2007 - 2022

Questions about the new Chair of the Scottish National Investment Bank (SNIB)

GENERAL ELECTION media froth rather buried last week’s announcement that Finance Secretary Derek Mackay had appointed veteran investment broker Willie Watt as the first chair of the SNP Government’s new Scottish National Investment Bank (SNIB).  Watt will effectively shape the future lending direction of SNIB – which is scheduled to open its doors next year – so his apointment is significant in telling us what the SNP leadership expects from this flagship policy.
Given the palpable failure – if not actual toxicity – of the private financial sector in recent decades, there is an obvious need for a state-owned investment bank able to take the long view and act in the social interest.  Theoretically, therefore, the SNIB is a powerful tool for shaping Scotland’s economic future.  Unless it is captured by representatives of the very financial class who have done their best to ruin the Scottish and global economies over the past period.
So just who is Willie Watt?  Let me start with a modest complaint.  In any functioning democracy, political appointments to significant administrative positions (such as chair of a state bank) should be subject to some process of public scrutiny and confirmation by elected representatives.  Mr Watt has been appointed by Scottish ministers (specifically the FM and Financial Secretary) without any such public scrutiny process.  That is wrong.
For example, SNP MPs at Westminster (myself included) have worked with MPs of other parties to gradually bring senior UK financial appointments under scrutiny and confirmation by the backbench Treasury Select Committee.  Currently the Governor of the Bank of England, Deputy Governors, members of the Bank’s committee which sets interest rates, and the heads of important regulatory bodies (e.g. the Financial Conduct Authority) are subject to pre-commencement public hearings vote by the Treasury Select. In 2017, the newly appointed Deputy Governor of the Bank of England, Charlotte Hogg, was forced to resign the post after a hearing at the Treasury Select (which I took part in) exposed serious conflicts involving her brother, a senior banker with Barclays.
Unfortunately, since early on, successive Holyrood administrations have been reluctant to entrench or extend any system of confirmation of political appointments.  In rejecting a private members bill introducing confirmation hearings, initiated by the SNP’s Alex Neil in 2002, the then Labour-Lib Dem administration pontificated that “excessive Parliamentary scrutiny might have a deterrent effect on the number of candidates coming forward. It might also be perceived as extending politicisation of the appointments process”. Translation: we don’t want messy democratic scrutiny getting in the way of jobs for the boys.
A democracy is just that – an open system where the citizens get to know and chose their leaders, including the chairs of public bodies. If there are those who demand secrecy before applying for, or being appointed to, public positions then that seems a good yardstick by which to reject them a priori.
The appointment of chair of a major public bank is a post that should be subject to public scrutiny and confirmation.  We are not talking about the operational chief executive. We are not talking about a technician. We are talking about the key figure who chairs the policy board of the bank and oversees its governance and probity. It is vital the public has faith in such an appointee and can hold them, in turn, to account.
Not is it sufficient for such an appointment to be supervised by some small, internal panel appointed by ministers. Overseeing the Scottish National Investment Bank is as political (small ‘p’) a task as you can imagine. Elected members must be involved in making the appointment if only to ensure the appointee is then free of ministerial undermining.
Alas, Willie Watt has ‘emerged’ as a key figure in Scotland’s economic future with no such public or democratic scrutiny.  In fact, with less scrutiny that would be the case for a UK public appointment in the financial sector. This cannot be good for the future Scotland we are all trying to build. And it cannot be good for the SNIB or its credibility.  The Scottish Parliament must demand that Mr Watt appear before it and seek its confirmation, after due questioning.  This is not a partisan matter. It goes directly to the heart of the democratic process.
Which brings us back to Mr Watt.  For the past 18 years, till he retired in February, Watt has been boss of Martin Currie Limited, which manages and invests money on behalf of global clients.  Previously he spent 16 years with the 3i Group, a multinational private equity company based in London.  Watt is also a member of the advisory board of Scottish Equity Partners, a venture capital outfit specialising in high tech.
In other words, Willie Watt has spent his life as a major cog in the global investment world. If Scotland has a financial bourgeoisie, Mr Watt is its principal representative.
In Mr Watt, despite the down-to-earth ‘Oor Willie’ handle, we have international finance capital’s representative in Scotland.  For Martin Currie Limited is no longer some couthie Edinburgh investment trust but the wholly-owned UK brand of Baltimore-based Legg Mason, one of the world’s largest asset managers; i.e. it invests in stocks, bonds and property on behalf of rich clients, who can be private or corporate.  It is hard to estimate the total assets controlled by Legg Mason, but it is somewhere around $758bn in assets under management.  That’s equivalent to the annual GDP of Turkey or Saudi Arabia.
Willie Watt was at the helm of Martin Currie (whose Scots roots go back to 1881) when it was acquired by Legg Mason in 2014. It is important that members of the Yes movement grasp the fact that most of Scotland’s financial sector is now under foreign control.  Fifty years ago, the opposite was true. Independent Scotland will be a significant regional base for global finance capital. That, in turn, will influence our political establishment and economic choices.
Legg Mason likes to operate through a series of local ‘front’ such as Martin Currie Limited. However, even before the 2014 takeover, Martin Currie Limited had internationalised itself. For Martin Currie’s holding company – which controls the various, individual, global investment vehicles managed from Edinburgh – is actually registered in Bermuda and has been since 2007.  Mr Watt was chief executive of Martin Currie Limited when the latest Bermuda registration was secured.
Why does an Edinburgh-based company (though US owned) have its registered offices in Bermuda?  The reason is crystal clear: by registering its ownership outside of the UK’s legal jurisdiction, Martin Currie Limited can hide the identities of investors in its investment vehicles.  Hide these identities from the UK taxman, other tax authorities and global law agencies. Additionally, being registered in Bermuda gives Martin Currie Limited (and its labyrinthine series of global investment funds) significant tax advantages.
(Note: one benefit of the recent hung UK Parliament was a law change in 2018 forced on the Tory Government to make Bermuda, a British Overseas Territory, more open to disclosing beneficial owners of assets registered on the island. This comes into effect next year. We will see if it makes any difference.)
So Mr Willie Watt, who registered Martin Currie Limited in Bermuda to hide its secrets and minimise taxes, is to be put in charge of Scotland’s new public sector investment bank.  And appointed without scrutiny at Holyrood – no wonder.
Let us see something of Martin Currie Limited under Willie Watt’s tutelage. The sort of questions Mr watt might be asked if ever he was scrutinised by a Holyrood committee.
You first must understand that Martin Currie Limited is what is known as an ‘active’ share investor.  It adopted this adventurous (and risky) new strategy in 2001 when Willie Watt became chief executive – just as the global financial system was going mad.  Watt sold off the company’s traditional (but pedestrian) private client business in 2003 then offloaded its private equity arm a year later. The way was clear to play the markets and make pots of cash.
Active investors think they know more than anybody else. An active investor does detailed research into companies and markets, looking for ‘value’ (i.e. a way to make a quick buck). It then advises clients where best to put their cash, to maximise returns. In other words, Mr Watt was selling the ability of himself and his investment team to outperform the market.  All this is in contrast to so-called ‘passive’ investment funds, which merely track existing market trends (buy when the market goes up, sell when it falls).
Alas, Martin Currie has been poor at active investing, triggering major recent personnel changes at the company.  We might care to remember that in connection with Willie Watt taking over as first chair at SNIB.  True, the failure of active investment strategies is a common theme globally in the past decade.  In fact, most active investors fail to deliver returns that outperform passive investment strategies over the long term.  There are several reasons for this.
First, since 2008 bank crash, central banks have printed huge amounts of new money in order to boost bond and share prices. This has removed much volatility from the markets and kept share prices artificially high – which favors passive investors tracking ever-rising stock values. In turn, desperate for profits, active investors like Martine Currie have been driven to take short-term risks, usually with catastrophic consequences.  Martin Currie tends to bet on a narrow portfolio of 35–55 stocks, of biggish companies.  In particular, the firm has been forced more and more to invest in Asian stocks (the real reason it was acquired by Legg Mason).  But with the Chinese economy slowing rapidly in the last few years, future returns to clients look increasingly problematic.
Relying on risky investments in the chaotic world of Asian capitalism is a dangerous game, as Martin Currie discovered in 2012 when it was fined £8.6m by UK and US regulators for advising the use of client’s money in one fund to buy unlisted (i.e. private, over the counter) bonds issued by another client, who just happened to be having a serious liquidity crisis. In other words, Martin Currie used insider knowledge and influence to move cash from one client to another who was in trouble rather than who was a good investment. The transaction proved to be a poor investment for the purchasing fund, which duly halved in value over the next two years.
In the cosy world of regulation, the official documents explaining the scam deliberately did not disclose which Martin Currie fund transaction subsidised which other Martin Currie transaction, lest customers rightly get spooked. The whole operation took place in the company’s Shanghai office, which explains why nobody went to jail.
Amazingly, because Martin Currie settled early with the FSA, it received a 30 per cent discount on its fine.  By the way, the fine was levied on the company, not Mr Watt personally.  Oor Wille must be glad he does not have to face a Holyrood scrutiny panel.
Willie Watt left Martin Currie at the start of 2019.  It was a providential exit as Legg Mason, Martin Currie’s owner, is in trouble of its own. The company’s ill-advised and very belated launch into Asia has come unstuck. The result is that Legg Mason’s management and board are under attack by a vulture hedge fund called Trian. This is owned by billionaire Nelson Peltz, a man who has cut a swathe through US industrial and financial companies in search of a quick buck.  Unsurprisingly, Peltz is a big fan of Donald Trump and was also business partner of the late and unlamented Jeffery Epstein.  Peltz has now been given seats on the Legg Mason board. Thus the outreach of the vulture hedge funs reaches ever deeper into the Scottish financial sector.
Which, of course, is why we desperately need the Scottish National Investment Bank. And why the private financial world will do everything it can to subvert the SNIB. Game on.

Comments (22)

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  1. Mary MacCallum Sullivan says:

    For all of this, George, much thanks. So how can we go about ensuring that Mr Watt has to account for himself to the public?

    1. Papko says:

      He is Scottish, Mary and he supports Scottish Independence; he is beyond reproach.

      1. Graeme McCormick says:

        That may be so but many public appointments by the Scottish government have not been Independence or SNP supporters

  2. James Anderson says:

    Seems to me that having retired Watt is a good choice to start the bank. Once it is operational, I suspect another appropriately recruited seasoned finance person will take over. It is not unusual to start a business of this nature with a hand picked expert to see it through the early stages and Kerevan knows this! Why is he so full of angst, does he have a personal grudge, as that is how the piece reads?

  3. Darby O'Gill says:

    Interesting that Legg Mason invest in socks.

    1. Derek Thomson says:

      At least he’ll get off on the right foot. I’ll get my coat.

    2. Derek Thomson says:

      And the “little people” will have no say. Right, that’s my coat on now.

  4. Allan Ralston says:

    Poacher turned Gamekeeper?

  5. Michael says:

    The Growth Commission report was an indication to the financial elites that the SNP are safe hands. This appointment seems to consolidate things – business as usual

    1. Derek Henry says:

      Bang on the money.

      I have said it for months their advisors should be sacked.

      Nicola has lost control to a bunch of liberals of the NEO persuasion.

  6. Josef Ó Luain says:

    Our elected representatives may ask all the questions they like; the real question is: will they understand the answers?

  7. Derek Henry says:


    Can someone explain to me what this call for a National Investment Bank is about?

    Surely if Scotland becomes independent with our own central bank it is utterly pointless. Scotland would its own public bank the central bank. The shortest distance between two points is a straight line. Scottish Parliament—Scottish central bank.

    So this is what drives me mad. Because people don’t understand how government finance actually works, we get a bunch of half-baked calls to invent institutions we don’t actually need.

    When you study the accounting it makes no sense whatsoever.

  8. SleepingDog says:

    I am not sure what a Chair of a national investment bank does, but if an active role, isn’t this the kind of thing better done by an unpaid AI these days? Presumably they can beat human grandmasters at Monopoly now.

    It would be of some interest to know if Chairman Watt agrees with Mariana Mazzucato’s conclusion in the “Outsourcing Scotland’s Infrastructure” section of chapter 8 of her book The Value of Everything: Making and Taking in the Global Economy, where she describes PFI financing in Scotland between 1993 and 2006. Official figures apparently show a cost of £30.2 billion, over five times the original estimate of £5.7 billion. She claims (p256):
    “A recent study by the New Economics Foundation found, for example, that between 1998 and 2015 the Scottish government would have saved a total of £26 billion if the projects financed through the Private Finance Initiative (PFI) and Non-Profit Distribution (NPD) schemes had instead been funded directly through a Scottish public investment bank.”
    I think the report she cites is available on the Commonweal site but I cannot be bothered ploughing through it all. Anyway her conclusion is that private financing frequently results in “less transparency, lower quality, higher costs and monopoly” (p258).

    But it seems we are getting little transparency here. Are we to expect that simply hiring an insider mercenary (a classic flaw in nationalizing industries, apparently) will also result in lower quality and higher costs in a state investment monopoly? In other words, will the expected savings to the public fail to materialize if we put profitarian skim-scam-scum in charge, and we won’t know we are being ripped off until too late?

    1. Derek Henry says:

      No need for it.

      a) own currency

      b) Scottish treasury is consolidated with the new Scottish central bank.

      So a pointless excercise.

  9. Derek Henry says:

    All those championing Central Bank Independence have a political motive. And that political motive is to stop a government from doing what the people elected it to do.

    It’s pretty clear that ‘central bank independence’ is, for some, a stepping stone onto ‘central bank dominance’ – where the central bank countermands or cripples what a sovereign elected government decides to do by using financial weapons.

    We have seen how that plays out in Greece where the central bank declares banks solvent with one hand (thereby denying depositors access to the insurance funds) while denying liquidity with the other to cripple the payments system. All to bring an elected government to its knees.

    You have the Bank of England able to adjust long term rates via reverse ‘re purchase agreements ( RRPs ) and you have the Debt Management Office (another subsidiary department of HM Treasury) issuing Gilts to do the same thing.

    In the case of the Funding for Lending Scheme you actually had the Bank of England *borrowing* Treasury Bills from the Debt Management Office that the debt management office had created specifically for the task.

    The Bank of England should simply be merged with the Debt Management Office, and the bankers turned into Civil Servants. The new debt management office would have as much freedom as it does now, but it would be very clear that they report to the elected Chancellor of the Exchequer.

    That is a far cry from the finance minister instructing a central bank department to manage the yield curve appropriately for the capital development of the economy.

    It is vital that central banks are merged with the debt management offices so that central banks can manage the entire yield curve *and* that they become a department of Treasury. Then it is clear the central bank is an arm of government and answerable to the minister in charge and ultimately to the elected parliament of the country.

    Central bank autocracy must be avoided at all costs.

    Answers the problem George raises in this piece. Mark my words the neoliberals within the SNP that is the next thing they will be asking for. I would bet my last pound in it. They will want the new Scottish central bank to be independent.

    It is a shame George and the Common Weal missed the glaring fact that a national investment bank would work exactly the same as a government simply spending from the government’s account at the new Scottish central bank.

    As the accounting clearly shows. There is simply no need for a national investment bank once we get independence.

    Which brings up another HUGE problem. Who in earth is going to run the new Scottish central bank ?

    When it is quite clear nobody in Scotland knows how It works never mind run it.

    It is a deliberate political move to try and prevent any debate between competing ideas about how an economy should be run.

  10. Derek Henry says:

    Of course we all seen what happened in the EU when the neoliberals got their hands on the ECB !

    The Mastricht Treaty stopped nation states central banks within the EU from using their Ways and Means accounts. Which were simple overdrafts at the central banks.

    Forced them to issue debt instead giving the top 1% free money instead. Welfare payments they do not need.

  11. Derek Henry says:

    The matter has already been in front of the ECJ and they widened the scope of interpretation in the treaty. The famous napoleonic fudge facility within their law system, proportionality, thus gives the ECB the scope to do what they will.

    “111. In any event, the Court finds that the features of a programme such as that announced in the press release exclude the possibility of that programme being considered of such a kind as to lessen the impetus of the Member States to follow a sound budgetary policy.

    112 In that regard, it must be borne in mind, first, that the programme provides for the purchase of government bonds only in so far as is necessary for safeguarding the monetary policy transmission mechanism and the singleness of monetary policy and that those purchases will cease as soon as those objectives are achieved.

    113 That limitation on the ESCB’s intervention means (i) that the Member States cannot, in determining their budgetary policy, rely on the certainty that the ESCB will at a future point purchase their government bonds on secondary markets and (ii) that the programme in question cannot be implemented in a way which would bring about a harmonisation of the interest rates applied to the government bonds of the Member States of the euro area regardless of the differences arising from their macroeconomic or budgetary situation.

    114 The adoption and implementation of such a programme thus do not permit the Member States to adopt a budgetary policy which fails to take account of the fact that they will be compelled, in the event of a deficit, to seek financing on the markets, or result in them being protected against the consequences which a change in their macroeconomic or budgetary situation may have in that regard.”;jsessionid=9ea7d2dc30dd55196930cacb47e791b188e97c0f5d37.e34KaxiLc3qMb40Rch0SaxuQaxf0?text=&docid=165057&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=332191

    Whether the scope creep since 2015 has pushed the boundaries of proportionality has yet to be tested in court. I suspect the ECJ, if it ever responds to being asked, would just push the boundaries again with even more weaselly words.

    The German constitutional court that raised the issue has just sat on the problem and is now refusing to hear challenges, sloping shoulders to the ECJ which is dragging its feet.

    All of which just goes to show what a sham constitutionalism is. It’s just a way for those with money to get what they want.

    But hey, that is what Scottish voters keep voting for. Heart of Europe nonsense thinking it is a left wing paradise that will save Scots from the neoliberal bogyman.

  12. Jo says:

    “If there are those who demand secrecy before applying for, or being appointed to, public positions then that seems a good yardstick by which to reject them a priori.”


    Furthermore, what is the point in appointing someone to a post if, potentially, they could (later) be exposed as totally unsuitable, bringing more bad publicity for those who appointed him?


    i do think this man or any other person in the future should be subject to scrutiny by a cross party committee , he must have been around in 2008 when the crash happened ,for that reason alone we need to know more about this man .

  14. Richard Martin says:

    Astonishing ignorance of financial matters:

    – active investment management is not necessarily short-termist. The really successful investors such as Baillie Gifford, Warren Buffet and indeed Martin Currie think like owners rather investors in a business and hold for many years.

    – It is investors with money offshore who can remain anonymous. It is irrelevant whether the arm of the manager is offshore – the actual management is invariably handled in the head office in Edinburgh, London or New York.

    – the track record of government in investing in the private sector is even worse than the investment industry. Think back, if you are old enough/educated enough, to the state investment bank (the IRC ) set up by Harold Wilson and George Brown. It squandered millions (billions in today’s money in propping up lousy car companies which were being ravaged by the unions. Since then even more money has been poured into failing industries like steel, without success. Political pressures will inevitably shackle the SNIB with disastrous decisions.

  15. Fed up says:

    His attempt to misappropriate the Staff pension has been overlooked. Regulators stopped him in his tracks. Why is this not known? All while he was paid handsomely.

  16. Iain says:

    This is an exceptionally insightful and prescient article. It just isn’t right that key posts such as this are filled on No more than a ‘grace & favours’ basis. Scots have rightfully railed against this practice elsewhere so to see it being institutionalised here is embarrassing. And, if this has to be the way it to be done, at least they shower such grace & favour upon a competent individual.

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