Subsidised Scotland
Civil servants as bankers
Michael Fry
During the 1970s they added up to the demand for devolution. Today the syllog- ism arrives at a more modest conclusion. Once upon a time the English, if they still wanted their confounded Union, were going to have to give us all the cash we needed to fulfil our every dream — since much of it came from under the North Sea it was really ours anyway. Now we merely demand enough for our microchips, our small businesses, our landscaping of dere- lict industrial sites, that sort of thing. And, most conveniently, we have to hand for the spending of it one of our peculiar institu- tions, the Scottish Development Agency.
What could be more worthy and re- sponsible? This may not be the sort of wisdom that prevails south of the Tweed, though echoes of it are certainly heard north of the Trent. Indeed, John Smith, David Owen, Shirley Williams and Ted Heath have declared that the SDA is a model for Britain.
But the SDA is no longer as compassion- ate as Sassenachs might believe. One of the things that greeted our dynamic new Secretary of State, Malcolm Rifkind, on his entry to St Andrew's House was a challenge from Nanny Foulkes, already familiar to readers of the Spectator. He was this time fussing about an official letter from the SDA, taking the view that the Ravenscraig steelworks would close in 1987, and asking the Secretary of State to prepare some plan for the 4,000 men who would then become unemployed. Needless to say, this missive had not been published, and Mr Foulkes wanted it to be. Mr Rifkind has declined his invitation.
The story appeared as a scoop in the Glasgow Herald, a paper now considerably more lively and intelligent than its rival, the Scotsman, which is a mere mouthpiece of the corporatist Left. Even so, the Herald cannot quite escape the conventional wis- dom. What it failed to pick up was that the SDA's economists, besides believing that Ravenscraig would be shut down, also thought it ought to be shut down. It does, after all, lose £100 million a year and, through forcing the country to rely on its obsolete and over-priced products, has cost thousands of jobs in other industries. The battle to preserve it nevertheless arouses incredible passions. Those who say we would be well rid of it are damned not merely as misguided or heartless, but as unpatriotic. Small wonder, then, that the journalists were simply blind to the SDA's sound reasoning. What they saw was just another chance to call for subsidies.
Clearly, however, the SDA is no longer so hidebound, and has been overcoming its own worst problems. From its inception in 1975 it was instructed to spend on anything for which a minimally plausible case might be made out, that is to say, on anything for which the wicked English government might otherwise be attacked by the SNP. By the early 1980s, it had a truly disastrous portfolio, with a return on investments averaging minus 14 per cent. As one of those mad, bad dissidents pointed out, Scotland would have been better putting her money into premium bonds. A fine measure of the strength of the Scottish corporatist consensus is that it was thus indulged for three full years after Mrs Thatcher took office.
Since 1982 a new chief executive, Dr George Mathewson, has been putting the house in order. The lamest ducks were left to go under, others sold off for what they would fetch. Now only a seventh of the budget goes directly into industrial invest- ment. The most objectionable of the re- maining roles is that of industrial landlord, building factories as a subsidy to prosper' Live tenants. By, definition, the task is carried out on sites that have not been picked by any commercial developer --- and probably never would be, for many are vacant. This, too, may soon change. After a tiff with the Treasury, a review of the SDA's functions is being carried out by Sir Gavin McCrone, permanent under-secretary at the Industry Department of Scotland. Quite what he expects to discover that he does not know already is unclear, for he set the SDA up. Since, in his courteous and urbane fashion, he has been running Scot- tish regional policy for near on 20 years, the notion that anything important can have escaped his attention, or have hap' pened without his acquiescence, strains the credulity. But if there is a man who can charm away those £200 million proPertY investments, it is the good Sir Gavin. Should he decide that this, among other useless activities, must cease, then two things would ensue. First, a much mote modest SDA could indeed serve as a model for similar outfits in parts of England --- though, to be sure, they would be pre- sented as founts of bounty and benefA" cence. Secondly, however, the SDA wont' have become essentially a merchant bank- ing service to those who, for one reason and another, can raise no support from conventional financial sources. It is not too hard to believe in an equity gap, stunting our entrepreneurs, which ought to be filled. But can one also believe that mer- chant banking is a necessary or efficient function of the state? Very well, the privatise the SDA. If the 'Agency Super- men', as one Scots financier calls them, are really so brilliant at identifying the loll term potential for success, they should have no trouble in raising the necessary capital on the open market.
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