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Thank you for setting me up nicely there, convener.

I will caveat my questions by stating two things. First, as the Public Audit Committee, we have a specific role in scrutinising the numbers. We make no apologies for that, but please do not take any of our questions personally.

Secondly, I would note that, overall, the Auditor General’s report was perhaps at the more positive end of things, given some of the reports that we have seen in this room. I think that that is commendable and should be acknowledged at the beginning. I am not saying that just because you made a substantial investment in XLCC in my home region—although that, too, was very welcome—and I should also say that that will not influence my tenacity when it comes to asking my questions.

Let us start with your operating costs, gentlemen. My understanding is that, since 2020, you have spent around £41 million in operating costs—I have a little table that shows how much money you are spending on running the business. When it comes to income—and I appreciate that that is different from the profit that you will make from future equity or future exit strategies—the figure is £32 million, which makes a difference of about £9 million. You could argue that that is a loss, although I appreciate that, in 2023-24, the trend reversed. Is that normal in the first five years of a bank, first of all?

People who are watching this meeting might argue that £250,000 a year is a lot of money as a salary.

I have a follow-up from my last line of questioning. I know that you have a £1 million threshold, which you will go below in the right circumstances but, from a public relations point of view, if nothing else, would you consider opening seed funding opportunities at the sub-£1 million investment level if you could demonstrate that the successful applicants would be subject to further tiers of future investment as they grow? Alternatively, could you offer some sort of match funding opportunity? The big issue that is often highlighted in the feedback that we receive is that, as you say, grant funding is limited and is becoming more scarce, and private banks are saying no to higher-risk start-up seed funders. Is there an opportunity for SNIB to get involved at the lower end in the hope that those companies will scale up?

Thank you.

Good morning. You have just been asked about the lessons that were learned from the experience with Circularity Scotland, and I listened with intrigue to your responses. What I heard was a summation of what went wrong with the deposit return scheme and Circularity Scotland. We already know what went wrong with them; what I did not hear was what went wrong in your internal decision-making and risk-assessment processes. Mr Denholm, you said that you were confident that robust processes were followed in the decision making that led to the initial investment. Mr Watt, you seemed to suggest that you were somewhat surprised by the politicisation of the issue. The scheme had been highly political since it was first mooted by the Government, and anyone worth their weight in research would have been able to tell you that, so I am still struggling to understand who in your organisation made the decision that the risk was low enough. In what way was it not going to become a political issue? I ask because I am particularly nervous that 50 per cent of your investments are in the net zero space, and we all know that there are shifting sands around these issues.

Would you not have unearthed those issues before committing £9 million of public money to the investment?

That is good to know. You have not booked your cruise just yet, then.

The reason that I asked that question is that the scenario is very different from that involving the previous chief executive, who tendered resignation and very promptly exited the organisation. It is a matter of public record that he was paid a six-month salary in lieu. What is the difference in the two scenarios?

You might have paid attention to the committee’s work in relation to the departure of senior members of staff from other public organisations. We take quite a forensic interest in things such as notice period, exit sums and remuneration, and we are always keen to unearth the processes that were gone through, particularly when it comes to the chairs of organisations. Our interest in that is well documented, but I will not dwell on issues that are a number of years old.

However, the issue of salaries has come up quite a few times this morning. It seems to me—I mentioned this the last time we talked about the bank—that there is an inherent conflict of interests between working under the constraints of public sector pay policies, which most people would agree have certain caveats, and working for a financial institution. For example, it is very unusual to have bonuses in public sector organisations, but you have a well-structured bonus system. Talk me through that.

I am sure that you have studiously read the Official Report of our previous evidence session in preparation for today’s meeting. One issue that came up was the quite substantial difference between the amount of money that the Scottish Government had allocated to the bank and the amount that had been committed. I appreciate that not all of the investments will have been made in the financial year in which the deal, say, is agreed—I do understand that there will be a rollover element.

However, the numbers that I have in a letter of 16 June that we received from the Auditor General subsequent to that evidence session, and which I am sure that you have also read, point to a difference of around £70 million over the bank’s five years between how much money the Government allocated to you and how much you committed to investments. That is a substantial difference. Can you explain it?

I accept and acknowledge that. I am not entirely convinced that the argument that we should pay people more so that fewer mistakes are made is the right one to make—