As I See It: Terry Murden
Benny Higgins wants us all to become stakeholders in companies that might otherwise disappear as the country emerges from the mist of the coronavirus.
The former banker has been leading an ad hoc group that includes Glasgow University principal Sir Anton Muscatelli to advise the Scottish government on the road to recovery. Among the first its suggestions is a new agency to manage a series of equity stakes the group believes ministers will be forced to acquire in private companies.
It sounds like a mini-me version of UK Financial Investments, that division of the Treasury which managed the billions spent propping up the banks a decade ago and which still holds the taxpayers’ 62% stake in Royal Bank of Scotland.
It also echoes the ambitions of the current Project Birch which Chancellor Rishi Sunak is overseeing in order to ensure Britain’s “strategically important” companies are not lost in the carnage caused by the pandemic and the lockdown.
Mr Higgins has some first hand experience of company rescues having been part of the management at HBOS when it was a central feature in the banking crisis. He was credited with advising the board not to play fast and loose in the mortgage market, but was unable to stop the car crash that followed.
He subsequently helped wean Tesco Personal Finance off the Royal Bank of Scotland and turn it into a standalone bank, though some of his efforts were rolled back after he left. Since then has taken on a number of non-executive and advisory roles, chief of which was making recommendations on setting up the Scottish National Investment Bank (SNIB). It is due to debut some time this year.
It will be interesting to hear if his new advisory group’s initial thoughts on getting the Scottish economy back on the road to recovery involves an additional role for the SNIB which is expected to beef up the state’s direct investments in growth businesses. Using SNIB as the “new agency” would save a lot of time and expenditure in setting up a new organisation. It has got a new management team and is ready to roll.
One consideration that might prevent it having this wider role would be SNIB’s green remit. It is expected to deliver “environmental, social and wider economic as well as financial returns through its investments”. While this may be a worthy objective, it would not make it easy for the bank to buy into businesses that may not fit that ideal, but which need rescuing now if we are to avoid a jobs catastrophe.
Unlike Project Birch, ministers in Scotland will be advised to rescue a number of small firms that need their help. Like it or not, many of those may not be big on social and environmental impacts, but are nonetheless important. Oil and gas businesses, for instance, and the petrochemicals industry. Unless we are prepared to let them go because they don’t fit the long term goal of being clean and green then SNIB won’t have much of a role to play.
However, circumstances have changed markedly since the bank was legally established in January. A bit of emergency legislation could surely be rushed through to expand its role.
Otherwise the government will be running a twin-themed and potentially contradictory agenda: an investment bank backed by £2 billion of taxpayers’ money and which rules out anything that could be deemed a polluter, and a new agency that will prop up businesses where saving jobs takes priority.