2007 - 2020

Questions on the Scottish Government’s Programme for Government

SNP PROGRAMME FOR GOVERNMENT: HANDING THE SCOTTISH ECONOMY OVER TO FOREIGN CAPITAL?

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THE SNP’s new Programme for Government (PfG), announced on Tuesday, contains an interesting reference to foreign investment, as part of its economic strategy.  This specifies a new “Inward Investment Plan to create 100,000 high value jobs over the next decade and boost GDP”, to quote the FM directly.
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Nicola Sturgeon’s speech in parliament seemed to imply this was a definite target figure. However, the actual PfG (rather than the FM’s speech) was a bit more nuanced: “The collective measures to be outlined in the plan… could deliver 100,000 high value jobs in Scotland over the next decade.”
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We are not told where the 100,000 number comes from, but it is easy to guess. The agency responsible for securing foreign direct investment (FDI) is Scottish Development International (SDI), an arm of Scottish Enterprise. Every year, SDI publishes statistics on inward investment activity.  For the fiscal year 2018-19 (the latest available), SDI reported that 10,074 jobs (new or “protected”) had been announced by inward investors, as a result of Scottish and UK activity.  If you assume that the 2018-19 figure of circa 10,000 jobs from FDI will hold, then you get 100,000 over the next ten years.
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Leave aside the impact of Covid-19 for a moment. The truth is that the 10,074 jobs the SDI reported for 2018-19 was anomalously high.  The year before, the figure was only 8,516.  If you average the jobs reported by SDI from inward investment over the past six years, it works out at just over 8,000 per annum. So: the PfG is exaggerating the likely number of jobs over the next decade by around a quarter (80,000 rather than 100,000).
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There’s more.  The jobs referred to by SDI include those new and “protected”. In other words, some are created in wholly new activities while others are existing jobs that are being maintained through fresh investment in existing plants.  Certainly, the latter investment is vital because machines grow obsolete. However, we need to be aware of just how many jobs are net additions to the workforce and how many are old jobs retained.
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This is important information to have because SDI is counting only those jobs that result from public subsidy. Without being too cynical, multinational corporations are only too happy to play countries off against each other in order to access subsidy from the taxpayer.  We need to know whether we are getting a return on public cash.  The PfG is proposing an extra £100 million be given to SDI to promote inward investment.  Will we get value for money?
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As it happens, on average around two thirds of the jobs announced each year by SDI are wholly new, and the other third are “protected” jobs.  So: of the likely 80,000 FDI new jobs (not 100,000) we might expect in normal circumstances by 2030, around 53,000 will be wholly new. Which is roughly half the headline figure stated in the FM’s speech, though very welcome.
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But there’s another wee problem.  The SDI annual jobs figures are only projections.  They are not certified, guaranteed, real jobs.  They represent the estimates made by inward investing companies regarding how many jobs they think they will create, at some point in the future – provided they get a public subsidy from SDI or the UK government. I assume both SDI and Whitehall do due diligence.  But there is obviously a moral hazard here.  It is in the interest of the companies collecting the subsidy to exaggerate the potential jobs involved.
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Periodically, SDI tries to measure the jobs actually created.  But the results are fairly useless as the original job forecasts are never tied to a given future year.  A company can always say jobs in a given project are still in the pipeline.  And circumstances can change dramatically – witness the pandemic.
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WELCOME BARCLAYS – NOT!

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Let’s examine a particular example – SDI’s support for Barclays’ new “campus” facility at Tradeston (pictured), the last remaining inner-city waterfront in Glasgow, due to open next year.  This project was originally marketed as Buchanan Wharf, named after tobacco lord and slave-trader Andrew Buchanan.  After a protest by Black Lives Matter, Barclays quickly changed the name to ‘Barclays Glasgow Campus’.
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Barclays claims to be investing £400 million in the Tradeston project.  Of the 10,074 jobs SDI claimed in its 2018-19 annual report, fully 5,000 are counted as coming from this development. SDI has put a grant of £12.75 million into the project, a modest subsidy but then Barclays’ 2019 profit was £6.2 billion, up 9% on the previous year.
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However, if we delve a bit into the jobs forecast, we find that of the 5,000 promised, some 2,500 already exist in Glasgow.  So: the net gain is only 2,500.  Fair enough except that Corvid-19 has destroyed the model of thousands of bank employees working in the same building. As it is, Barclays’ share price has crashed by 40% year-on-year, as a result of the impact of the pandemic on the economy.  Barclays (and Glasgow) could be building a colossal while elephant at Tradeston.
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On the other hand, the site also has permission to build over 300 flats, mostly for buy-to-rent.  So: this FDI Cinderella could easily morph into another private landlord’s dream.  Which is why we should take SDI jobs forecasts with a big pinch of political salt.
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INDY UNDER FOREIGN CONTROL

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Of course, Scotland has always relied on inward investment to bring capital and new technology.  Even after independence, that will not change.  One rather assumes the PfG 10-year plan to attract 100,000 FDI-funded jobs includes the post-independence period!
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However, after indy, Scotland will find itself with most of the cose parts of the economy in foreign ownership.  This is blithely ignored in the Growth Commission report which forms the basis of future economic policy.  And the PfG seems bent on increasing the foreign stake in the Scottish economy.
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Does this matter in a globalised world?  After all, Ireland is in very much the same position. But in fact, Ireland and Scotland are the exceptions.  Small countries such as Switzerland, Denmark, Sweden, Finland and Austria have retained significant, strategic parts of their economies in local control. Certainly, the balance has shifted towards greater foreign ownership in particular sectors (witness the sorry tale of Sweden’s Saab cars).  But the Swiss still have a big stake in banking and chemicals, as do the Dutch in oil and electronics, and the Danes in energy and agriculture.
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My point is that an independent Scotland would be beholden to foreign investors and their requirements, as is Ireland.  That singular fact will influence our corporate taxation policies, business regulation and employment rules.  Think “austerity” in difficult times.  And now the PfG is proposing a plan to deepen our exposure to foreign investment and influence.
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But there’s more to the PfG than the FDI-funded jobs target (exaggerated as it is).  The PfG also contains the following proposal: “We will launch a £3 billion Green Investment Portfolio – a package of investable propositions we can take to global investors to secure investment into Scotland… We will now launch the first round of projects in September 2020. The value of investment opportunities to projects and companies within this initial portfolio will be £1.16 billion, covering a range of different sectors across Scotland from environmentally sustainable commercial real estate to low emission transportation and green energy.”
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So: ScotGov is planning to raise £3 billion by selling off a portfolio of assets (commercial property, transport systems, energy providers) to global finance capital.  This is a worrying prospect. Scotland is by no means a poor country.  In fact, it is a key part of global finance capital.  For instance, Edinburgh investment fund giant Baillie Gifford is one of Tesla’s largest individual shareholders, with a stake in the electric car company worth $20 billion alone.  It’s not as if we need foreign capital because we don’t have our own.
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So why is the SNP Government seeking “global investors” to flog off our green assets?  Let me remind the SNP Government: “He who pays the piper, calls the tune”.
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Comments (8)

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  1. Pete Roberts says:

    I’m sure that once the Murrels are retired from politics, they will have a nice comfy retirement with generous contributions from the corporations profiting from the Scottish assets they picked up. See Tony Blair as an example.

    I raelly want Scottish independence but the way things are going it looks like it’s going to be business as usual but wrapped up in a saltire.

    1. james gourlay says:

      Yes, I think when we get independence the Establishment will be running our Civil Service. And, via that, our Government. Shades of “Yes Minister”.

  2. Josef Ó Luain says:

    They know no other way, it would seem.

  3. Bob says:

    Of course when we are Independent all of these issues will be up for grabs. The SNP will not be the sole ruling party as a transition government will be put in place to manage the transition. A general election will then take place within Scotland to decide the party who will govern the first term of office and it will be at that point the SNP and other parties standing for election will lay out their stall for the Scottish people to decide.

    1. Ian Davidson says:

      Bob. Whilst the process you set out is one I would endorse, where is your authority for that confidence? For example, if there was a Yes majority in an indy ref 2 held in say 2022 or 2023, is there any constitutional, legal or political commitment to have a transitional government and/or new elections to the Scottish Parliament before 2026? What’s to stop the Scottish Government formed after the May 2021 elections being the main Scottish* player in setting up the new Scottish independent state bureaucracy after a Yes vote? The establishment of new “independent” Scottish political parties to reflect the full range of political opinion in an independent Scotland may take many years to bed in, leaving the SNP and (Scottish) Civil Service to make the key decisions before elections in 2026?
      *not forgetting that like it or not, there would have to be “Scot exit” negotiations with the rUkGovernment over a whole range of issues including the location of UK nuclear bases.

  4. florian albert says:

    George Kerevan does a good job of pinpointing the weaknesses in the SNP’s future economic planning. What stands out is the similarity with the economic thinking of every ‘Scottish government’ since the 1950s.
    What this means is that there is no political party of any significance putting forward left wing policies.
    The Scottish left has been content to put forward its plans using platforms such as Bella Caledonia and Common Weal; in the belief that these plans would, in due course, be taken up by SNP, who have a near monopoly of political power in Scotland.
    It is now clear that Nicola Sturgeon, like Alex Salmond before her, has no interest in left wing economic ideas. There is little or no prospect of a different SNP leader – committed to left wing economic policies – emerging.
    The pro-independence Scottish left is in need of fresh political thinking.

  5. Wul says:

    Would this be similar to the “inward investment” that sees my son’s rent payments, for his student halls of residence in Glasgow, pass directly to a faceless “Investment” company based in a Channel Islands tax haven?

    So, the “investment model” goes: Planning and Building Control laws relaxed to allow cheapo student rabbit hutches to be built everywhere by a hedge fund. Scottish taxpayer gives loan to student, student passes loan cash to tax-avoiding company based in Jersey, student works for several years to (maybe) pay back loan to Scottish taxpayer, then moves away to earn a decent wage. Not quite sure how Scotland becomes prosperous from this?

  6. w.b. robertson says:

    I welcome Mr K`s contributions to what should be a long overdue national debate. Pity that, so far, it does not seem to lead to a more in depth party political debate.

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