Highlands advice and South's "Aye Been" mentality

DOUG COLLIE reports on reaction to the proposed South of Scotland Enterprise Agency 

The publication of more than 240 responses to the Scottish Government's consultation on the establishment of a South of Scotland Enterprise Agency (SOSEA) has thrown up a complex range of issues which must be addressed if the region's failing economy is to be turned around.

It is clear SOSEA will not be short of ideas and proposals when it gets down to business in 2020 with the aim of achieving similar results to those chalked up at the other end of Scotland by Highlands & Islands Enterprise (HIE). No doubt HIE will be a hard act to follow.

But a number of the written submissions refer to an "Aye Been" attitude which may have stifled economic prosperity in the Scottish Borders and Dumfries & Galloway by resisting change in the past. Now there are calls for a radical approach following the comparative failure of conventional methods of promoting business expansion, inward investment and tourism.

The scene is set in a submission on behalf of Scottish Borders Council by its chief economic development officer Bryan McGrath.

He points out that the territory to be covered by SOSEA makes up one seventh of Scotland’s total land area with 24 people per square kilometre, the most sparsely populated area outside of the Highlands & Islands; low wealth creation (Gross Value Added (GVA) per head in the South of Scotland is £19,793 equating to 79.5% of the national average (£24,876 for Scotland}; low average weekly wages – the median weekly wage for all workers in the South of Scotland is roughly £467 (£467.8 in SB and £466.5 in D&G – 29th and 30th respectively amongst the 32 local authorities across Scotland). This is significantly below the national average of £547.30.; out-migration of young people and shrinking workforce - in 2017 the proportion of people of working age 16-64 was 58% in the South of Scotland compared to 64% for Scotland. 

Another of the issues pinpointed by Mr McGrath is low Gross Value Added – GVA per worker in the South of Scotland is 20% below the Scottish average, demonstrating that there is a significant productivity gap in the region. A key objective should be to close this productivity gap to the national average. Adding 20% on to the GVA would contribute over £750 million a year to the South’s economy.

Then there is the small matter of low investment in Research & Development – in the South of Scotland, business investment per head is £50, while the national average is almost four times higher at £198.

According to Mr McGrath: "We must be willing to take a long-term view of what we are trying to achieve in the South of Scotland and what it will take in resources and collective effort to deliver it. A particular priority could be supporting the regeneration of the more economically fragile towns and town centres, and rural communities."

He adds: "Critically, the Agency will need to break the cycle which sees an outflow of well-educated young people from the South of Scotland, leaving the area light on the skilled workforce which would attract more specialised higher paying businesses."

There are a number of interesting suggestions from HIE which produced a detailed report setting out its views and offering its support for the fledgling SOSEA.

Like Mr McGrath, HIE warns: " It takes considerable time to turn around an under performing economy and the new agency must be able and empowered to take a long-term view. We would support a focus on inclusive growth and therefore suggest that an appropriate aim may be to reduce the economic disparity between the South and the rest of Scotland, while contributing strongly to Scotland’s economic prosperity."

The HIE submission says: "Our ambition for the South of Scotland is very much based on our experience in the Highlands and Islands. When HIE’s forerunner was established in 1965, it was as an innovative model to halt and reverse enormous economic disadvantage that was then affecting all parts of the Highlands and Islands.

"Fifty years on, the region is a very difference place. Population has grown by 23% (compared to 3% across Scotland over the same period) - reflecting the growing attractiveness of the region as a place to live, work, study and invest. The business base has been broadened from traditional industries to encompass life sciences, creative industries, energy, universities, and business services, while food and drink, and tourism remain strong contributors. Similar diversification is required in the South of Scotland."

A number of commentators have claimed the new Agency will fail in its objective unless it has a similar sized multi-million pounds budget to that enjoyed by HIE. And that appears to be borne out by HIE itself.

 The Highlands submission explains:"Over the years, HIE has taken a number of bold and ambitious decisions to provide catalysts to the region’s development. Examples include: The University of the Highlands and Islands; the development of the European Marine Energy Centre (EMEC) in Orkney - the world’s first grid connected wave and tidal test centre; the successful inward investment of Inverness Medical (now LifeScan Scotland, part of Johnson & Johnson) – the catalyst for a regional life sciences sector and the development of Inverness Campus.

"Similar bold and large-scale investments such as these need to be an ongoing feature of the South of Scotland’s economic development. This is an exciting opportunity for the South of Scotland and HIE would be happy to continue to support, not only the development phase, but the initial delivery years of the Agency as these will be crucial to its success.

"HIE and the South of Scotland have many common challenges and opportunities, i.e. similar focus on sectors with most growth opportunities. Ongoing collaboration should be mutually beneficial in addressing these and contributing to national growth."

One of the most contentious issues for those involved in setting up SOSEA is likely to be the location for the Agency's HQ. Some of those who sent in their views claimed a headquarters in the Borders or Dumfries & Galloway (depending where they lived) would be disastrous for the other half of southern Scotland.

And one anonymous respondent put it this way: "Share resources to keep the civil service spend to a minimum;what we don’t need is another publicly funded office of 200 well paid pencil pushers in Dumfries or Galashiels."

NEXT: THE TIMBER INDUSTRY AND THE ROADS NETWORK 

Borders council's lender sued for "alleged fraud and interest rigging"

by EWAN LAMB

A bank used by Scottish Borders Council to secure a controversial £6 million LOBO loan more than a decade ago is being sued by 14 other local authorities who claim the 'rip-off' loans were fraudulent as interest rates may have been rigged to manipulate charges to the borrowers.

Councils throughout Scotland and England arranged long term LOBO loans (Lender Option Borrower Option) between 2001 and 2010 from a selection of lenders including Barclays and the Belgian bank Dexia.

Now a High Court action has been raised by a group of authorities including the councils at Leeds, Bristol, Nottingham, Sheffield and Greater Manchester. The claimants are alleging that the loans they took out between 2004 and 2010 should be rescinded with fees returned. They also want compensation for damages.

Court papers seen by a Sunday newspaper accuse Barclays of “deceit and/or fraudulent misrepresentation” as its bankers were secretly rigging Libor, which was “integral” to the rate at which LOBO loans had to be paid back.

Libor is the interest rate at which banks offer to lend funds to one another in the international market. In 2016, three former Barclays traders were convicted of conspiring to fraudulently manipulate the global benchmark rate.

It was in May 2005 that officials at Scottish Borders Council (SBC) acting on advice from Butlers' Treasury Consultancy. agreed a £6 million LOBO loan from Barclays with repayment of the principal sum due by June 2065. The original interest rate of 2.87% went up to 4.4% in 2009. In 2016 the fair value of the loan was estimated to be £10.644 million.

LOBO loans were attractive to councils as they often offered interest rates below that of central government’s Public Works Loan Board although they allowed lenders to change rates at set times in the future. Refusing to pay updated interest rates would mean councils are forced to pay back the loan in full.

This form of credit certainly proved popular with SBC, the council setting up a total of eleven LOBOs with a total value of £43 million. The true value of all eleven is now in excess of £70 million, according to figures supplied to a Freedom of Information requester two years ago.

A spokesman for the campaign group Debt Resistance UK, said: 'Having campaigned for councils to file fraud cases against the banks since 2014, we are thrilled these local authorities have finally stepped in to protect local taxpayers by filing fraud claims against banks which brought our economy to the brink. Ten years after the crash it is councils which are now facing bankruptcy to pay for the bankers bailouts.

'We are aware that 240 councils have rip-off LOBO loans. We're now calling on the other 226 councils with LOBO loans to file legal action against Barclays, RBS, Dexia, ICAP, Tullet Prebon and CAPITA."

No fewer than six of SBC's loans are with Dexia Bank. In 2004 and 2005 the authority borrowed £24 million in total from the Brussels-based bank.

In 2011 Dexia was the subject of a massive £3.4 billion bail-out by the Belgian Government after it encountered serious liquidity problems. It then became known as Belfius Bank. More recently there have been stories in the press and media linking the financial institution with revelations in the so-called Paradise Papers with allegations of money laundering and tax evasion.

Research by Unite the Union in 2016 on the state of debt in Scottish local government concluded that the equivalent of 26% of SBC's council tax income was used to service outstanding debts. The total collected from council taxpayers was £46.1 million with £11.806 million being swallowed up by interest and capital repayments on loans.

Barclays has so far declined to comment on the High Court action by 14 of its local government clients.

Code of conduct or secrecy charter?

DOUG COLLIE on yet another measure to keep sensitive local government information from public view

In a land where members of the public have been regularly frustrated in their attempts to prise potentially embarrassing material from the 'top secret' files held by their local council, it was often a tip off to a trusted and reliable journalist by a 'friendly' councillor which managed to tear the odd veil of secrecy to shreds.

But now any elected member of Scotland's 32 local authorities who might be thinking of passing a confidential document to his local paper or contemplating an off-the-record chat with her local radio station might think twice before spilling the beans.

A revised Code of Conduct for Scottish councillors warns that they must respect the confidentiality of any information classified as private which might be given to them during the course of their work.

This rejigged secrecy clause in the code almost certainly means that any snippet of information deemed to be confidential by a local government officer or a fellow member must not be passed on to anyone.

Any individual 'leaking' this private stuff and thereby breaching the code could face a five year ban from public life if caught and 'convicted'. Other sanctions include periods of suspension from council duties.

Here's what sections 3.16 and 3.17 of the newly issued code says about maintaining a wall of silence:

"Confidentiality Requirements 3.16 Council proceedings and printed material are generally open to the public. This should be the basis on which you normally work but there may be times when you will be required to treat discussions, documents or other information relating to or held by the Council in a confidential manner, in which case you must observe such requirements for confidentiality.

"3.17 You will often receive information of a private nature which is not yet public or which perhaps would not be intended to be public. You must always respect and comply with the requirement to keep such information private, including information deemed to be confidential by statute. Legislation gives you certain rights to obtain information not otherwise available to the public and you are entitled to exercise these rights where the information is necessary to carry out Council duties. 

"Such information is, however, for your use as a councillor and must not be disclosed or in any way used for personal or party political advantage or in such a way as to discredit the Council. This will also apply in instances where you hold the personal view that such information should be publicly available."

It would seem from this catch all regulation that there will be little point in locally based journalists inviting councillors out for a pint or a bite of lunch in hopes of a story. And, of course, the reporters' expenses claims will be diminshed too.

One former councillor told us: "I know from experience that far too much information and far too many reports are kept under wraps while far too many meetings take place in private.

"This new code will only make matters worse, and it is to be hoped efforts will be made to ensure knowledge of interest to council taxpayers isn't stifled even if it shows a council in a bad light. As it stands these clauses in the code amount to a virtual gagging order".

Freedom of Information has helped to lift the lid on a number of topics which councils would rather have kept as skeletons in their cupboards. But far too often documents have been censored to protect the identity of those public servants guilty of costly cock-ups.

The last thing the local government service requires is yet another weapon to protect it from public scrutiny. But will there be "code breakers" out there willing to take a chance?

Local MPs well above average...with expenses' claims

EXCLUSIVE by DOUGLAS SHEPHERD

The four Conservative MPs who represent constituencies across the south of Scotland and north Northumberland between them claimed more than £237,000 in costs and allowances last year, each of them surpassing the average figure paid to all 650 members of the House of Commons by a wide margin, according to an unofficial expenses website.

And while remoteness from London might be cited as a reason for the four's sizeable expenses bills on top of their £77,379 salaries there are various examples of MPs representing areas much further north who claimed considerably less.

The official expenses statistics for 2017/18 published at the weekend by IPSA (Independent Parliamentary Standards Authority) are different from those posted on the website www.mpsexpenses.info. It estimates a total sum of £26.267 million having been paid out by the Parliamentary authorities covering a total of 144,844 items claimed for. That produces an average claim per MP of £40,410 in respect of items including travel, accommodation and office costs.

Both sets of statistics show the four sitting MPs in Scottish Borders, Dumfries & Galloway and the northern half of Northumberland received considerably more than the quoted average. Here are the local statistics, first the IPSA sums with the 'unofficial' figures in brackets:

Alister Jack, Dumfries & Galloway £67,350 (£68,337); David Mundell, Dumfriesshire, Clydesdale & Tweeddale £57,330 (£58,338); John Lamont, Roxburgh, Berwickshire & Selkirk £57,727 (£58,148)  and Anne-Marie Trevelyan, Berwick-on-Tweed  £54,972 (£56,989). Mr Jack and Mr Lamont were newly elected in June 2017 which means their claims were made over a 10 month period rather than a full financial year. It means each of them submitted claims worth in excess of £1,000 per week.

The difference between the quartet's allowances and the standard figure for all Tory MPs is also substantial, according to the mpsexpenses.info calculations. The party's average expenses claim for each member amounted to £32,219, it says..

Not Just Sheep & Rugby examined the IPSA statistics for a number of Conservatives representing seats far further away from Westminster than the Border country. We found that Ross Thomson (Aberdeen South) claimed £48,717 while Douglas Ross (Moray) chalked up £50,459, Bill Grant (Ayr, Carrick & Cumnock) £33,144, David Duguid (Banff & Buchan £49,416, and Paul Masterton (East Renfrewshire) £46,809.

In constituencies close to the four seats highlighted there were a number of examples of MPs claiming considerably less than their counterparts in southern Scotland and north Northumberland.

Ian Lavery, the Labour member for Wansbeck around the town of Morpeth collected £46,817 over the full 12 months. His Labour colleague Danielle Rowley (Midlothian), also elected last June, was paid £48,550.

Meanwhile John Stevenson, the Conservative MP for Carlisle, received £46,227 while fellow Tory Rory Stewart (Penrith & the Border) claimed £35,432.

A number of Conservatives had extremely low claims. They included Jacob Rees-Mogg (North east Somerset) £1,043; Michael Fallon (Sevenoaks) £1,828, and Simon Burns (Chelmsford) £2,545.

Before becoming a MP at the 2017 General Election Mr Lamont served as a member of the Scottish Parliament (MSP) where he regularly featured in local news stories concerning allowances claims by MSPs serving South of Scotland voters. The sums paid on an annual basis to Mr Lamont tended to be considerably higher than those received by his 'neighbours'.

In 2016/17 - Mr Lamont's final full year as a MSP - he claimed £34,209 for 436 items. The 2017/18 sum of £57,727 relating to his work at Westminster was for over 460 items.

Multi-million pounds Tweed angling industry facing crisis

by DOUG COLLIE

The recent dry and extremely hot spell of weather is the latest negative issue to blight the beleaguered owners of world famous salmon angling beats on the River Tweed where five poor seasons in succession have already had a devastating impact.

Fishing for salmon has reached a virtual standstill this month as water levels drop and temperatures soar to unusual heights.

Angling activity on the main river and its tributaries has been estimated to be worth in excess of 20 million pounds per year to the economy of the Scottish Borders, supporting up to 500 jobs for ghillies, boatmen, and in the tourist sector.

The negative effects of the current heatwave have been outlined on the Tweedbeats website by Andrew Douglas Home who is an angling proprieter at Coldstream on the lower river.

His post on the Tweedbeats blog explains "After yet another boiling week Tweed salmon fishing has all but ceased. The river is at or even below, summer level and the afternoon water temperatures here at Coldstream are consistently in the mid 70sF".

Apparently only 27 salmon and five sea trout were caught last week bringing the seasonal total so far to 1,030 salmon and 254 sea trout.

Mr Douglas Home writes: "At a time when salmon numbers in Scotland are low anyway, it is a pretty disastrous situation for everyone connected with the salmon fishing industry; for fishermen and women for spoling their annual Scottish fishing holidays; ghillies and boatmen for having endless poor, even blank fishing weeks to endure; proprietors for now (most probably) having a fifth poor fishing year in a row; and tackle shops, hotels, restaurants, B&Bs, self catering accommodation, petrol stations...you name it...because they are financially much worse off, some in vulnerable, often remote rural communities".

He finishes by asking 'Is it a crisis? Well if not it is not far from it'.

The prime beats on Tweed can command rents of up to 4,000 pounds a week with affluent anglers willing to pay that much if guaranteed top class sport. Studies suggest that during a 'good' season 53,000 rod days are let on the river.

However, there were reports last year that a considerable number of days and weeks on stretches of the river remained unlet leaving some proprietors with no income for those 'unfished' periods. Only 6,577 salmon were caught by rod and line in 2017, even less than the 'poor' catch of 7,680 the previous year.

For decades it has been claimed the North-east Drift Net Fishery, off the Northumberland coast, has been responsible for the interception of tens of thousands of salmon heading for Scottish rivers, including the Tweed.

The coastal fishery has been gradually scaling down in recent years, and is due to be phased out altogether. Newly available figures show that in 2017 the 11 remaining drift net licence holders together with 47 so-called T & J nets took 9,157 salmon, well down on the total of 18,824 the previous year.

In one season alone - that of 1981 - this form of net fishing accounted for no fewer than 69,113 fish.

The grey seal colony on the Farne Islands off the north Northumberland coast - predators who are accused of preying on salmon stocks - are also blamed for the poor fortunes of Tweed anglers. And flocks of cormorants are said to be taking large numbers of juvenile fish from the river system.

All in all, the various issues outlined above appear to be having an extremely serious impact on a once flourishing Borders industry.

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Multi-million pound investment failed to impress

EXCLUSIVE by EWAN LAMB

Elected members of Scottish Borders Council agreed in 2013 to move more than four million pounds of cash from hundreds of local trusts and charities they administered into a single investment fund with a performance target of LIBOR - the London offered bank rate - plus four percent.

But despite promises that yields from the Newton Real Return Fund [NRRF] "should increase the income of all the entities moving funds out of the council", the fund consistently failed to hit its ambitious targets and produced much lower than expected returns over four years.

The disappointing dividends generated by NRRF prompted the council to spend 15,000 pounds on commissioning accountants KPMG - auditors of both SBC and Newton's at the time the multi-million pound deposit was made - to recommend an alternative investment fund for the cash. As a result all of the money has now been switched to the Kames Capital Diversified Income Fund in a bid to improve the situation.

Newly published annual accounts for the various local trusts including the region's seven Common Good Funds show that 'disinvesting' from Newton - a move approved by the council last December - has cost these seven town funds a total of 101,000 pounds.

The poor performance of investments of Common Good monies - some 2.6 million pounds - has been a bone of contention for many years. Prior to 2013 the money had been earning less than 0.5% in SBC's own loan fund.

It had been thought professional advisers and fund managers would boost the various kitties. So all 32 Borders councillors who are the nominated trustees responsible for the various local funds and bequests will no doubt be hoping Kames Capital comes to the rescue.

The 2013 decision to invest in NRRF, a subsidiary of the Bank of New York Mellon Corporation, meant combining the cash assets of a range of entities under council control and sinking it into a single fund.

As well as the money from the Common Good funds the mass transfer also involved most of the assets from around 290 separate organisations, 112 of them registered charities. A number of these were formed originally to look after money gifted by generous Borders benefactors in the Victorian and Edwardian eras.

This diverse range of trusts include : Anderson Trust “For the poor of Selkirk” - balance in 2013 2,053 pounds; William Forrester’s Bequest “Poor and distressed, Galashiels” 23,493; Mary Allan Bequest “Peebles Senior Citizens”3,981; James Hart Trust Fund “Spinsters – Selkirk” 5,937; Colvins Fund “Poor in parish of Lauder” 4,130; Dunlop Bequest “widows and spinsters – Duns” 93,471; Katherine Veitch Memorial Fund “women of Jedburgh” 17,562; Marion Law Bequest “Aged and Poor in Hawick” 8,533. 

It was also decided to invest a 420,000 pounds bequest made to Scottish Borders Council by the late George Knox, a former town clerk of Galashiels who left instructed that the money should be used for the benefit of elderly people in the town. And a further 155,000 pounds from the William Hill Trust, based in Melrose, also went into the Newton Fund. Mr Hill was another wealthy benefactor who died in 1974, and his trust has already provided many financial contributions for local organisations.

The recommendation made in 2013 to put all of the council's eggs in one investment basket was accompanied by a report which claimed: "The use of the approved Common Good and Trusts Investment Fund should increase the income for all of the entities moving funds from the Councils Loans Funds, where they currently earn less than 0.5%, to the new investment fund, which has a performance target of LIBOR + 4%."

"Since these investments are seen as being for medium and long term holding no significant risk to the financial position of the funds is identified."

The report went on to stress: " There are positive impacts upon the quality of community life and improvements in local amenities. The potential improvement in levels of income through the use of the new investment fund will act to make a number of the funds more sustainable in the future."

Unfortunately things do not appear to have worked out that way. It is believed several stakeholders in the Common Good funds expressed dissatisfaction with the returns on investment which were typically in the 1.8% to 3% range.

A report presented to the Jedburgh Common Good Fund Committee in December 2017 admitted: "The Capital and Investments Manager advised that the Newton Fund had once again delivered a negative return (-0.6% against benchmark of +1.1) in the quarter to 30 September 2017. General hedging against risk within the portfolio had contributed to this negative return and negative returns from corporate and government bonds were also seen.

"This negative quarterly return had resulted in a 5 year rolling return which was below the 5 year benchmark, which the fund was ultimately measured against (3.6% against benchmark of 4.4%). The fund has delivered below benchmark performance in the last 5 quarters."

Meanwhile the William Hill Trust committee was told a few weeks earlier: "The Council's Investment adviser KPMG was commissioned to evaluate and report on the continued suitability of the Newton Fund going forward. KPMG have concluded this assessment and have indicated there are more attractive options available within the market which would provide improved performance, whilst continuing to provide reasonable rates of income (through dividends) as well as capital preservation."

Then the common good committees were informed earlier this year that as part of the move from Newton to Kames the fee of 15,000 pounds had been incurred for the role of KPMG, the council's pension fund investment adviser, in selecting and recommending Kames Capital as the replacement for Newton.

The Common Good fund accounts for 2017/18 show a net reduction in funds of 289,000 (reduction in 2016/17 was 150,000 pounds) from 13.745 million pounds, including property and land to 13.456 million pounds. The Governance Costs - the sum charged by the council for administering the funds - increased last year from 48,000 pounds to 57,000 pounds. Income from investments was up slightly from 69,000 pounds to 75,000. That represents a 2.8% return on the 2.659 million pounds invested.