How to stop faith-based funding for private interests

The Herald today reports that neither the Scottish Government nor Scottish Enterprise has been able to provide any data on how many manufacturing jobs have been supported by the public funds that have been spent to support manufacturing jobs.

To anyone else in the public sector that would be all but unthinkable – if there is one feature of public sector life in Scotland which is ever-present it is the micromanagement of performance indicator data set by managers to monitor the impact of how those in receipt of public funds use it.

But for any regular watchers of business support policy in Scotland this will be of no surprise at all. The history of devolution is the history of generous payments to private interests the purposes of which are vague and the monitoring of which are non-existent. There is a separate system of government for private businesses than for everyone else.

There has been a string of scandals and mini-scandals around this since the dawn of devolution. Early in the devolution era there was a public debate over why a generous fund had been set up to link MSPs to business interests. This was promoted unquestioningly as being about helping politicians empathise with the interests of business more.

Of course, there was no comparable fund to help politicians understand the working lives of nurses or teachers, or of the conditions of those living on benefits, or the disabled, or basically any interest which wasn't private business. It was a case of using public funding to bias politicians towards a single strata of society.

Then there was the case of half a billion pounds being spent on a flat-rate cut in business rates across the whole economy (in the name of economic growth, naturally). When it turned out a couple of years later that not only was there no evidence that this had had any positive effect but that the government of the day hadn't even bothered to try and assess whether the money had been well spent, many assumed that would be the end of the initiative.

It was not. It was renewed and many more hundreds of millions of pounds of public money was given to private businesses purely on faith.

Tracking the extent of faith-based funding for private sector business interests is tricky. As well as the number of individual funds directed openly at private interests (there have been countless funds open to private businesses over the years, on everything from building a marine energy industrial sector 20 years ago to compensation payments for island businesses in the last week), there are lots of individual government-to-business deals.

The former include instances like the half a billion pound loan guarantee given to Sanjeev Gupta to build an aluminium smelter in Fort William. This was agreed after a secret, unminuted meeting with a government minister. It includes multiple rounds of genuinely inexplicable grant funding to massively profitable global corporations like Amazon and arms manufacturers.

And then there are the many 'desperation' decisions where large-scale funding is given to try and fend off approaching job losses or company closures. Those include the money spent to try to rescue Bifab and Alexander Dennis.

There is something that connects a lot of the above; Alexander Dennis closed anyway, as did Bifab. An aluminium smelter in Fort William turned out to be no more than a pipe dream. We don't have a successful marine energy industry – we have very little renewable energy industry at all. Very few of the grant funds are ever evaluated and certainly whatever has been spent on subsidising industry to achieve a 'just transition' appears to have achieved little.

The grants to phenomenally profitable global corporations remain genuinely mysterious and inexplicable. And the above represents only a tiny subset of the inexplicable, unmeasured or frankly failed funding that has been given to the private sector. This really all looks like ‘money for nothing’.

This scale of failure would not be tolerated in any other part of the public sector, and yet not only are there never consequences for failed private sector funding, there are barely any questions asked and the data that is gathered is barely worth gathering.

In the end, Scottish Enterprise is more like a slush fund for an economic elite who are allowed to dip in and out of it at will, consequence free. It operates more like a religion than any other part of the public sector where it is expected that success and failure are properly measured.

Only a revolution in business support in Scotland will change this system. That is why Common Weal favours a radical reorganisation with economic development pushed largely down to the local and regional level. With proper scrutiny. Find out more here.