SNIB ad-blitz tries to manufacture consent while avoiding all the key questions
SNIB potentially losing £9m via Circularity, £5 million of taxpayers’ money in a firm partly owned by one of SNIBs own directors and £7.5m dished to a company run by a brother of SNIB employee
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SCOTLAND’S NATIONAL INVESTMENT BANK is in full salesman mode as it purchased a paid feature in yesterday’s Scotsman newspaper. But beneath the public relations blitz the SNIB continues to wheeze as growing questions mount.
As the legally mandated oversight board of the Bank remains absent, serious questions have been raised regarding a poor investment track record, questions of political intervention, risk management failures and potential conflicts of interest.
What we will explore is a taxpayer funded National Investment Bank which has potentially lost £9m via the Deposit Return Scheme (DRS) debacle. How £5 million ended up invested in a firm partly owned by one of SNIBs own directors. With a further excursion into the circumstances where £7.5m was put into a company run by a brother of SNIB employee. All with no legally mandated advisory (oversight) board in operation despite SNP promises after three years to deliver one.
Naturally I should emphasise the SNIB insist all due diligence has been undertaken in all instances. Nevertheless appearances exist, and SNIB risk management is described in internal documents as having “screwed this up”. So public interest merits a more forensic examination into matters, in pursuit of reasonable answers and explanations (if any).
Engineering consent
But before we dig into all of that, first I’d ask everyone to humour me for a few minutes. As the SNIB launches a public relations blitz, it’d be useful to understand what ‘engineering consent’ is, and why it matters in this instance.
So, let me ask you a question: how do you get the public to support ideas or programs?
The answer was provided by Edward Bernays, who pioneered consumer psychology. As the nephew of the famous psychoanalysis Sigmund Freud, Bernays realised that humans are irrational beings; thus contemporary advertising, public relations and modern propaganda was born.
Bernays from the 1920s until his death in 1995 was the father of modern ‘consumer psychology’. It focuses on his uncle Freud’s notion that human beings are motivated primarily by inner desires hidden in their unconscious.
Bernays theorised that if he could understand peoples unconscious desires, then he could use this advantage to sell products and increase sales. Or even, perhaps, manufacture public support…
His earliest and most (in)famous application was the iconic “Torches of Freedom” campaign. When asked to help big tobacco sell cigarettes to American women, Bernays pledged to deliver the undeliverable to his client. He’d eliminate the social taboo against women smoking in public.
Bernays approached psychoanalyst A. A. Brill for advice. Brill explained to Bernays that “Today [1928] the emancipation of women has suppressed many of their feminine desires. More women now do the same work as men do. Many women bear no children; those who do bear have fewer children. Feminine traits are masked”
Bernays thus found his answer. Cigarettes - at the time traditionally associated with men - would instead be equated with femininity and women’s liberation.
He paid fashionably dressed women to smoke their cigarettes in public, as they walked in the Easter Sunday Parade in New York. Thus was born the “torches of freedom.” It represented the ‘viral moment’ of the roaring 1920s America.
And also born were subsequent generations of women smokers and spiking lung cancer rates. But big tobacco (and Edward Bernays) had their goldmine.
Why am I telling you all of this? It’s important for you to realise how businesses, (some) politicians and investment banks apply Freudian psychoanalytic concepts. These techniques are how they manipulate you. And this is going prove relevant when we come to the SNIB’s current advertising blitz, so please indulge me a short while longer.
Bernays in 1955 wrote ‘The Engineering of Consent’, which clinically details how it’s possible for governments, businesses (and perhaps even investment banks) to create public support for what they do.
And no, it’s not via dispassionately presenting a factually accurate case. Instead, you discover what people unconsciously want, and simply sell them that idea.
The potential dangers of this were seen as so profound that a US government textbook once warned of its potential political dangers…
“Under modern conditions of political advertising and manipulation, it has become possible to talk of the engineering of consent by an elite of experts and professional politicians. Consent that is thus engineered is difficult to distinguish in any fundamental way from the consent that supports modern totalitarian governments. Were the manipulated voter to become the normal voter, the government he supports could hardly be said to rest on his consent in any traditional sense of that word.”1
Ironically, future US governments would put Mr Bernays to work helping the CIA, so they weren’t too worried about heeding their own warning.
What is left unsaid in the SNIB ad blitz…
A sterling example of Bernays engineering of consent is visible in yesterday’s Scotsman newspaper. In a paid feature - masquerading somewhat as an article - the SNIB “reflects on three years of investment and what it means for Scotland’s future.”
How lovely, I’m riveted.
But remember, advertising and public relations is all about consumer psychology. So, the SNIB’s media push is
focused on what they reckon Scottish people unconsciously want
is using consumer psychology to manipulate perception
wants to engineer public consent for its existence
In it’s purchased ad-feature, the SNIB describes in cheerful tones how they are “on a mission…for all Scotland”. They are striving for nothing less than “all our investments” to “meet the aims of at least one of our three key missions”
First growing a “fairer, more sustainable economy”.
Secondly to help “society through the journey to net zero”.
Thirdly, the SNIB seeks nothing less than “to transform communities, making them places where everyone thrives.”
Fantastic, who doesn’t want these things? But if we draw back the advertising curtain, we discover what the SNIB isn’t telling us.
An excellent example for what’s left unsaid was:
“As we approach our third anniversary, a lot has been achieved for a start-up, and we have ever more clarity over the positive difference we can make. We have made 29 investments, committing almost £460 million of our own capital which has in turn enabled over £750m from other investors to be committed alongside us. That’s over £1.2 billion committed to the Scottish economy in nearly three years.”
Having already sold you the happy mood music of “thriving” and “transforming communities”, they’re slipping in a few boasts. But it’s what they aren’t telling you which is fascinating to this jaded former lecturer. Namely, how that “£460 million” of (taxpayer provided) capital faired.
Harry Clynch of Disruption Banking revealed that £460 million invested by the SNIB secured a return on investment of just 2%. The paid Scotsman feature didn’t mention any of that.
Harry puts thing in context explaining “commercial banks now offering savings rates of 5% or more, this means the SNIB would have achieved stronger returns by simply leaving the cash in a bank account.”
So, the SNIB’s mission to help Scotland (and you naturally) “thrive” in a “sustainable” way is to undertake investment decisions so poor we’d all collectively be better off leaving the dosh in a savers account.
Suddenly the picture isn’t so rosy, is it?
“Appearing before a Scottish Parliament Committee yesterday, the SNIB’s CEO, Al Denholm, told MSPs that the Bank has only seen returns of £10 million on the £460 million in public money that has been invested so far. Putting £460 million in a bank account with a 5% saving rate would return £23 million after a year”
Notice however none of this is in the SNIB’s paid advert/feature editorial in The Scotsman. If they admitted this too publicly, you might withhold judgement as to whether the SNIB is quite walking straight yet.
I discussed these issues with Harry Clynch in a long form interview that you can watch in full here. But let’s hone in on some particulars which really deserve greater public scrutiny. As we do, I’ll include a few clips from the long-form interview I had with him.
Advisory Board ahoy?
Section 29 of the Scottish National Investment Bank Act 2020 mandates the establishment of an advisory board; whose purpose is to “provide Scottish ministers” with advice on the banks “objects, conduct and performance”.
Important stuff, only one problem. It doesn’t exist, even after three years of the SNIB existing and investing taxpayers cash.
One man attempting to figure out where the missing advisory board has went is Douglas Lumsden MSP. He asked the Scottish Government if the SNIB is operating lawfully given the failure to implement section 29 of the Holyrood Act.
The reply he obtained from the Scottish Government however explains that the SNIB and its “growing portfolio of investments” will at some point (finally) be under a legally mandated advisory group supervision. But when? In 2024, maybe, we’ll all need to wait for an “update” next year.
But if the Scottish Government is still figuring out “details” such as “membership, recruitment and appointment processes” after three years, our advisory board seems far from view.
All of this matters folks, not least since the nature of the SNIBs investments needs greater scrutiny. As Mr Lumsden explains:
“The Scottish National Investment Bank has been in operation for three years now and, recently, serious allegations have been made against it. One is that the bank lent £7.5 million to a company that is run by the brother of a bank employee — a company that was loss making and whose accounts were overdue. It has also been reported that there was political pressure to invest £9 million in Circularity Scotland, most of which has now been lost,”
Ash Regan MSP also raises questions concerning the nature of SNIB investments made to date. She asked Neil Gray (SNP) about the SNIB investing £5 million of taxpayers’ money in a firm partly owned by one of its own directors (something Disruption Banking revealed in August)
“In light of recent reports that the Scottish National Investment Bank is investing in firms that are linked to personnel at the bank, what work is the Scottish Government undertaking to improve transparency at the bank, avoid such conflicts of interest, and meet the high standards that are expected of a public entity?”
Circularity debacle
Digging into some of the examples raised by Mr Lumsden and Ms Regan requires that we talk about SNIB risk management. Why? Because risk management informs where (and how safely) the SNIB is investing our money.
And given there is still zero sign of any legally mandated advisory board for oversight, I thought we may as well attempt the job ourselves.
SNIB Chief Executive Al Denholm has admitted that risk management procedures may need updating. He informed Holyrood for example that Acts of Parliament should no longer be viewed as “reliable” mitigants to risk.
Now, let’s be fair, the SNIB is a young institution still learning to walk straight. Perhaps this represents understandable naivety? Perhaps.
However Harry Clynch pointed out to me during our interview that in the case of Circularity Scotland (CS) and the Deposit Return Scheme (DRS) (emphasis added is my own)
“given this was a flagship scheme, of the Greens and the SNP, in the Scottish parliament, many suspected there were potential political as well as commercial motivations at play. The SNP have denied this. But the Times did a piece a couple of months ago, which they obtained under FOI, found out that Nicola Sturgeon actually personally intervened in that process. I’ll allow others to draw their conclusions from that”
Interestingly, Harry also points out that the SNIB didn’t wait for any potential legal issues for the DRS to be clarified, instead ploughed straight on in. This was despite the fact that private banks proved more cautious:
“In terms of the legal issues raised it was a bit strange because several private banks were going to be involved in investing in Circularity but deliberately waited until the legal situation of the DRS could be clarified.”
Given the obvious potential for the DRS to contravene the UKs internal market act by putting up trade barriers, why didn’t the SNIB wait to invest that £9m of taxpayers money?
The private banks were waiting for that legal position to be clarified but the SNIB didn’t. It just went straight in with a £9m taxpayer investment which SNIB Chair Willie Watt has confessed might be mostly or entirely lost.
Mr Watt has subsequently told our MSPs that he “hopes” the SNIB’s bizarre taxpayer-backed investment recklessness won’t result in a 100 per cent loss.
But remember, the SNIB is “on a mission…for all Scotland”.
“I think risk has screwed this up”
Things get even more concerning at the SNIB when we examine the internal documents obtained by Disruption Banking. It casts even greater question marks over SNIB investment decision making.
Disruption’s reporting reveals a somewhat chaotic picture of high staff turnover, long running job vacancies and internal procedural problems.
SNIB Senior Executive Eddie McAvinchey reportedly said the SNIB’s risk management committees are “terrible”.
“Some of what DC [former head of investment] said was just rubbish. Our committee processes are terrible here…I think risk as screwed this up”
Disruption Banking's reporting tells of committee processes which weren’t thought through. Perhaps as a consequence of senior staffing vacancies and turnover, “there was no true accounting or appropriate experience to approve deals”
Perhaps this goes some way to explaining why the SNIB has a pathetic 2 per cent return rate on its taxpayer funded £460m investment? There is a picture forming of an organisation potentially unable to adequately vet potential investments using your money.
Funnily enough, the SNIB’s Scotsman advert-feature didn’t address any of this either. But recall, it’s on a “mission” to help you “thrive”. Sadly adequate risk management procedures when dishing out taxpayer dosh isn’t thriving inside the SNIB, so it seems to this former lecturer.
Lack of transparency
Another thing which doesn’t seem to be thriving inside the SNIB is transparency.
According to Harry Clynch’s excellent reporting, the SNIB made a taxpayer-funded investment of £7.5m into a loss making firm that had not filed company accounts for two years.
It just so happens that the firm in question was run by the brother of an employee of the SNIB (the SNIB insists all due diligence has been followed). All of which rather raises the issue of potential conflicts of interest when deciding how to undertake investments using your money.
Do you feel like the SNP created SNIB is helping you “thrive” yet?
What’s needed going forward
We need less engineering of consent and more straight answers to fair questions. If the SNIB is to succeed in its laudable purpose we would all benefit from it (and the SNP) spending less time manufacturing public support and more time addressing the outstanding issues.
I fully concede there could very well be perfectly reasonable answers addressing all the issues my and Harry Clynch’s reporting has raised. But we are yet to hear them.
What is surely beyond all doubt is the pressing need for the legally mandated advisory and oversight board to be established. After three years, being told by SNP ministers to wait for 2024 to hear more details is far from sufficient. If public confidence in the work undertaken by the SNIB is to be maintained, transparency and oversight are essential prerequisites.
On a personal note, I continue to be amazed the SNIB story emerging hasn't made more press headlines. Naturally for my own part I hope to provide some remedy for this, pointing others in the direction of all the above points.
Finally, I would gently suggest to the bigwigs in the SNIB that maybe it’s a tad cynical to be pushing paid ad-features when key questions remain unaddressed?
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Alternatively why not make a one-off donation? All support is appreciated
John C. Livingston & Robert G. Thompson (1966) The Consent of the Governed, 2nd edition, page 11, Collier Macmillan