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The SNP: Inside a party in crisis

First Minister Humza Yousaf has come under intense media scrutiny in relation to his party's finances

The SNP: Inside a party in crisis

The SNP is a party in crisis. We may not have realised it when the police started investigating its finances in the summer of 2021, or when treasurer Douglas Chapman stood down almost as soon as he was elected after being denied access to the books – the very thing a treasurer needs to properly do their job.

We may not even have known it when the party was forced to reveal it had lost tens of thousands of members in just over a year, or when its chief executive – former leader Nicola Sturgeon’s husband, Peter Murrell – was ousted then arrested. It started to look likely when a video emerged of Sturgeon chastising colleagues for questioning the state of the party’s finances, giving the lie to claims she had been in the dark about any emerging issues. It looked likelier still when Colin Beattie, the long-standing party treasurer who served in that role both before and after Chapman, was last week arrested too.

Colin Beattie resigned as SNP treasurer after being arrested by Police Scotland and released without charge

Now that Beattie – who, like Murrell, was “released without charge pending further investigation” – has resigned we can be in no doubt. Newly anointed First Minister Humza Yousaf, who just a few weeks ago had never set eyes on the SNP’s books, has been forced to fill Beattie’s shoes, with both the SNP’s constitution and Electoral Commission rules requiring the party leader to step up.

It is not the start that Yousaf’s administration had been anticipating. The aim had been to get everyone talking about government priorities and plans for a wellbeing economy. Instead, the news agenda was dominated by reports of Deputy First Minister Shona Robison defending her new boss’s integrity while Yousaf himself has had to justify his decision not to suspend longstanding colleagues from his parliamentary group. Meanwhile, as he prepared for just his second outing in the hot seat at First Minister’s Questions, all anybody could talk about was whether his predecessor – the person Yousaf had repeatedly billed as the best politician in Scotland during the leadership campaign – was going to be arrested too.

While the exact nature of the police’s SNP investigation is not yet clear, what is known is that it relates to over £600,000 raised by the party with the explicit aim of funding a second independence referendum campaign. In March 2017 the party launched a website to raise £1m for the cause. The campaign raised close to £500,000 before being closed when the SNP put in a lacklustre performance at that year’s general election, but a subsequent fundraiser mounted in 2019 took the total closer to £660,000. The party has always claimed the money has been “ring-fenced”, but its bank balance – which sits nowhere near that level – appears to suggest otherwise. 

In the corporate sector such funds would have to be held in a separate bank account, with stringent laws determining how different pots of money must be accounted for. In the charities sector the Charity Commission has strict guidance on how restricted and unrestricted funds should be dealt with – if a charity says it is raising cash to pay for watering cans then that money has to be set aside and used to buy watering cans.

The Electoral Commission has no such rules, though. Members of a political party might give cash in response to a particular campaign, but, unless its own rulebook states otherwise – and the SNP’s, which was last updated in 2020, does not – if a party decides to use the money for other things, that’s its business. So the £2,000 the SNP had left over from a 2010 fund raised to take action against the BBC – action that was ultimately dropped after a judge said it “lacked requisite precision and clarity” – and the £500 bequeathed to erect a flagpole outside party offices are therefore fair game. 

The problem is, people from right across the Yes movement contributed to the indyref2 fund and, while it might – grudgingly – be possible to persuade SNP members of the rationale for using their money for general party purposes, members of the Scottish Greens, Labour for Independence, or indy-supporting individuals are far less likely to acquiesce. Hence multiple calls to the police.

First Minister Humza Yousaf has fielded repeated questions from journalists about the state of the SNP's finances

Though the police have been investigating the party’s finances for the best part of two years, it was easy for the SNP to take the ‘nothing to see here’ stance as long as it had an auditor for its accounts in place. The job of an auditor is, after all, to validate the integrity of an organisation’s financial processes and reports. From at least 2009 until 2021 Johnston Carmichael was willing to do that for the SNP. Yet the party’s accounts show that, latterly, it did so in an ever-more cautious manner. 

In 2017 – the same year the indyref2 fund launched – the auditors started putting additional health warnings on their work, with the accounts for that year including a 1,500-word caveat that had never been inserted before. Noting that the national treasurer is responsible for preparing the financial statements, Johnston Carmichael added lines about “exercising professional judgment” and “maintaining professional scepticism throughout”. 

By 2021, the year the police were called in, the auditors’ note included passages about “making enquiries of management and those charged with governance” and how “related party transactions and manual journal entries” were assessed as “having a heightened risk of fraud”. It is not unusual for accountants to heavily caveat their work, but the level of these additions – and the language used – is extreme. “There seems to be a lot of it,” one accountancy source confirms. 

 Major political parties don’t tend to go bankrupt – some have periods carrying huge debts but they tend to survive through major retrenchment or donors coming to the rescue

Johnston Carmichael has refused to comment on why it chose to end its relationship with the SNP, saying only that it “adheres to obligations on client confidentiality and does not discuss client business”. The fact it gave up the mandate before the 2022 financial year had ended means it likely had nothing to do with the firm being unable to sign off the full-year accounts on a going-concern basis.

Rather, the fact that Johnston Carmichael earned an average of just £23,000 a year for auditing the SNP’s accounts is a far more likely reason for the split. Though that figure had more than doubled to £57,000 in the year the police investigation was launched, for a highly profitable firm with a turnover of £62m it is still very far from a significant sum. Earning a tiny fee to be associated with a party whose finances are being publicly scrutinised is one thing; earning a tiny fee to be associated with a party whose financial practices are being investigated by the police is very likely not worth the reputational risk. 

Yousaf says he is committed to appointing both an interim treasurer and a new audit firm as a matter of urgency. It is likely to be easier said than done.

The SNP’s former business minister, Ivan McKee, told the BBC’s Good Morning Scotland programme last week that part of the problem the party is facing is that “there are more businesses looking for auditors than there are auditors available”, and it is certainly true that the number of audit firms in the market has shrunk massively in recent years. Consolidation has taken out many of the smaller players this type of low-fee work would typically go to while the consolidators would not want to risk alienating the lucrative clients on their roster by taking on work that could give the whiff of political bias. The accountancy source says it will not be impossible for the SNP to find an auditor willing to review its accounts – “there will always be an aggressive little firm willing to take something like that on” – but the pool it has to choose from is vanishingly small.

The Glasgow home shared by former SNP leader Nicola Sturgeon and her husband Peter Murrell, the party's former chief executive, was searched by police earlier this month

This matters because without professional advisers the party will be unable to file audited accounts for 2022, something it must do by July this year to avoid breaching its responsibilities under electoral law. Not filing will create a problem for the SNP’s Westminster group in particular as it relies on the short money all opposition parties receive to help with running costs. In 2021 the SNP received just under £938,000 from this source, but if it cannot produce an auditor’s certificate verifying its expenses for 2022, that money will be lost.

But, just as the Electoral Commission has no rules around how party money is held, nor does it take a particularly tough stance on parties that do not comply with their electoral responsibilities. A spokesperson confirms that the commission would deal with breaches on a case-by-case basis, preferring to work alongside parties to find solutions and only taking enforcement action as a last resort.

Unlike Companies House, which can strike off a business that does not file accounts within a set period of time, the Electoral Commission has no power to deregister a party and the most stringent enforcement action it can take is imposing a fine of up to £20,000. Notably, when the SNP failed to declare that Murrell had loaned it over £100,000 in 2021 – £60,000 of which is still owed to him by the party according to filings –  the commission took no action, pointing to the SNP’s positive compliance history as a reason for giving it only a ticking off.

There has been much speculation that the resignation of Johnston Carmichael means the SNP is no longer a going concern, but even if a party is bankrupt no action would be taken against it – funding ongoing activities would prove difficult but MPs and MSPs could continue to sit and, according to University of Edinburgh public policy professor James Mitchell, so long as it had the support of parliament, the SNP government could remain in place. 

That may or may not be moot, given that Stuart Wilks-Heeg, professor of politics at the University of Liverpool, notes that “major political parties don’t tend to go bankrupt”, because while “some have periods carrying huge debts they tend to survive through major retrenchment or donors coming to the rescue”. Historically, that has been the case for the SNP, which, despite outspending its income in 11 of the past 20 years, has managed to keep going due to a huge uptick in fee-paying member numbers post-2014 as well as a number of hefty and well-timed one-off contributions. Indeed, while the party was running with a deficit of almost £306,000 at the end of 2010 – the year before Salmond won his historic majority at Holyrood – the following year it was gifted £1m from National Lottery winners Chris and Colin Weir, a legacy of £918,000 from former Makar Edwin Morgan and £570,000 from Stagecoach founder Brian Souter.  

But there’s the rub. Since 2017, when donations stood at £1.4m, the party’s legacies have been in decline, with just £695,000 being pledged in the 2021 financial year. With membership numbers falling, subscription income is expected to drop too. In 2021, the party received £2.5m from 104,000 members. Though the amount each member pays clearly fluctuates (in 2019 a higher number of members paid a lower level of combined fees), if the average amount remains unchanged – and the number of members remains at the 72,000 the party said was on its register during the recent leadership campaign – that would result in an income in the region of £1.7m. It is a significant drop to be dealing with in the run up to an election year. 

The SNP's headquarters in Edinburgh were also searched as part of the police probe 

The irony of the situation is that in an ignored 2021 governance review that Yousaf has promised to revive, the SNP’s deputy leader Keith Brown wrote that the downside of gaining so many members in such a short space of time was that “new challenges have emerged in terms of how the party manages its finances and how it shares financial information at appropriate levels”.

The SNP tried to deal with that issue by rewriting its constitution to create a more professional-looking “mass-membership organisation”. It did that in such a cack-handed fashion, though – locking out branch members that had formed the grassroots of the party for decades and appearing to hand National Executive Committee places to what one disgruntled member terms “spotty youths” – that many members started voting with their feet. It should come as no surprise that the former chairman of a north east branch who used to use British Legion drinking sessions to cheerlead for the SNP has hung an Alba poster in the window of his living room. 

If the SNP looks like a party in disarray that’s because it is. But, just as the party has shown itself unable to satisfactorily manage its own affairs, it has proved itself lacking when it comes to managing the country’s affairs too. Report after report from Audit Scotland has criticised the Scottish Government for actions such as handing cash to bankrupt fabrication businesses and awarding hugely lucrative contracts to ferry companies that seem unable to produce a ferry. 

Last summer Auditor General Stephen Boyle told Holyrood that the government needed to be “more transparent” on how public money is spent, with a lack of detail making it impossible to scrutinise the terms of several large and complex deals. In November, Fraser of Allander Institute director Mairi Spowage told the magazine ahead of the Scottish Budget that making sense of where the government gets its money from – and how it spends it – was proving difficult. “They are saying they’re being transparent about where they get the money from but people like us who are analysing it are a bit confused,” she said.

Professor Mitchell says the troubles surrounding the SNP mean the Scottish Government “already looks like a lame duck administration”. If the party fails to get its house in order and file its accounts by July, he says, “the governing party would be weakened, and the already weak position of the SNP leader and first minister will be weakened further”. 

That Yousaf has started his term as first minister in a weakened state is already clear. When parliament reconvened after the Easter recess he had hoped to move the political debate on to discussion of his plans for government, with a statement billed as Our Priorities for Scotland scheduled for the first sitting day. His mission, he said, is to “build a fair, green and growing economy, improve our public services [and] improve the lives of the people of Scotland”. It was not what anyone wanted to talk about outside the Chamber, though, with the highlight of the day being a video of the first minister saying he does “not believe” the SNP is operating in a criminal way and that he is “of course” surprised that one of his colleagues had been arrested.

With questions about when, not if, his predecessor would be arrested hanging over his first full week in the top job, Yousaf – billed just a few weeks ago as the Sturgeon continuity candidate – even had to distance himself from many of her government’s policies. The fight over gender reform goes on, but the controversial Deposit Return Scheme has been kicked into the long grass, public health-related proposals for a ban on alcohol marketing have been torn up, and Yousaf’s own supposedly game-changing health proposal – the National Care Service – has been paused and possibly binned. Far from representing a continuation of what went before, Yousaf has been forced to turn himself into a replica of what his main leadership rival – Kate Forbes – had promised she would be. As Forbes said during the campaign – presciently, as it turns out – continuity won’t cut it.

This is not just a crisis for the SNP, but for the government and country too. These are deeply troubling times for Scotland. 

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