In a refreshing twist for Scotland's party of government, the latest potential scandal facing the SNP administration does not involve allegations of sexual misconduct, but rather high finance.
Earlier this week, finance company Greensill Capital filed for administration. Greensill specialised in supply-chain finance, which involves acting as an intermediary to raise money on the back of payment commitments between companies and their suppliers. Greensill's innovative financing arrangements were instrumental in metals tycoon Sanjeev Gupta's rapid expansion of his business empire, including his 2016 acquisition of an aluminium smelter at Lochaber in the Scottish Highlands, plus two nearby hydroelectric dams.
Companies within Gupta's GFG Alliance group bought the industrial assets from Rio Tinto for £330 million, but the deal was achieved on the back of the Scottish Government providing a 25-year guarantee on purchasing power from one of the hydroelectric sites if the smelter shut down. The key to unlocking finance came from understanding the value in this type of asset – not the industrial assets, but the guarantee of a string of payments long into the future.
Greensill was able to take that guarantee and sell bonds worth hundreds of millions of pounds on the back of it. Estimates put the value of the guarantee at over half a billion pounds.
But despite all that money raised, the new wave of jobs promised with the deal have failed to materialise. In March 2017, Scottish Government rural economy secretary Fergus Ewing said the deal would create up to 1,000 direct and 1,000 indirect jobs, bring a billion pounds into the local economy and spark 'an economic revival in these Highland communities'.
That has not happened. A proposal to build an alloy wheels factory has been ditched, and there is now talk of far less ambitious plans for aluminium recycling and water canning. With a key player in the deal now in administration, questions are being asked as to why the Scottish Government allowed itself to be used as a catalyst in a highly complex structured finance deal that raised a pile of cash for third parties, but has so far failed to deliver on re-industrialisation promises. There are big questions as to what any potential future liability for the taxpayer might be.
This is not the first troubled SNP industrial project. In December, the Scottish engineering firm BiFab went into administration. The company, which has steel fabrication yards in Fife and the Isle of Lewis, had over £50 million of taxpayer's money pumped into it after being ‘rescued’ by the Scottish Government three years ago with plans for it to fully participate in the market for manufacturing offshore wind turbines. Alex Salmond had, after all, once described Scotland as potentially the 'Saudi Arabia of renewables'.
Last month it was announced that InfraStrata, which owns the Harland & Wolff shipyard in Belfast, had bought BiFab out of administration in an £850,000 deal, agreeing to take over two of its three yards. Quite the return on investment for the Scottish Government.
But perhaps the most damning industrialisation failure is the fiasco of the SNP government's attempts to get two ferries built to operate on Scotland's west coast. The Scottish Government had stepped in to stop the Ferguson shipyard on the Clyde going under in 2014, with Scottish billionaire Jim McColl’s Clyde Blowers Capital persuaded to take it on. Scotland's publicly owned ferry firm Caledonian MacBrayne subsequently placed a £97 million order for two passenger ferries.
The cost of the project, which has been beset by technical difficulties, has skyrocketed to over £200 million, with speculation that the final bill will be considerably higher. That is if the ships ever get finished, for they are nowhere to be seen. Actually, that's not entirely accurate. One of the boats, the Glen Sannox, was brought out for an official 'launch' event attended by First Minister Nicola Sturgeon in November 2017. Farcically, the unfinished boat had painted on windows. Will the ships ever make it to sea? Who knows.
To say that Scotland has an industrial policy would be wrong. It has a government ready to throw money at projects that produce the right optics (reindustrialisation and green jobs) but with little appetite or ability for the hard graft of getting beyond a publicity event and a press release.
The Scottish Government's foray into high finance looks set to be the latest in a line of industrial debacles.