Why does the Government keep undermining its own policies?
The Scottish Government’s love of “arms-length” companies should be a strong tool for furthering mission-driven governance, but are often used merely to claim credit when things go well but deflect blame when they go badly.
The Scottish Government loves its arms-length companies and organisations. From running trains, through supplying water, to owning airports and running energy auctions, the Government often claims the credit when these organisations do well.
But when trains are late, sewage leaks into the oceans, foreign militaries use our airports to conduct acts of privateering or to support illegal wars and those energy auctions sell Scottish resources almost to the lowest bidder, the Government can equally turn around and say “it’s nothing to do with us – it’s at arm’s length!”
They cannot have it both ways.
There’s a slightly deeper problem here too that I especially encountered during the ScotWind debacle but have observed it in other places such as even this week with the news that the Scottish National Investment Bank was investing to boost landlord profits instead of providing people with affordable homes or when Historic Scotland was left with zero Ministerial oversight despite increasingly erratic behaviour.
I have a real suspicion that to the Government “arms-length” increasingly means “just ignore it until we can’t”. This has led to multiple organisations appearing to do their jobs in ways that contradict or outright undermine stated Scottish Government policy.
As a first example, we can look at that story this week about the SNIB investing in buy-to-rent houses. While the Scottish Government says that it wants to end the housing emergency and to ensure that everyone has access to affordable housing. While they say this, their own arms-length bank is investing in a London-based financial house that wants to build extremely expensive houses that will be exempt from the Government’s own rent-controls. This will almost certainly result in increased house price inflation and tenants being exposed to rent increases that far outstrip inflation.
The case of the Scottish airports is similar. The Scottish Government professes outright objection to America’s wars and yet Government-owned facilities end up being used to support those wars. Yes, the actual defence planning side is a reserved issue but the Government seems to be unable to tell the operators of the airports to stop providing services to aircraft engaged in illegal activity. Prestwick Airport has done precisely this before when it announced that it would no longer allow Israeli aircraft to land but it appears that while the Government agreed with this policy, it wasn’t theirs to make and therefore they claim they can’t tell the airport to do the same to the Americans.
The example of ScotWind too, where Government policy is that Scotland’s resources should maximally benefit the people of Scotland, but the Crown Estate set up an auction with a maximum ceiling price (a bizarre thing to set for an auction in the first place) and almost certainly set it too low, resulting in the loss of possibly tens of billions of pounds for Scottish public services or a Scottish wealth fund as well as the lion’s share of the profits from the eventual developments going to multinational companies and foreign public energy companies with comparatively little going to Scottish companies and the absence of a Scottish public energy company at all being glaring.
We can’t go on pretending that arms-length companies are independent of government when they do badly but allow Ministers to claim credit for their successes. We need to consider the role of arms-length companies as part of broader reforms to governance in Scotland.
““Arms-length” shouldn’t mean politicians think of them as “too far away to hurt us” but rather “close enough for us to grab them and set them right”.”
The SNIB has, fundamentally, a good model here even if it evidently isn’t working in practice. Operational independence from politicians who’d love to meddle near election time is often a good thing but there is a role for Ministers to set missions for these organisations and, crucially, to hold them to those missions.
The SNIB is not a perfect example, of course, because the missions it has appear to be so broad and vaguely defined that apparently paying a London bank to exploit tenants is not in breach of them. Ministers (or even better, Parliament as a whole) must do more to haul the executives of the companies in to hold them to account. It’s worth saying, as we did in our briefing this week, that in our original plan for the SNIB, there would be a third governing body made of stakeholders such as workers, tenants-rights activists and unions who would suggest missions to Ministers and would judge both Ministers and the bank on their respective performances – this plan was watered down to homoeopathic levels by the Government, turning it into an advisory board that reports only to Ministers.
In short, “arms-length” shouldn’t mean politicians think of them as “too far away to hurt us” but rather “close enough for us to grab them and set them right”.
We should be proud of our public-owned companies. The rampant privatisation experiment of the last 40 years has impoverished all of us. But a company that is publicly-owned but is allowed to act as if it is privately owned then the result is scarcely different. The point of public ownership isn’t just to ensure services are delivered to “commercially unviable” places (like buses serving rural areas), it’s not just about retaining profits and helping to support rather than exploit customers and the public sector, it’s about ensuring that the motives for running the organisations are not merely commercial or profit driven at all. It’s about ensuring that these companies act in the best interests of the people they serve rather than just their owners – because through public ownership, the people they serve ARE their owners. They are all of us. The incoming new Government should remember this and start better using its own assets, including its owned arms-length companies, to better meet its own targets – even if it means also accepting the consequences when those targets are missed.
