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Publication - Publication

Scottish National Investment Bank: implementation plan

Published: 28 Feb 2018
Directorate:
Chief Economist Directorate
Part of:
Economy, Money and tax
ISBN:
9781788516600

This implementation plan provides recommendations on the establishment of a Scottish 'National Investment Bank'.

Contents
Scottish National Investment Bank: implementation plan
Appendix A Terms of reference

Appendix A Terms of reference

In September 2017, SG announced within the Programme for Government that it would begin work to establish a Scottish National Investment Bank. The First Minister subsequently asked Benny Higgins, the CEO of Tesco Bank, to lead the work on developing the Bank’s remit, governance, operating model and approach to managing financial risk. Mr Higgins convened an Advisory Group of experts to support him in the development of this plan. In addition to the support from Scottish Government staff, membership consists of the following individuals:

  • Paul Brewer (Former Corporate Finance Partner, PwC LLP)
  • Paul Lewis (Interim Chief Executive, Scottish Enterprise)
  • Professor Mariana Mazzucato (Director of the Institute for Innovation & Public Purpose, University College London)
  • Alan McFarlane (Senior Partner, Dundas Global Investors)
  • Peter Reekie (Chief Executive of Scottish Futures Trust)
  • Liz Ditchburn (Director General Economy, Scottish Government)
  • Alyson Stafford (Director General Scottish Exchequer, Scottish Government)
  • Gary Gillespie (Chief Economist, Scottish Government).

This Implementation Plan describes the conclusions reached by Mr Higgins and the Advisory Group and makes recommendations about how SG should proceed with establishing and capitalising the Bank, what the Bank’s functions and structures should be, the relationship that the Bank should have with SG and existing financing agencies and interventions.

In addition to a commitment to establish the Bank last September, the First Minister set out Terms of Reference for the development of this Plan to guide the work of the Advisory Group and the Outline Business Case which accompanies this report.

The Terms of Reference are set out below, including the Implementation Plan section reference to ease cross reference of key sections.

Terms of Reference Implementation Plan Section Reference
Evidence of market failure and business case
The implementation plan will be underpinned by analysis of the evidence on market failures, and appraisal of potential solutions to ensure that the bank has the maximum impact on the Scottish economy. In particular this should set out how displacement will be minimised and additionality maximised by the proposed approach. This should consider the potential scope of the bank in the widest sense drawing on this to inform its view on scope. The need for a Scottish National Investment Bank
The plan will be based on engagement with key stakeholders in finance, the wider business community and civic Scotland to gather views on the merits of potential delivery models and approaches and their likely effectiveness in stimulating additional investment. Initial focus for investment activities
It will develop the aims and objectives for the Scottish National Investment Bank, drawing on work from the Council of Economic Advisers and elsewhere and seeking to maximise the contribution to the long-term growth of the Scottish economy. This will include whether the activities of the bank should be focused exclusively on the private sector or whether there is also scope to secure value in delivering new approaches to public sector financing. The need for a Scottish National Investment Bank
The final report should take a wide view of market failure and consider how this can be addressed by the bank, e.g., not just the quantum of business finance but also how the bank's scope of activities, and involvement both direct and indirect, might impact on improving conditions attached to finance for both businesses and infrastructure investment. Initial focus for investment activities
The final report should consider whether the bank should interact directly with business or through intermediaries. It should also consider the market for finance should it be limited to SMEs, wider business or include the public sector, in which case how would it complement existing sources of public finance. Initial focus for investment activities
Governance
Propose a governance model for the SNIB to ensure effective oversight and accountability in the delivery of the aims and objectives, and in particular ensure that the governance addresses the relationship with Scottish Ministers and the Scottish Parliament. Whether or not this is best delivered in the public or private sectors should be considered as part of the plan. Governance arrangements
Working with SG Finance, consider the implications of the proposed governance model for National Accounts classification of the SNIB and consequently any questions that would need to be addressed with UK Government about its operation within budgetary rules. Classification and capitalisation of the Bank
Identify how the bank could operate within the current rules setting out what it could do and what it could not do. Make a clear case as to where any existing budgetary rules have the unintended consequence of forcing a National Investment Bank to operate in a sub-optimal manner and the advantages that could be gained from any changes. Initial focus for investment activities
Consider how the SNIB would relate to existing bodies, initiatives and funding streams which support infrastructure, business investment and innovation, and if appropriate where these might be consolidated within the SNIB. Fit with the existing public sector financing landscape
Operating model
Develop a Target Operating Model for the SNIB to support recruitment of appropriately experienced staff and establishment of other aspects of the SNIB operations. Transition plan
As part of considering the Target Operating Model, set out initial principles for the SNIB to ensure robust management of financial risk. Transition plan
Capitalisation
Drawing on discussion with SG Finance, the report should propose a capitalisation plan over an appropriate number of years to allow the Bank to operate effectively. Classification and capitalisation of the Bank

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