Scottish National Investment Bank facing 'barriers' due to Treasury rules, watchdog says

The Scottish National Investment Bank will not end its reliance on public funding unless ministers convince the UK Treasury to change its rules, a watchdog has said.

Launched in 2020, the bank has made "good progress" in its first years, according to a new report from Audit Scotland.

The Scottish Government pledged £2bn over a decade as a basis for its investments into start-ups, with £785m used to back more than 40 projects so far.

The work kas attracted £1.4bn in private sector funding and created or supported more than 3000 jobs.

In 2023-24 it generated income of more than £19m, a sum in excess of its operating costs.

Audit Scotland said it has been "well run to date", with a "rigorous process for investing public funds".

But the watchdog said existing financial rules are a "barrier" to the bank's aim of ending its reliance on public funding.

Scottish budget rules stop it from carrying any unspent funds into the next financial year, Audit Scotland pointed out, and Treasury rules mean the bank is unable to keep financial returns and reuse them for future investments.

Without a change in the rules, it said Scottish ministers must continue to provide annual capital allocations. 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 it "underlines the positive impact the Scottish National Investment Bank has had on the investment landscape" and notes the "sound arrangements" on governance, accountability and risk management.

She went on: "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."