:00:01. > :00:10.keeping inflation high, so as to keep some people who shouldn't have
:00:11. > :00:13.borrowed the money in houses they cannot afford. Thank you very much
:00:13. > :00:17.indeed. Tonight on Newsnight Scotland: The new Green Investment
:00:17. > :00:20.Bank is to have its headquarters in Edinburgh. But how much new
:00:20. > :00:25.investment will it actually deliver, how much will be north of the
:00:25. > :00:28.border and could the whole thing be hobbled by the European Commission?
:00:28. > :00:31.Also tonight, it's part of Britain, but not the European Union. It's
:00:31. > :00:35.defended by the UK, but it sets its own tax rates and its own
:00:35. > :00:42.parliament spends its own money on what it wants. Are we watching
:00:42. > :00:45.modern independence in action? Good evening. The campaign to bring the
:00:45. > :00:46.Government's Green Investment Bank to Scotland paid off today when the
:00:46. > :00:50.Business Secretary announced Edinburgh as the headquarters,
:00:50. > :00:52.although the team raising much of the money will be in London. Was it
:00:52. > :01:02.politics or commerce? Either way nobody is complaining. But what
:01:02. > :01:06.
:01:06. > :01:11.will the Green Bank actually do? Nick Clegg said it could be based
:01:11. > :01:15.on Mars for all the difference it could be it -- it could make. Today
:01:15. > :01:20.Vince Cable said the location of the green investment bank in
:01:20. > :01:25.Edinburgh and London was crucial to its success. Edinburgh is a very
:01:25. > :01:31.good financial centre. There is a lot happening on the green industry
:01:31. > :01:36.front. London is the centre of specialist banking. We had the
:01:36. > :01:40.competition and those two cities came out on top. By the end of the
:01:40. > :01:45.year, it will be getting out good projects and be well on the way to
:01:45. > :01:49.making Britain a good leader in green investment. Edinburgh has the
:01:49. > :01:54.asset management background and green industry expertise and London,
:01:54. > :01:58.as a leading finance capital, has experience in brokering
:01:58. > :02:03.transactions. The other bidders may not have been all that serious.
:02:03. > :02:07.Edinburgh seem to be the standard. London is a financial centre. You
:02:07. > :02:11.could have put the HQ in there but it would have been lost. In
:02:11. > :02:18.Edinburgh, it says the statement about the importance of Edinburgh.
:02:18. > :02:24.It brings in a lot of activity around it. On its own, a few dozen
:02:24. > :02:28.jobs - high quality jobs - but it is the catalyst effect of putting
:02:28. > :02:32.in green investment banking and other expertise and other financial
:02:32. > :02:37.firms may see Edinburgh as a place to put their renewable energy
:02:37. > :02:42.finance teams as well. Edinburgh beat of bits from 30 other centres,
:02:42. > :02:49.claiming interest in wind and wave power and had support as falling
:02:49. > :02:54.over themselves to work permit and claim some credit. As we build up
:02:54. > :03:01.and build the public money we have committed to the bank, that will
:03:01. > :03:05.create great opportunities. When it comes to long-term investment and
:03:05. > :03:11.mobilising that large-scale investment, the Scottish financial
:03:11. > :03:18.sector excels. I hope you believe that is the reason at Edinburgh is
:03:18. > :03:25.the choice. What is a green investment bank? What is it for? It
:03:25. > :03:31.is a small acorn of �3 billion of taxpayers' money come at seeking
:03:31. > :03:37.businesses to invest in, so they can grow into mighty oaks. It will
:03:37. > :03:42.try to get �200 billion of private sector money to turn into renewable
:03:42. > :03:46.business projects, designed to reduce our reliance on fossil fuels.
:03:46. > :03:50.It is partly the Government committing money long term on
:03:50. > :03:54.preferential terms but also to get money leave it in from the private
:03:54. > :03:58.sector and on longer term horizons than the market has been willing to
:03:58. > :04:02.back. The market has come forward with a lot of money for renewable
:04:02. > :04:07.energy and new technologies but nothing like enough and nothing
:04:07. > :04:14.like on the long term basis that you need to develop them. This bank
:04:14. > :04:18.is aimed at filling the gaps the market is not yet filling. The
:04:18. > :04:23.union is seen in a positive light if the HQ of the British
:04:24. > :04:27.institution comes to the capital of Scotland, despite the looming
:04:27. > :04:31.referendum. Worth remembering the words of Vince Cable in a leaked
:04:31. > :04:34.letter to the Prime Minister. We need to remain sensitive to the
:04:34. > :04:39.Scottish dimension with the perception that Alex Salmond cares
:04:39. > :04:45.and London does not. It is about renewables but it is also a
:04:45. > :04:47.decision, driven at least in part, by politics. A short while ago, the
:04:47. > :04:50.chief executive of Scottish Financial Enterprise, Owen Kelly,
:04:50. > :04:57.came into our Edinburgh studio. I asked him what he thought this bank
:04:57. > :05:02.would invest in that a normal bank wouldn't. The whole purpose of the
:05:02. > :05:07.Bank is to address what the UK government perceives to be a market
:05:07. > :05:09.failure in that private investors are currently not investing so
:05:09. > :05:15.visually in the low carbon technology that is so necessary for
:05:15. > :05:19.the transition to the low carbon economy. In that sense, they will
:05:19. > :05:24.be investing and making up the slack, if you like, in order to
:05:25. > :05:29.ensure the process goes at the pace it needs to go to achieve the
:05:29. > :05:35.objectives. Babe want to bring in private investment, don't they?
:05:35. > :05:39.They want to put up so many of their own. If this is going to be
:05:39. > :05:43.investment in brings the private sector would not invest in any way,
:05:43. > :05:51.I presume they are aiming this at things like pension funds, what is
:05:51. > :05:54.the carrot? The carrot is the opportunity to invest along with a
:05:54. > :05:58.public sector organisation. I suppose, the reason we are
:05:58. > :06:02.particularly pleased about today's announcement is, the way to do that
:06:02. > :06:07.is to ensure you have top quality investment professionals coming up
:06:07. > :06:12.with the kind of projects that make that sort of investment attractive.
:06:12. > :06:17.It is great for Edinburgh that it has been chosen as the place to do
:06:17. > :06:24.that sort of thinking. In order to invest in some of these projects, a
:06:24. > :06:28.state needs to get a waiver, doesn't it, from European rules?
:06:28. > :06:34.Can you just explain that? My understanding is that they actually
:06:34. > :06:39.have not got that way they yet. the latter point, it is a matter of
:06:39. > :06:43.time. We understand this is a process that takes time. I do not
:06:43. > :06:48.think we should read anything alarming into the fact there is a
:06:48. > :06:52.timescale here. In terms of the reason for it, it is any state aid
:06:52. > :06:56.and European law, anything that involves the state spending manic
:06:56. > :07:01.or investing has to be approved by the European Commission under
:07:01. > :07:05.single market rules. That is what that is about. What type of
:07:05. > :07:09.spending has to be approved? Is expending a private company would
:07:10. > :07:13.not engage in? Is the European Union more concerned about
:07:13. > :07:18.investment in this sort of thing a private sector company might engage
:07:18. > :07:22.him because it might be crowding them out? The crucial thing for the
:07:22. > :07:25.European Commission is protecting a single market and ensuring that all
:07:25. > :07:32.member states or public money of any kind really does not distort
:07:32. > :07:36.the market. Obviously, there are exceptions. There are exceptions in
:07:36. > :07:41.subsidies for railways and other things. The European Commission
:07:41. > :07:47.does want to keep tight control over those things. This bank could
:07:47. > :07:52.go ahead as matters stand and invest in something which was a
:07:52. > :07:56.very long term renewables project which the private sector would be...
:07:56. > :08:00.It is almost inconceivable the private sector would put money into
:08:00. > :08:05.it. They could go ahead with that presumably because it would not be
:08:05. > :08:14.competing with anything else? Public money could not do that but
:08:15. > :08:22.Private Manning could. There is lots of investment in wind. --
:08:22. > :08:28.private money. This is about harnessing public and private money.
:08:28. > :08:38.I am curious about this European point. What am getting at is, it is
:08:38. > :08:39.
:08:39. > :08:43.it things that are not... That the private sector would not do on its
:08:43. > :08:48.own. I think in some areas, it might be theoretically possible but
:08:48. > :08:53.it does not apply with this. What can they do until they get this
:08:53. > :08:56.permission? What they can do it is what they have started doing in
:08:56. > :08:59.London already and that is preparing the organisation in
:08:59. > :09:04.getting the expertise together. That is what the announcement today
:09:04. > :09:09.is about. They have said they want to appoint the chairmen, chief
:09:09. > :09:15.executive and so on. That is part of building the banks are that it
:09:15. > :09:20.is ready to hit the ground running. Obviously, I presume people like us
:09:20. > :09:24.survive delighted it has come to Edinburgh. What the implications of
:09:24. > :09:29.the transactions team still being in London? The transactions team is
:09:29. > :09:33.part of the organisation that actually, if you like, delivers the
:09:33. > :09:38.actual investments in consultation with banks and other investors.
:09:38. > :09:41.That part of the organisation will be located in London. We always
:09:41. > :09:46.knew it would be a challenge to prise it away from London, partly
:09:46. > :09:51.because it is already up and running in shadow form. There will
:09:51. > :09:55.be a bit of inertia around moving ahead. That is where the markets
:09:55. > :10:01.are. The brain of the organisation and the headquarters functions that
:10:01. > :10:06.we always argued the best place for them was Edinburgh, and they are
:10:06. > :10:10.coming to Edinburgh. The real brain of the operation, the creation of
:10:10. > :10:16.investment vehicles and taking investment decisions, will be here
:10:16. > :10:20.in Edinburgh. Edinburgh is a centre for that kind of activity. Thank
:10:20. > :10:24.you very much indeed. Now, something of a devolutionary riddle.
:10:24. > :10:28.It is part of the British Isles but not part of the UK. It is defended
:10:28. > :10:31.by the British armed forces and its currency is backed up by the Bank
:10:31. > :10:35.of England, but it sets its own personal and business tax rates and
:10:35. > :10:39.spends what it wants on what it wants. It is not in the EU but it
:10:39. > :10:42.gets to trade with the EU. It used to be part of Scotland, then part
:10:42. > :10:52.of England and it has been independent, sort of, for 150 years.
:10:52. > :10:55.
:10:55. > :11:04.Ian Hamilton reports from the Isle When is a country not a country?
:11:04. > :11:09.When it is the Isle of Man of course. The locals would disagree.
:11:09. > :11:17.It might not be a sovereign state but the Isle of Man has all the
:11:17. > :11:22.trappings of a country. To all intents and purposes, we are
:11:22. > :11:30.internally self-governing. We have our own Parliament, our own laws.
:11:30. > :11:36.Our head of state is the Queen. We are in a very fortunate position,
:11:36. > :11:40.from that point of view, what Scotland is striving for, which
:11:40. > :11:45.already have and have had for a long time. The Manx government has
:11:45. > :11:49.no shortage of power, they can spend and raise their own taxes.
:11:50. > :11:54.The only two things they do not have control of his defence and
:11:54. > :11:59.foreign affairs. It has been suggested this small island in the
:11:59. > :12:07.middle of the Irish Sea, with a population of less than 90,000, is
:12:07. > :12:15.a perfect example of devolution. contribute to the United Kingdom �3
:12:16. > :12:21.million a year. That covers defence and foreign affairs. That is an
:12:21. > :12:26.agreed figure, which increases annually come up on the rate of
:12:26. > :12:30.inflation. That relationship has been in place for a few years.
:12:30. > :12:35.do tend to mirror Westminster legislation, particularly with
:12:35. > :12:42.benefits, pensions and the health service. We have a reciprocal
:12:42. > :12:47.agreement with the UK where we keep our benefit rates and pensions, etc,
:12:47. > :12:52.in line with the United Kingdom. On the state pension, the UK set the
:12:52. > :13:02.state pension. The Isle of Man pays the premium over and above the
:13:02. > :13:02.
:13:02. > :13:10.basic rate for local residents. island has its own currency but it
:13:11. > :13:18.is linked to sterling. The island is not and never has been part of
:13:18. > :13:25.the United Kingdom, not a member of the European Union. However, it can
:13:25. > :13:31.deal with the EU through UK membership. It has its own bank.
:13:31. > :13:38.They have attracted financial houses from around the globe. It is
:13:38. > :13:44.not just about money. They want to diversify their economy into other
:13:44. > :13:48.sectors. We have 34% in financial services and we also have a
:13:48. > :13:52.burgeoning manufacturing sector as well as a business and other
:13:52. > :13:58.sectors, such as retail and hospitality. We are doing well.
:13:58. > :14:08.There are challenges. The Isle of Man has grown for 27 years
:14:08. > :14:10.
:14:10. > :14:20.Because they are a small country, it is easy for them to engage with
:14:20. > :14:20.
:14:20. > :14:26.the government and the radical. In recent years, the Manx government
:14:26. > :14:36.has given the vote to 16 and 17 year-olds. At this public meeting
:14:36. > :14:36.
:14:36. > :14:42.about the island's health service, it is thought that it is a good
:14:42. > :14:48.example of devo max. A relationship is informal, which brings a raft of
:14:48. > :14:54.issues that I am sure Scotland will not want to follow. I suspect that
:14:54. > :14:58.Alex Salmond is after devo max and not be for devolution. The Scottish
:14:58. > :15:05.people need to be aware of the options they will be offered.
:15:05. > :15:11.Scotland has a fair bit of power over Westminster. Whereas the Isle
:15:11. > :15:16.of Man, we can't call any shots at all at the moment. Scotland does
:15:16. > :15:21.have some control of a Westminster, I feel. Do you think the Isle of
:15:21. > :15:27.Man is a good example of devo max when it refers to Scotland? Is it a
:15:27. > :15:30.good model? I am not fully aware of what devo max Intel at the moment,
:15:30. > :15:38.but if it were to end tell something equivalent to the Isle of
:15:38. > :15:43.Man, it would be beneficial for Scotland. So some dispute the
:15:43. > :15:49.independent status of the Isle of Man. They say it is just a tax
:15:49. > :15:57.anomaly of the UK. As a real model of what the Scottish people want to
:15:57. > :16:04.develop, I would say no. Scotland has shown itself as being more
:16:04. > :16:10.willing to act as an independent country. I would say that Scotland,
:16:10. > :16:19.if you do go down the road at independence, you will need to show
:16:19. > :16:24.us how it is done. A combination of land mass and population means that
:16:24. > :16:28.the differences are massive between Scotland and the Isle of Man.
:16:28. > :16:32.Perhaps there will be looking across the water to us.
:16:32. > :16:35.I'm joined now by a man who spent 15 years as Clerk to the Parliament
:16:35. > :16:38.of the Isle of Man alongside his career as a constitutional Law
:16:38. > :16:40.academic. St John Bates is currently a visiting professor at
:16:40. > :16:50.Strathclyde University and still travels the world consulting on
:16:50. > :16:50.
:16:50. > :16:56.constitutional issues. First, a few facts. What -- in what meaningful
:16:56. > :17:03.sense is it not part of the UK? is a Crown dependency, which means
:17:03. > :17:09.the Queen is head of state, but it is not actually part of the UK.
:17:09. > :17:13.in what sense is it not part of the EU? He it is part of the EU in a
:17:13. > :17:18.sense. It is an illustration of one of the problems you have just seen
:17:19. > :17:23.in the film really. When the UK joined the EU, the Isle of Man said,
:17:23. > :17:27.what about us. So did the Channel Islands. Basically the UK
:17:27. > :17:34.government response was, we are having problems getting in
:17:34. > :17:44.ourselves, do not make life difficult. You're either have to
:17:44. > :17:45.
:17:46. > :17:53.come in at some point or stay out completely. The pro to court was
:17:53. > :17:57.small and provided for what was needed at the time. -- the protocol.
:17:57. > :18:04.It was a sparse document because it was done at the last moment. It was
:18:04. > :18:10.an illustration of the problems someone else looking after external
:18:10. > :18:14.relations if you are a small place because they are doing their own
:18:14. > :18:20.thing and they are an element of that. All of these anomalies, and
:18:20. > :18:27.it is an unusual set up, isn't it the case up that is fine as far as
:18:27. > :18:33.Britain is concerned because it is so small? It is a bit like councils
:18:33. > :18:43.for small islands get to do things... They can't legislate.
:18:43. > :18:46.
:18:46. > :18:51.course. The UK and a larger -- and other states are worried about the
:18:51. > :18:57.financial aspect. If someone invests in the Isle of Man, it goes
:18:57. > :19:07.on the London market and back into London. Public attention here was
:19:07. > :19:13.
:19:13. > :19:22.drawn to the Isle of Man over the saving issues. Gordon Brown wanted
:19:22. > :19:26.to crack down on tax havens and wanted to know why there were some
:19:26. > :19:36.that were part of Britain. There are discussions about changing
:19:36. > :19:38.
:19:38. > :19:43.financial regulations to make sure the financial cannot happen again.
:19:43. > :19:47.-- financial crash. The offshore market is competitive and if you do
:19:47. > :19:56.not regulate your industry properly, you are dead in the water because
:19:56. > :20:03.you do not get a plaque listing and people will not invest. -- get the
:20:03. > :20:13.right listing. In Isle of Man they have things like the FSA and they
:20:13. > :20:19.
:20:19. > :20:27.do a very thorough job. That did not save the bank going down the
:20:27. > :20:34.drain? Of course not, but other things have gone down the drain.
:20:34. > :20:39.But there are strong links with the FSA and the equipment on the Isle
:20:39. > :20:46.of Man. In terms of the European thing, if you are part of the EU,
:20:46. > :20:52.are there disadvantages to not being a normal part of it? There
:20:52. > :20:59.are. This protocol dealt basically with agriculture. What matters now
:20:59. > :21:05.our services. They can sell insurance, but they cannot sell it
:21:06. > :21:09.directly into the EU. There has to be a bilateral individual state. If
:21:09. > :21:14.the UK had entered 10 years later, we would have been looking for
:21:14. > :21:24.something very different. Are there any parallels with the situation in
:21:24. > :21:29.
:21:29. > :21:35.Scotland? Yes. We heard in that piece about devo max. If you take
:21:35. > :21:42.the sort of, or one end of the spectrum in terms of everything it
:21:42. > :21:48.been devolved to Scotland apart from defence and foreign affairs,
:21:48. > :21:52.then defence and foreign affairs are quite close to the relationship
:21:52. > :22:01.on the Isle of Man. The other thing they had that was not mentioned in
:22:01. > :22:07.the film is that it is dealt with by unwritten rules and not an act.
:22:07. > :22:10.The convention is that the UK is responsible for defence, foreign
:22:10. > :22:20.affairs and ultimately be good government of the island. Again,
:22:20. > :22:24.
:22:24. > :22:33.the issue there would be the economy, or what the -- what an
:22:33. > :22:40.independent Scotland could do financially. What the Isle of Man
:22:40. > :22:46.does is not going to affect... there is a lot of Investment there.
:22:46. > :22:51.In that sense it is more like a council. It will not have a big
:22:51. > :22:56.effect if one council, for example, does something that is financially
:22:56. > :23:01.bad. You can look at it another way. People see it as offshore and so
:23:01. > :23:08.forth, but in fact, we use the power was to create the shipping
:23:08. > :23:17.register, Aircraft Register, a very large space industry by using tax
:23:17. > :23:23.breaks to help people. My mind boggled their. Unfortunately we are
:23:23. > :23:33.out of time. You would have to come back. Very quickly, tomorrow's
:23:33. > :23:49.
:23:49. > :23:57.That is all we have time for this A cloudy night tonight means it is
:23:57. > :24:01.not quite as cold. It makes for a rather grey start on Friday morning.
:24:01. > :24:09.The wet weather will slowly spread across Scotland and into Northern
:24:09. > :24:13.Ireland. Some drizzly conditions across the Pennines. Central and
:24:13. > :24:21.eastern England will see some brighter skies. With a hint of
:24:21. > :24:28.sunshine, temperatures could jump up to 13 Celsius. Maybe some
:24:28. > :24:35.drizzle here and there across the south-west. Most of Wales will be
:24:35. > :24:43.dry and cloudy. Same for the sudden heart of Northern Ireland. Possibly
:24:43. > :24:51.14 degrees in Belfast. It will turn whipped by the afternoon. Northern
:24:51. > :24:59.Scotland start wet, but it should brighten up. More proneness on