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FLUSHING OUT THE SCOTTISH FINANCIAL MAFIA:
The shady Case of the Glasgow Development Agency
by Billy Clark
The aim here is to examine in some detail an
organisation called Scottish Enterprise (SE) which
was invented in 1988 by Bill Hughes, at the time a
CBI boss and advisor to the Thatcher government,
now the director of Grampian Holdings. SE is the
parent body of 14 local Enterprise Companies (LECs)
and by looking in detail at one of these, the
Glasgow Development Agency (GDA), we shall see
that it represents a gathering of powerful
business/financial alliances. The information
provided here aims to inform our understanding
of the forces in operation here, how they
function and in whose interest.
When Hughes proposed the SE system, he bypassed
the then Secretary of State for Scotland, Malcolm
Rifkind, going straight to Mrs. Thatcher. This
unusual tactic was adopted because after the disastrous
fall in the Scottish Tory vote in the '87 elections,
the Scottish Office was blamed for resisting the new
economic culture through the Scottish Development
Agency (SDA). Unable to conceive that her policies
alienated the Scottish electorate, Thatcher was
already mulling over plans to scapegoat and abolish
the SDA when Hughes opportunistically knocked on
her door. We cannot fully reconstruct their
conversation, but perhaps Hughes promised to set
things to rights by transforming the SDA (created
in '75 by Willie Ross) from a child of Wilsonian
Corporatism, into a vehicle for promoting Thatcherism .
Perhaps too, he would have said something about the
deal being squeezed past the Treasury via the promise
of selling off, what could be sold of the SDA's
property portfolio (they managed to raise 100m pounds
before the slump set in), and privitising anything
else the SDA had a share in. In any case something
made Thatcher's eyes light up and two years later
the project was launched at the Dunblane Hydro. It
has hardly met with a word of praise since.
OBVIOUS CONNECTIONS
Its initial hierarchy was established as follows: at
the head of SE Sir David Nickson of the Clydesdale
Bank, General Accident, Hambros Bank and Scottish &
Newcastle Breweries. This choice alone represented a
sizable percentage of Scottish Capital and was further
enlarged with the two leaders of the main LECs in
Glasgow and Edinburgh: Lord McFarlane and Sir
Charles Annand Fraser respectively. Having the more
obvious connections to Nickson, McFarlane is the
director of some fifty or so companies, the main
ones being The Clydesdale Bank, General Accident,
The American Trust, Clansman, Edinburgh Fund Managers
and United Distillers/Guiness plc. His other
companies concentrate on the construction and
fitting out of offices from their painting right
down to the packaging the furniture comes in,
its transportation, and adhesive labels, the
lot basically : if you work in an office, go
the bank then go for a drink, McFarlane's interests
are well served. Politically we can locate him on
the Authoritarian Right, he funds British United
Industries (a somewhat secretive channel for
funding right-wing political projects), and of
course the Conservative Party, General Accident
alone donates around 50,000 pounds a year.
In the light of this it is clear that McFarlane
would readily be attracted by a steering role in an
organisation devoted to manipulating the political
climate of Glasgow towards the right, and that he
would have identified this agenda as one which
would in due course enhance his own empire. McFarlane
also seemed to have been highly aware of the
opportunity the creation of the Glasgow LEC
offered in openly manipulating the Labour controlled
District Council: and it looks like he achieved
everything he set out to do in this respect, but
we will return to this subject later.
Sir Charles Annand Fraser's interests are
similar to McFarlane's, and they have been similarly
financially enhanced through the hype of local
enterprise. He is the director of about sixty companies
including Scottish Television, Scottish Widows, Stakis
plc and United Biscuits. Fraser's main activities
are inextricably linked to Edinburgh tourism, with
Stakis and United Biscuits, and are augmented with
other interests concerning property development and
"Heritage" projects; further interests being offshore
tax-exempted trusts ( British Assets Trust, Fidelity,
Investors Capital Trust etc) dealing mostly in cash
deposits in various currencies . These are all
very large companies if not monopolising their
fields, certainly dominating them, Scottish Widows
alone makes profits of 1,000m and is the second
biggest Company in Scotland. So here we have two
rich, highly important and influential men, who
would feel insulted if we did not describe them
as motivated solely by personal gain and the
pursuit of wealth, at the head of the Glasgow
Development Agency (GDA) and Lothian and
Edinburgh Enterprise Ltd. (LEEL). The question is why?
The other question - as ever - is where is all the
money going?
A COMMUNAL SLUSH FUND
But there are more than just two men running the Scottish
Financial Mafia, the LECs as an adjunct to the process
of profiteering seems to be acting as a communal slush
fund for a fair cross section of Scottish capitalism.
If we were to examine the other directors of even one
each of McFarlane and Fraser's main companies we would
see that they are connected to almost the entire
spectrum of the nonparliamentary right who control
finance, investment and industry in Scotland. To
identify just the Banking interests alone: McFarlane
and SE boss Sir David Nickson as we have already seen
represent The Clydesdale Bank and General Accident.
General Accident's other directors include the
directors of the Royal Bank of Scotland, the TSB
and the Ottoman Bank so we have four banks there,
(five if we count Nickson's directorship of Hambros
which is a Merchant bank). One of Sir Charles
Annand Fraser's Company, Scottish Widows, contains
directors of the Clydesdale Bank, The Royal Bank of
Scotland, The Bank of Scotland and Merchant Bank
Kleinwort Benson, together with directors of the
main Scottish Investment Trusts, Murray Johnstone,
Jardine Fleming and Baille Gifford. Undoubtedly it
was these connections - and you will appreciate we
have just skimmed the surface - which would further
recommend them for the job of heading a LEC. Such
alliances are not unusual: we would find similar
groups of supposedly competing banks always in existence,
to a greater or lesser extent, if we examined any of
the top Clearing Banks, Merchant Banks, Insurance
Companies or Investment Trusts.
It should also be pointed out that the official
function of an LEC is defined as that of encouraging
enterprise by providing business with financial or
other forms of "strategic leadership and tactical
support" including the encouragement of investment
and training. It has never been openly advanced in
their own publicity material that they have, a now
somewhat anachronistic, "Thatcherite" mission, nor what
that might entail. Their involvement in local politics
is usually defined, if at all, in terms of unsubstantiated
boasts or buzzwords such as "job creation" and "inward
investment". Each of the LECs have a budget of upwards of
55m pounds, while the total SE expenditure was put at
449m pounds for the last financial year. While the overall
initial popular perception of this was that the money is
given to deserving cases, SE have made it clear that they
do not think their role is to "bail out bankrupt companies".
(Herald 1/5/93). They are however hell-bent on spending money
on themselves.
THEY LIKE TO SAY YES !
Now let us focus on the Glasgow LEC, the Glasgow Development
Agency (GDA). McFarlane recently departed his post handing
it over to Forbes McPherson (the director of the TSB, Glasgow
Cultural Enterprises, Hill Samuel Bank (a Merchant bank subsidiary
of the TSB), The Scottish Metropolitan Property Co. and Scottish
Mutual Assurance). Under his leadership the GDA has funded
several "new operations", the main ones, indeed the onlyones,
include aiding Abbey National Life in occupying the building
that BP vacated when they removed their operation elsewhere
(to be awarded 260,357 by Forth Valley Enterprise, whose
directors include Edward Ferguson of BP Chemicals). The GDA
has also funded "second round investments", passing funds to
Direct Line Insurance (a subsidiary of the Royal Bank of
Scotland ), Provincial Insurance, British Airways, Barclays
Stockbrokers, The Norwich Union and the Army Personnel
Centre, most of which as we shall see are old friends to
Bill Hughes. The GDA's 92/93 Accounts and Report gives
us an interesting insight into how they arrived at these
decisions : "Other location marketing activities
include ... participation in complementary events such as
the Scottish Financial Enterprise dinner in London ."
Some readers may have already come to the conclusion that
for a business to relocate in Glasgow it will most likely
have closed its operation somewhere else, obviously resulting
in staff dismissals, and such is the case with the examples
cited above: the Army Pay Centre for example relocating from
Ashton-under-Lyne with all the workers being sacked. If we
examine the pattern of funding we would see that the financial
institutions received funds on the pretext of training. This
too is somewhat misleading given that virtually all of the
large financial institutions have been heavily fined by their
regulatory bodies for failing to properly train their staff
and engaging in professional misconduct (thus precipitating
the massive private pensions swindle); including ofcourse
Abbey National Life and the Norwich Union (who suspended their
entire pensions sales staff as part of their re-training).
So here we have an insight into the process of how
the GDA works, which could be roughly summarised as follows:
(1) You go to a free lunch in London with a group of people
who are stockbrokers, bankers and insurance men. (2) They tell
you what to do. (3) You give them lots of money. (4) They sack
a lot of their workforce.
A NICE LINE IN........
The decision to award 250,000 to Direct Line Insurance (again
taken from the GDA training budget) did not pass without
comment by the Labour Party who called for an enquiry into
the matter. By the reactionary nature of the enquiry they
demanded, it could be easily argued that they either completely
fail to understand the reality of the function of the GDA or
are unwilling to concede their own role in it. Their posture
of outrage seems solely fuelled by the fact that Direct Line
gained a high public profile as one of the fastest growing
companies in the UK, with one of the highest paid directors,
Peter Wood, who receives a yearly salary of 6m. The Labour
Party are happy with SE as a whole, and they have to be, because
their argument that Directline should fund themselves rather
than dip into pork barrel, while being morally inspiring in
an abstract way, directly intertwines with the process of
Labour Party patronage, as we shall see below. One could
also say the same concerning the fuss made over the fact
that a great deal of the LECs, all of them it would seem,
have been awarding funds to companies owned by members of
the LECs. Direct Line is not run by anyone on the GDA,
it is though run by someone on Dumfries and Galloway
Enterprise: its chairman, Sir Michael Herries (also of
Scottish Widows and one of Sir Charles Fraser's Investment
Companies).
Although the GDA claim (Glasgow Herald 11/11/93) that
"no directors or connected persons had a material interest
in any contract [issued by the GDA]" they add the paradoxical
rejoinder that "this does not mean, however, that there were
no financial contracts involving companies with directoral
links". Sadly they declined to provide any further information,
but what they are most likely concealing is the fact that
Scottish Mutual Assurance, Forbes McPherson's company, is a
subsidiary of the Abbey National, who as referred to above
are supposedly slipping quietly into the old BP offices aided
by GDA funds and good wishes. Coincidentally BP Chemicals
had to hand over most of the 260,357 when it was fined a
total of 230,000 for burning one worker to death and seriously
burning three others in February '92. So there we have another
use for enterprise cash: if you kill your workers your local LEC
will cover your legal fees.
Research has only begun into the merry-go-round of funding
concerning LEC's director's companies receiving LEC funds
(Herald 11/11/93); a bigger and more revealing picture of
this process would show the inter-relationships between
LECs funding other LEC directors companies.
RETURN OF THE JOKER
But none of this would come as any surprise to our founding
father Bill Hughes. Who has gone on record as viewing the
situation thus : "You're always going to get the joker,
always that one case every year or two where the Fraud Squad
is called in. That's unavoidable in any walk of life
today ... If we are going to have top-quality people serving
on LEC boards I would be surprised if they weren't trying to
help their own businesses. Gosh they're giving up their
time for nothing and that's good news".
That kind of talk cuts both ways ofcourse: as was mentioned
above Hughes runs a company called Grampian Holdings which is
engaged in such diverse activities as transport bulk tippers,
plant hire equipment, sporting goods and pharmaceuticals, its
institutional shareholders are Murray Johnstone: 4.08%, Scottish
Widows: 4.89%, Barclays Bank: 4.3%, Standard Life: 3.48%, Scottish
Amicable: 3.52%, National Westminster Bank: 3.09%, Abbey Life:
(a subsidiary of Abbey National) 3.27% and Scottish Mutual
Insurance: 3.55%, the bulk of whom we have already encountered
above as the recipients of GDA funding. Another director of
Grampian Holdings is Professor Donald Mackay who last year
took over from Sir David Nickson as the overall head of
Scottish Enterprise. Professor Mackay (an advisor to six
Secretaries of State for Scotland, and whose other Company
Pieda has been receiving SE money from the start) has
his work cut out for him, with an investigation by the EC
Commission's Co-ordination of Fraud Prevention Unit (Glasgow
Herald 10/7/93), the result of an adverse audit of SE
accounts in relation to their disposal of European Social
Fund Money (money designed to help the poor),resulting in
the present Commons Select Committee on Scottish Affairs
enquiry into the operation of all the Enterprise agencies.
It will be interesting to see if the Commons enquiry
touches upon the GDA's secret allocation of 500,000 to
another of the UK's fastest growing companies, Peel
Holdings. This is something of a farcical tale of Peel
Holdings claiming that it had negotiated a contractual
claim on a plot of land in Cambuslang Glasgow (which
incidentally is highly polluted) during the old days of
the SDA. They made their claim known when the GDA
paradoxically offered the same land to a very peculiar
company called Superstadia (run by a man facing racketeering
charges in the USA). The money was given to Peel so they
would give up their "rights" to the land; but because of
the secrecy of the transaction the nature of these were never
fully established. Peel itself is based in Manchester and
run by a millionaire property speculator, some local
Councillors and individuals from the local Manchester
Development/Enterprise companies. On a similar theme,
and unfortunately for our righteously indignant Labour
Party, the enquiry could also touch on one of their more
sensitive points, namely an old SDA loan to a property
company run by some Monklands District Councillors which
was unaccountably written off. The Labour Party calls
for investigation into quangos has already reached points
of transcendental absurdity with ousted Glasgow City
Council Leader Jean McFadden going into print railing on
about their lack of accountability, without disclosing
that she herself is on the board of the GDA, as was
her predecessor Pat Lally, and as is STUC "supremo"
Campbell Christie .
Turning back to Forbes McPherson, the reader will
recall that he is a member of a company called Glasgow
Cultural Enterprises (GCE). This was set up in 1990
during the "Year of Culture " to profit from and administrate
(including the spending of a 1m Council subsidy) the recently
built Royal Concert Hall, (a similar deal being struck with
the other main Glasgow concert venue, the SECC). Similar to
the GDA, GCE is made up of a alliance of Labour Councillors
and top Businessmen and aptly demonstrates the willingness
(some would say complicity) of the Labour Council to embrace
the privatisation of its amenities indicative of the transfer
of power integral to the GDA's right-wing agenda. The
celebrations of a new Glasgow in 1990 directly coincided
with the launch of the GDA, which from its onset completely
took over the Council's budget and responsibilities regarding
the "redevelopment" of the City, largely on the pretext that
they would encourage "culture and tourism". In regard to their
Thatcherite crusade (inasmuch as that word merely mystifies
the unaccountable power of finance capital and the City of
London) the notion of cultural redevelopment provides the
GDA with an all encompassing scope for tinkering with
local democracy.
FINGERS IN THE PIE
Another significant member of GCE is (the recently knighted)
Sir Ray Johnstone whose directorships include Scottish Amicable,
Murray Johnstone Investment Trust, and Scottish Financial
Enterprise (SFE). The reader will also recall that it is
SFE which advises the GDA at those London dinners.
A partial breakdown of some of the other directors of
Scottish Amicable including their other directorships
would include:
Dr. William Brown: GMTV, Pauline Hyde & Associates,
Radio Clyde. The Scottish Arts Council, STV.
[Brown is an ex-director of the GDA].
Roy Nicolson: Cathedral Investments, Eurosalas Properties,
Forth Valley Enterprise, J. Rothschilds Assurance.
Maurice Paterson: Lautro Ltd.
[The regulatory body for Insurance Companies].
Thomas Johnston: Bank of Scotland, Science Projects (Scotland).
Ronald Miller: Dawson International, Christian Salvesen, Securities
Trust of Scotland.
Peter Jamieson: Robert Fleming Holdings, Jardine Fleming Group (Bermuda),
Kleinwort Overseas Investment Trust.
Bernard Solomans: Allied Provincial, Edinburgh Fund Managers
Investment Trust, The London Stock Exchange, Scottish Financial
Enterprise.
Through Ray Johnstone we can see an intimate picture of the
relationship between SFE, GCE, and the LECs not to mention
Cultural funding bodies, the media and a range of Investment
Trusts and Financial Institutions. One other, now ex-director
of SFE is Angus Grossart whose companies Noble Grossart
(Scotland's first merchant Bank), Alexander & Alexander,
American Trust, Scottish Investment Trust, Scottish Television,
The Royal Bank of Scotland, Edinburgh Fund Managers, Hewden
Stuart and Murray International Holdings; make Grossart one
of the most influential men in Scotland : Alexander & Alexander
is the world's second biggest insurance broker, and has
recently(more or less) taken over the running of the Glasgow
Royal Infirmary Trust, imposing ludicrous conditions on the
ancillary staff who have started a strike in protest.And
here we have the crux of the matter: if you have a conflict
of interest, because it is they who make their money through
people making private provision for theses things, through
private pensions, health care insurance and so forth, add
to that the unaccountability of a quango and we can see
the LECs as a key instrument in basic covert right-wing
operations. We can connect Angus up with Norman McFarlane
through The American Trust which they both run (interestingly
along with Aims of Industry member Lord Goold); they also
jointly run Edinburgh Fund Managers, its parent company.
These two companies run the mineworkers Pension scheme and
the British Coal staff pension scheme, investing it in
American securities. Edinburgh Fund Managers also manage
the investment portfolio of The Smaller Companies
International Trust, which they foolishly invested
in a company called International Signal & Control
(IS&C), which some readers may know became part of
the BCCI/Iran-Contra saga: it was an arms Company
which merged with Ferranti and then collapsed,
leaving a 1bn hole in Ferranti's accounts (causing
its collapse) and sending IS&C's far-right chairman
into an American jail (the other directors who were
Washington power brokers seem to have escaped).
It would be interesting to see when Edinburgh Fund
Managers ditched their IS&C shares, this would reveal
the extent of Grossart and McFarlane's far-right
connections. The investment world is a tricky
business and to get in on the bottom floor one must
engage in what can only be termed espionage. The
world of banking and high finance has long
interpenetrated with that of the Secret Service and
the sharing of intelligence forms the basis of how
UK interests are protected and advanced.
FAR RIGHT CONNECTION
The far-right connections seem to abound here, going
back to Forbes McPherson, our GDA leader shares his
seats on the board of the TSB and Hill Samuel with
Sir Richard Lloyd of the Ditchley Foundation and
various arms companies. The Ditchley Foundation is
based at Ditchley Park and " is a conference centre...used
for private VIP meetings guarded by Special Branch and MI5.
It was used by the ISC [Institute for the study of Conflict]
as a conference centre from 1972 onwards; the ISC Council
minutes of 21/1/72 mention an ISC conference on Ireland
that was held under conditions of extreme secrecy. Ditchley
park is closely linked to the Bilderberg Group, 14 of whose
members sit on the centre's board of Governors."
(Lobster no.26 page 16). Lloyd has been on the Council of
management of the Ditchley Foundation since 1974, and he
also sat in on the mid-seventies Wilson Committee's
attempts to curb the unaccountable power of the financial
world, so Forbes keeps some interesting company.
The question of whether the LECs are underwriting the
expenses of the larger businesses and financial institutions
is hardly open to debate . It is hard to see what the
waste of time and money represented by the Commons
tinkering enquiry into it will achieve, a fine perhaps,
some government funds returning to the Treasury, one or
two resignations ? Already there has been a few
resignations from within the LECs on the basis that
some directors were not told what was actually going
on.
SCREENING FOR WORKFARE
It has also been reported, even in the mainstream
media, that the banks have taken over the role hitherto
the province of the Economic League: that of amassing
personal information on individuals to establish a political
and social profile with a view to political vetting
and blacklisting. Secretive elements in what must be
the most sinister aspect of the work of the LECs can
be tentatively identified in aspects of their training
projects, particularly with the work of the Restart
Programme (the LECs receive a large part of their funding
from the Department of Employment). It is true that the
management of the unemployed is moving into the hands of
shady little companies which are funded by the LECs while
assuming the guise of private companies. One of the more
peculiar activities of the week-long compulsory Restart
course is the collection of data on its subjects: they
are asked to write a CV as an exercise and these are
collected (typed out by persons unknown) and never
returned to the individual, there are also several
personality assessment questionnaires which are again
assiduously collected. All "long-term" unemployed
individuals have to endure these courses or suffer the
withdrawal of their benefit. Amounting to little more
than pencil sharpening and clock watching, the courses
offer a golden opportunity to gather all manner of
intelligence on "troublemakers". They are also staffed
at a higher level by people fresh from training in the
US on the Workfare system,the model for future Government
policy.
The Natwest Bank has also become the owner of the
Contaminated Land Register, which lists thousands of
polluted sites throughout the UK. Prior to the last
election the Government did promise that this would be
published and made public, but they reneged on this and
now a company or individual has to pay the Natwest (after a
suitable vetting no doubt) to find out what lies beneath the
surface of a prospective development or an existing one.
The LECs are also supposedly responsible for clearing up
polluted sites of, for example ex-steel mills such as
Ravenscraig. This is (at times literally) something of
a minefield in social, economic and political terms,
particularly since the property and construction industries
(the two biggest clients of the Banks and Insurance
companies) are in such a slump. There are massive
interests being protected here: in the US a new report
estimates that the insurance Companies will have to
reserve $260bn in additional funds to meet their exposure
to environmental and asbestos claims over the next 15
years (Financial Times 13/4/94). And it is much the
same in the UK, only made worse by the partially
cataclysmic problems already facing Lloyds (which acts
as the clearing house through which every Insurance
company works). So a document like the Contaminated
Land Register, and the responsibility for clearing up
the mess, of at times immortal toxins, strewn all over
post-industrial Britain, has to be put into safe hands
or better still in nobodies, hands in the Natwest's
bomb proof bunker.
STARSHIP ENTERPRISE
The concept of Enterprise and Enterprise Zones are, on a
wider scale, at the core of how the World Bank and the
IMF function as the premier development agencies. Both
draw on top executives from the main European and American
Banks, and of course function as a wing of Western, mainly
US, foreign policy; largely free from legislative, judicial
constraints and popular influence, they are increasingly the
principal agents in forcing governments to "devalue their
currency, privitise their industries, open their doors to
foreign investment, freeze wages, raise food prices, slash
social services and implement Bank-sanction population
programmes." (Covert Action No 39, p28).
With a Government as intertwined with the financial
Institutions as we have in the UK, what is done in the
name of development by the World Bank and the IMF is not
restricted to the "Third World" but is continually modified
into local variants for home application. Professor
Donald MacKay, the new SE leader made his name as
a consultant by winning a $1m Economic consultancy
from the World Bank . Firmly in the neo-conservative
monetarist camp, he believes that "the only way public
spending can be cut in any meaningful way would be a
through a major shake up of the social security system
including a rethink about the principle of universal benefits".
(Scotsman 12/1/93) It was Bill Hughes' experimental contribution
to this, in the form of the creation of SE, which would have
really made Mrs. Thatcher's eyes light up. Back in '88
when she gave him the go-ahead Hughes must have felt like
Yul Brenner in the Magnificent Seven, gathering up
institutional investors in his own Company and his
CBI chums and riding into town, the difference being
that the Bandits terrorising the locals are
indistinguishable from their new found protectors.