Holyrood needs ‘capability’ to manage company stakes

Benny Higgins

The Scottish Government should build its “professional capability” to manage the ownership stakes in private companies which are likely to arise out of the coronavirus crisis.

That’s according to the report published on Monday from the Advisory Group on Economic Recovery led by banker Benny Higgins.

The report said this move should not require new legislation nor a new public sector organisation.

“There is a strong case for having a dedicated, specialist expertise to manage any expanding ownership role on behalf of the Scottish Government,” said the report.

“This need not require a new organisation at this stage.

“There is significant benefit to be gained by recruiting specialist financial expertise, covering corporate finance, asset management and governance, together with specific sector specialism.

“Alternatively, the necessary expertise could be acquired through secondments from the private sector.

“However it is resourced, the remit for the shareholder role of government should be clear, and it should operate to achieve its remit independently while reporting to Ministers who are then accountable to Parliament.”

The report made 25 recommendations including:

  • an urgent need to access low cost debt requires an accelerated review of the Fiscal Framework, and a significant increase in access to capital investment to support an investment-led recovery
  • a Scottish jobs guarantee, in partnership between business and government, should be introduced to address unemployment, with refocused skills strategies and decisive steps to align teaching and learning in universities and colleges to the needs of business
  • critical investment in the country’s digital infrastructure to improve connectivity, reduce inequalities and build the country’s resilience

On the Scottish Government equity stakes in private firms, the report added: “The experience of the development of the Scottish National Investment Bank, and the Scottish Government’s recent experience with taking on ownership of Prestwick Airport and Ferguson Marine has led to consideration of whether a Scottish equivalent of United Kingdom Government Investments (UKGI) should be considered.

“UKGI is the UK Government’s centre forexpertise, acting as shareholder for, and leading the establishment of, UK Government’s arm’s length bodies.

“UKGI has evolved to perform an increasingly important role overseeing publicly held companies, advising the UK Government on corporate finance and restructuring and managing corporate activity such as share sales.

“There is no equivalent function within the Scottish Government.

“In terms of international experience, Temasek in Singapore has now invested widely and at a very large scale.

“It is run independently of government to ensure it operates commercially and that its investments compete on a level playing field.

“Temasek issues its own debt instruments in support of its investment programme.”