'Good start' for national investment bank but rule changes needed

The Scottish National Investment Bank (SNIB) has made a “good start”, Scotland’s public sector watchdog has said, but changes to UK Government rules are needed for it to become self-sufficient.

The bank was launched in 2020, with the Scottish Government pledging £2bn over the next decade to allow it to back start-up businesses.

To date, the bank has committed £785m into 43 different projects and encouraged £1.4bn in outside investment, according to a report by Audit Scotland released on Thursday.

The 42-page report praised the bank’s “clear and rigorous” processes for managing the risks associated with investment and in 2023-24 recorded £19.3m in gross income, more than paying for its £16.1m operating costs.

But Treasury rules mean the bank is unable to carry forward income it generates on investments.

One of the recommendations of the report urged the Scottish Government to “ensure that it can effectively influence the UK Government’s review of public finance institutions by having clear proposals to support the long-term ambition for the Bank to become a perpetual investment fund”.

Auditor General Stephen Boyle said: “The Scottish National Investment Bank was set up to deliver economic, social, and environmental benefits for Scotland, as well as a financial return – and it’s made a good start on those ambitions.

“But for the bank to be successful, the Scottish Government needs to address the lack of flexibility around the bank’s budget, and the barriers presented by UK Treasury rules.”

Responding to the report, deputy first minister Kate Forbes said: “Audit Scotland’s report underlines the positive impact the Scottish National Investment Bank has had on the investment landscape.

“The bank has committed £785m in investments since its inception and attracted £1.4bn in private sector funding. This is helping build businesses, create jobs and reduce carbon emissions.

“The Auditor General also notes the sound arrangements made by the bank and the Scottish Government on its governance, accountability and risk management.

“The report sets out clearly the complex financial and budgeting operating environment.

“The Scottish Government is taking action to improve the financial position for the bank, but this report is clear that the UK Government also needs to take action as part of the Spending Review process to ensure that the bank can reach its full potential.”