Why Scotland needs a National Investment Bank

banking_for_common_good

(Photo: Richard Peterson/flickr/cc)

The Scottish Government has stated its intention to launch a National Investment bank. Influenced by a PhD thesis written by Gemma Bone Dodds, titled Banking for the Common Good, here are the main justifications for the decision:

  • When the Royal Bank of Scotland collapsed in 2008 costing the UK economy £7.4 trillion, it made clear that the current system is unstable and not fit for purpose.
  • Other successful countries such as Germany have more sustainable and socially just banking systems so it can be done
  • In the light of the RBS collapse, there is clearly a need to move away from a concentrated, profit-driven system to an ‘ecosystem of institutions structurally designed to work for the common good’.
  • The above would lead to not-for-profit regional ‘People’s Banks’ which would invest in local communities and businesses.
  • They would also invest in long-term projects which private banks won’t do.
  • It’s estimated that with an initial investment from the Scottish Government of only £225 million, £3.4 billion could be leveraged in the first year alone.

That looks like a compelling case to me.

http://www.esrc.ac.uk/news-events-and-publications/impact-case-studies/phd-research-prompts-launch-of-scottish-national-investment-bank/

Footnote: It’s good to see PhD theses getting a good name after the use of one in 2003 to inform the ‘dodgy dossier’ for the Iraq War.

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19 thoughts on “Why Scotland needs a National Investment Bank

  1. johnrobertson834 October 5, 2017 / 12:40 pm

    Mind you I’ve met George at the Ayr Air Show which he organises – bit…..?

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    • Clydebuilt October 6, 2017 / 10:25 am

      . Didn’t know he was involved with air show . . . Does this stem from an interest in aviation?

      Like

  2. Bill Mann October 5, 2017 / 12:40 pm

    I hope that, in parallel but financially separate, there are plans for an ‘ordinary’ publicly owned Scottish National Bank for Savings and Current Accounts. Namely, having the usual facilities for cheque books, cash machines, internet payments, direct debits, standing orders, mortgages, etc., and perhaps even short term small ‘payday’ loans (in order for people to avoid paying extortionate interest rates to loan shark companies and falling further into debt). I feel confident that many people would switch their accounts very quickly if they knew a publicly owned Scottish National Bank such as this would be run properly. There could be a gradual roll out across the country. Just a thought… See ‘Bank of Dave’ for an example of how a small bank initially with a staff of only three people do things differently… http://www.cobdencentre.org/2016/09/bank-of-dave/ and https://www.burnleysavingsandloans.co.uk/ Best regards

    Liked by 1 person

    • macgilleleabhar October 5, 2017 / 4:22 pm

      Bill, we had something almost approaching this and if I remember correctly it was called “The Trustees Savings Bank “probable legal ownership was the account holders but Tories in power at Westminster are a law unto themselves.

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  3. Willie Hogg October 5, 2017 / 1:55 pm

    Scottish Enterprise already have a bank to aid development of SMEs, called the Scottish Investment Bank. As I understand it the planned Scottish National Investment Bank is to provide capital for large infrastructure investments, a much less risky business but requiring much larger sums over much longer periods. It is, however, a very lucrative area of banking and the returns can be reinvested, building up both Scotland’s infrastructure and the National share in it. I feel that highly speculative investment in ground breaking ideas is best left to people who are investing their own money, rather than civil servants.

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      • Willie Hogg October 5, 2017 / 3:19 pm

        The whole point of speculative investment is that the results are unpredictable. So if someone invests their own money in such an investment they are driven by a very strong belief it will work and that it will not lose them their money. However, as soon as you put it into the hands of someone who has no fear of loosing it, I fear disaster.

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    • Willie Hogg October 5, 2017 / 3:28 pm

      Can you think of anyone who has lost status, position or future prospects by spending large sums of government money? There is always someone or something else to blame and let us remember that the outcome is unknown and unpredictable. We would have to say they tried and are uniquely qualified to try again!

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  4. johnrobertson834 October 5, 2017 / 4:12 pm

    I was a long-term academic and researcher and spent money carefully fearing damage to my career if I didn’t and the auditors condemned me. Won’t there be others like me along with the kind you refer to? Equally some pyschopathic risk-takers will spend all their money then go bankrupt leaving debtors destroyed before returning in a new guise. That guy White at Rangers?

    Liked by 1 person

  5. Willie Hogg October 5, 2017 / 8:07 pm

    I am not being derogatory about civil servants, but they are, like you were, tasked with spending money wisely. What would have happened if you had decided not to spend the money?

    White is a straw man and surely he is representative of a type of person as prevalent in the civil service as elsewhere. However, he does not have access to millions of pounds of government money.

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    • johnrobertson834 October 6, 2017 / 12:20 pm

      The project would have not come off and my chances of getting a senior lectureship, readership or professorship would have gone down the drain.

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      • Willie Hogg October 6, 2017 / 3:16 pm

        So the hypothetical civil servant will feel compelled to invest in projects with potential despite any misgivings regarding their likelihood of success. Think deLorean.

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  6. Ludo Thierry October 5, 2017 / 8:25 pm

    Hi John – and my fellow co-stars. The case for the planned NIB does, indeed, sound compelling – especially if the leveraging effects can be brought into play as suggested. I noticed Richard Murphy was in Scotland today speaking to COSLA on this very topic. He set out a list of ‘assumptions’ and ‘realities’ for COSLA to consider:

    The political assumptions in this:

    I am assuming Brexit because I think we have to

    I am assuming that there is a broad cross party consensus on the need for investment in Scotland – even though I know there will be difference on the detail

    I am assuming that there is a willingness to create real economic powers for devolved and local government involvement in Scottish economic development

    I am assuming Scottish parties will be willing to work together on a New Deal for Scotland on the basis of the threat Brexit and the economic crash it will create will bring to you

    The political realities of this:

    I know how massive my assumptions are

    But as someone who’s not a Scot and not a party politician I’ll say that this scale of vision is what the people of Scotland do, I am sure, expect of you

    I really do hope that Richard Murphy is correct and that, in the face of the impending Brexit cliff edge – there might be “..a willingness to create real economic powers for devolved and local government involvement in scottish economic development”.

    I suspect a fair percentage of the readers of this blog – myself included – have long and hard experience which is indicative of a very evident lack of such a ‘..willingness..’ amongst the BritNat faithful.

    Who knows – circumstances and people do change – but Richard’s hope for some outbreak of logic and reasonableness amongst the BritNat parties seems like a bit of a stretch from here.

    I am, naturally, here discussing the BritNat party chiefs and activists. The situation is decidedly more fluid among those voters who have given their vote to those Britnat parties (even very recently).

    Political economists view the world around ‘tipping points’ that come around when circumstances come together. Undoubtedly that does happen at times. However – sometimes change – big change – is just ground out by dedicated people staying focussed and working through the challenges.

    Either way – we just have to keep going – keep winning victories where we can (big and small) – and keep pushing the Indy project forward.

    Cheers, ludo

    Liked by 1 person

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