and spend all day on Twitter? I don’t get it… I don’t have enough information, but it gets to a point – and we are well past the point – where you just have to call it out. I’m not voting for that…

  6. Douglas Wilson says:

    The life expectancy rate for a man born in Glasgow is TEN YEARS less than a man born in Spain…

    TEN YEARS less of life on earth if you are born in Glasgow than Spain… and seven years less than the national UK average.

    One in four Scottish men born in Glasgow die before they are aged 65…

    You might think, again, that this might be of passing interest to the people who run Scotland, but there is no sign of that anywhere… the SNP are too busy appointing Lords and posting sh*t on Twitter…

    Can anybody imagine what would happen if the life expectancy of a man born in London was seven years below the national average? Or Paris, or Madrid? It would be a national emergency… it would a number one priority… not in Scotlandshire. Plus, the SNP top brass no doubt all live in Edinburgh or nearby…

    Glasgow is Scotland’s biggest and most important city and people are dying years before they should and the SNP, instead of fighting social injustice, collude in its perpetuation with the Community Charge….

    It’s a disgrace. Why are we not talking more about this?

    You know, there’s only so long the neighbours from hell can distract you from the seriously reactionary policies of the Scottish National Twitter Party in Scotland…

    1. Wul says:

      “Why bother voting SNP? What is the point if an independent Scotland is going to be run along the same lines an neo-liberal England as is the case at present?”

      The point is that you can vote SNP the now and maybe, just maybe, get to live in an independent Scotland where your vote (for whichever party takes your fancy) actually matters.

      Or you can go in the huff and live under Tory public schoolboy rule for ever. Your vote (and you) won’t matter. For ever.
      The UK’s next half-dozen PM’s are probably all enrolled at the elite public school of mummy & daddy’s choosing right now.

      You seem to be working on the misapprehension that an independent Scotland would be under permanent SNP rule.

      But yeah. The SNP ain’t exactly setting the radical heather on fire. We could do better.

      1. Douglas Wilson says:

        For a country, the only statistic more important than the life expectancy rate is the infant mortality rate… if people in Scotland are living significantly shorter lives than they are in the rest of Europe, then I think we can say that all Scottish governments have been a failure..

        The mortality rate of men born in Glasgow is a national disgrace. It’s a disgrace to Nicola Sturgeon, to Alex Salmond, to Gordon Brown and Alasdair Darling and Tony Blair and all their Thatcherite lies which they have peddled fro decades… it’s a disgrace to the press too, to the BBC and the papers and in fact the whole nation for more or less ignoring the issue.

        What kind of a country is Scotland that this is not a big issue, on the front pages every other day? Why has there not been a special task force or commission set up to tackle this problem? Why are the poor of Glasgow written off by the SNP, abandoned to their fate, and left to die young?

        The poor in Scotland are stigmatized to the extent that we have a kind of caste system like they do in India. What’s the difference? One system is ordained by religion, the other by the Neo-Liberal consensus in Scotland today. The poor in Scotland, especially in Glasgow, look physically different to the rest of the population…. it’s like the poverty has been written into their bodies, like in that Kafka short story, “The Penal Colony”, when the prisoner’s sentence is slowly inscribed on his body by a machine, which is also his death sentence…

        Nobody talks about these figures. Ten years of life expectancy between a Glaswegian (71) and a Spaniard (81) is not a gap, it is a chasm… it’s the kind of distance you might find between the developed world and the underdeveloped world…. It explains a lot of things, like why we’re so bad at football these days. I bet there is a correlation between the average health of the crowd at a football match and the national team they are supporting…

        The SNP have been running Scotland for ten years. They control big issues like Culture and Health. Why are they not doing something about this, I mean something serious, why don’t they have a plan? Why don’t they have any policies to address the national disgrace of the appalling mortality rates in Glasgow today? I mean, I can’t take them seriously, sorry…

        By the way, in order to radically change the dynamics of Scotland today, I would make Glasgow the capital…

        1. Wul says:

          I agree with a lot of what you say Douglas. Especially the part about the poor “looking different”.

          I remember once doing a leafleting campaign at a local supermarket in the “leafy suburb” part of the town. The next day we were in the Co-op in a “disadvantaged area”. It was a real shock; so many (youngish) people with walking sticks, wheelchairs, zimmers. Pale and withdrawn and unhappy looking. I’m pretty sure they were smaller too. It was night and day. A disgrace, as you say.

          I’d be interested to know what the “mode” lifetime expectancy is in Scotland, rather than the average. The average must get pulled down a great deal by all the early drug & alcohol deaths. What age are “most” of us living to?

          But then again, why stop at premature addiction deaths? Early deaths from violence, depression, poor diet, self-destructive behaviour, reckless driving and plain old “giving up” are all manifestations of poverty too.
          Am I stretching things to suggest that Scotland has a cultural wound too? That our apparent nihilism is shared with other colonised & “dependant” peoples?

          1. Douglas Wilson says:

            Wul, there’s a book called “The Scots’ Crisis of Confidence” by Carol Craig who explores the cultural wound side of the equation – which remains a bit elusive – if you’re interested in it, and its companion piece, “The Tears That Book the Clyde”.

            If we take out prosperous Glasgow, and concentrate on what the BBC comically call “less affluent” parts of the city, we’re talking about a life expectancy in large parts of Scotland’s biggest city in the late 60’s for men. There is nothing like that anywhere else in Europe…

            What would you expect from any Scottish First Minister, not least one whose basic argument is that things would be better in an independent country?

            Well, you’d expect her to set up a special unit or team in the Scottish govt, set a target for improving life expectancy over five to ten years, draw up a budget and then go and find the money to implement it, with the Scottish govt committing a certain amount to start with, and Nicola Sturgeon going down to London and asking for a cash commitment outwith the block grant to tackle this issue, and going to Brussels and doing the same, and going to Scotland’s business community and doing likewise there…

            …basically, chapping on all the doors she can, working hard to find the money that will make a serious impact on this appalling situation. We know that the Scottish govt can’t change the fundamentals, but that doesn’t mean it can’t do much, much more…

            As for culture, we know that it can save people’s lives. We know that discovering an interest in drawing or writing or acting or singing can transform people’s lives. There is nothing more transformational in fact….

            Lots of areas of Scotland have no access to culture, so you have to go into these communities and make sure the money earmarked for culture isn’t just going to middle class Scotland… you don’t set up a fancy office in Edinburgh full of people on big salaries, full of their own self-importance and ignore these communities…

            As for Lord Smith – a guy who has been around the block so many times he must be dizzy – I do now remember him saying he would be willing to vote for independence not so long ago, so now he’s got his reward from Derek MacKay…… oh the subtlety of it…

            I see on wiikpedia that his lordship was brought up in working class Maryhill – though I doubt he gets called Lord Smith there – which is where my own grandfather was from.. Unfortunately, I never met him, because he was dead at 62…

  7. MBC says:

    Didn’t Smith have a heart attack recently?

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