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2-11-2002 Scotsman Investment dream a costly nightmare By GETHIN CHAMBERLAIN CHUNGHWA, Hewlett-Packard, Alcan, Lite-On, Motorola, Hyundai. How much did the failure of Scotland's investment policy cost Scotland's 2.3 million taxpayers? 10 million pounds? £100 million? £1 billion? Who can put a figure on how much money was ploughed into a discredited dream? Regional selective assistance, the money used to lure companies to Scotland, now costs the taxpayer £80 million a year. In the last five years, £641 million has been paid out to 1,089 companies. Add the investment in infrastructure which inevitably came with each failed project, top it up with rent rebates, deferred charges and favourable rates, then throw in a hefty dose of desperation to drag the Scottish economy out of years of underperformance and into a new dawn of long-term economic success and what do you have? Not £10 million, certainly. Even after some of the money has been recouped, it is probably safe to start at £100 million and work upwards. In truth, the full price of the failure of the Scottish Executive's programme of inward investment in the 1990s may never be known. Yesterday the Executive's number-crunchers were frantically hammering away at their calculators trying to work out how much they had handed over to Chunghwa, the Taiwanese picture tube manufacturer which on Thursday announced it was leaving Scotland after five years and axing 600 jobs at its North Lanarkshire plant. Scottish Enterprise believes the sum expended is insignificant in comparison with the amount the companies themselves ploughed into the country. And even the SNP, the Executive's most vocal critic on the subject, is at a loss as to how much each taxpayer has handed over. Even with estimates of £80,000 of taxpayers' money subsidising the employment of each of the 600 people employed by Chunghwa at its Mossend plant, it is by no means the most costly of the firms which were drawn to Scotland by the favourable deals on offer. What it does represent, however, is another nail in the coffin for the Scottish Executive's now-abandoned dream of attracting massive foreign investment to the country by throwing more money at multinational firms than anyone else was prepared to pay. Coupled with the concept of cluster developments, grouping together all the companies needed to manufacture a complete product, the plan was to create thousands of jobs by providing a favourable environment in which major companies could do business. But the reality was that although companies were happy to take the cash while it was on offer, they were less enthusiastic about remaining in Scotland over the long term, and over the last four years there have been a series of high-profile departures. The decline began in 1998, with Hyundai's decision to mothball its £2.4 billion part-built semiconductor plant in Fife, destroying the prospect of the creation of 2000 jobs . US electronics firm ViaSystems shut two factories, in Selkirk and Galashiels, and another 922 jobs went down the drain. Now Chunghwa, once hailed as Britain's biggest inward investor , has gone. What should have been the jewel in the crown of the inward investment policy, creating 3,300 jobs and ensuring that new products would not only be built but also researched and developed in Scotland, succeeded in producing just 600 jobs by the time it closed. Others have also walked away with full pockets thanks to the generosity of the Scottish taxpayer. Alcan was handed £5 million in regional selective assistance. Lite-On handed back its £2.7 million RSA grant and Hewlett-Packard and Hyundai both missed out on such grants, but out of the £50.75 million which found its way onto Motorola's balance sheet, only £16.75 million has been recouped, leaving the taxpayer £34 million out of pocket. On top of those sums, the companies will also have agreed individual deals with local authorities keen to offer rebates on rates if it meant bringing in jobs. The experience has taught the Scottish Executive a lesson it will not forget. With the Motorola closure came the realisation that the policy of throwing money at overseas companies was no longer a viable proposition and the economic aftershocks of 11 September only confirmed the wisdom of that decision. Annual inward investment to Scotland slumped from more than £1 billion to less than £300 million. Until the Motorola closure, 60 per cent - about £70 million a year - of the RSA budget went to overseas companies. The Executive concluded that the ration had to be reversed, with money going into the development of indigenous companies which would not disappear overseas when the going got tough. But despite the sea change, critics fear the Executive still has lessons to learn about safeguarding the money it hands over to encourage inward investment. Andrew Wilson, the SNP shadow enterprise minister, yesterday questioned whether rules on the use of public money to support inward investment had been breached. "Someone, somewhere, has been incompetent," he said. "This was a worthy idea but it was based on offering low costs and subsidies, not on making Scotland a more productive economy. Scotland was desperate to attract inward investment so they tried their best to pay top dollar to get companies in but it was a policy to deal with the symptoms of economic underperformance rather than to give us long-term economic muscle." At Scottish Enterprise, however, the view appears to be that the companies involved have suffered far greater financial losses than have been incurred by the public purse. A spokesman explained: "If there is going to be a loss, it is them that will feel it. Clearly the taxpayers' money is an issue, but in the scheme of things it is always a smaller part of the money paid out. It is not as bleak a situation as people make out." The Scottish Executive is unlikely to take such a relaxed view about the millions it has handed over in good faith. Its task now is to try to recoup as much of that money as possible. Yesterday, it remained optimistic that it would recover a "significant" proportion.
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................................................................................................................. Copyright ©2004 Gethin Chamberlain. All rights reserved. |
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