A NEW energy company was launched in Edinburgh in July 2015. Our Power Energy was pitched as not-for-profit initiative that would alleviate the strain of fuel poverty for customers paying just too much for their energy. “This ground-breaking company will make a real difference to tens of thousands of low-income households,” said the SNP’s Social Justice Secretary Alex Neil as the Scottish government pumped £2.5m into it.
It is unfortunate, therefore, that four years later the company was forced to fold – with the further loss of £10m further Scottish government loans to the company, and 38,000 customers left in the dark. The volatility of the energy market, especially for small providers, is well known – at least nine similar small companies have gone bust recently – why did the SNP choose to throw taxpayer’s money at this market with such bravado?
Another political investment is that in energy giant SSE Renewables’ project to construct a large-scale onshore wind farm on Shetland accompanied by a long-range subsea transmission cable, which has unsurprisingly been met with much local anger. Scotland’s supply of renewable energy is extensive, which means that the power generated by the wind farm will need to be transmitted onwards to England. Unfortunately, the inadequate cross-border connectors force existing wind farms to be switched off, despite being paid for full capacity output.
Viking Energy’s new project will only add to this problem, as well as seeing increased costs for long-range transmission. Meanwhile, the loss of 23 hectares of peatland will release tons of carbon dioxide into the atmosphere – Shetland is home to high-quality peat, which acts as a carbon sink, which, if moved, releases that carbon. The Scottish Environment Protection Agency’s objections to the wind farm on these grounds has been ignored by the SNP, which has already pushed the project through the courts. This is an investment that fails on environmental and financial grounds. It is difficult not to conclude that political flash is all that matters to the SNP.
There are plenty of examples of SNP failure to invest smartly. Take Bifab, a fabrication company that received a £37m loan from the Scottish government which is now valued at £2m. Or Prestwick Airport, whose survival relies on SNP loans from Transport Scotland of £40m that are now worth only £7m. The Scottish government has now found, on its second attempt, a preferred bidder for the airport after eight years in state hands. Or the new Scottish Stock Exchange project, which collapsed with the loss of all jobs, but not before the SNP government had awarded it a grant of £750,000.
But what about the overall performance of SNP investments? Is it all bad? To answer this, we should look primarily to Scottish Enterprise, a non-departmental body of the Scottish government that is responsible for dishing out grants to companies across the board. By 2018 this quango had, over a decade, given out £95 million to 698 firms which had gone on to fail. High-profile cases include wave-power company Aquamarine, which received £15m before it sank in 2015, and Pelamis, another wave-power company that received £16m before it went under, literally. In 2018 alone £11.1m in investments was lost by the organisation. Its last annual report in July 2020 reveals a sharp increase in the scale of the losses. In that year Scottish Enterprise abandoned or waived 76 of its investments which had folded, amounting to over £20m. In the same month as the report was published the organisation admitted that it had run out of money and froze all new investments, halted the hiring of new staff, and even prohibited its employees from travelling.
All of this has somehow convinced the SNP that it is a great idea to pump £2 billion of taxpayer funds into a Scottish National Investment Bank that will no doubt be yet another expensive fiasco, as politically attractive projects gain the support of SNP Ministers. Nicola Sturgeon has made clear that it is a “truly transformative” project, which will provide funding according to certain “missions”, one of which is “promoting economic inclusion.”
One of the lauded ambitions of the new bank, which launched in November 2020, is to help commercialise academic research by funding university spin-off companies. If you were to ask organisations like Scottish Enterprise, however, you would discover that these investments are high-risk, simply because university spin-offs often don’t succeed. Last year Scottish Enterprise lost almost £2m in investments in NGenTec Ltd, a University of Edinburgh spin-out that promised to innovate gearbox technology – it was dissolved in April 2019.
Maybe these taxpayer funds are wasted because the SNP just doesn’t care, or worse, doesn’t understand business? Nicola Sturgeon has attended fewer than half of the meetings of the Scottish government’s flagship economic advisory group, the Council of Economic Advisers, since 2014. The current finance secretary, Kate Forbes, has attended only one of the four that have been held while she was in-post. Meanwhile, former RBS head Sir George Mathewson states that Sturgeon lacks both “empathy for business” and a “natural understanding” of it.
The SNP government’s extensive track record of failure in business investment is yet further evidence of its lack of basic administrative competence. Placing its frantic drive for independence above all else, it’s a sucker for any new project which can get it headlines – and it helps if it has stuck the Scottish flag on its brochure or shoved the word Scottish into its name. Sadly it’s the Scottish taxpayer who has been forced to pick up the tab for the tens of millions that have been lost.
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Max Young is an undergraduate student at Edinburgh University and can be followed on Twitter at @maxneoliberal
