RSA grants: being in the right place at the right time

Thursday 7th August 2008
Looking for information on innovation grants? Courtesy RSA

Some 25 Scottish businesses accepted RSA grant offers totalling more than £13.5m in the 2Q, 2008. Enterprise Minister Jim Mather said some 2000 Scottish jobs are to be created or safeguarded with the help of RSA grants. The offers relate to planned investment of more than £57m. It promises (perhaps) 1,158 job creation and 882 job safeguards.Of the 25 grants, seven are to the IT and related industries, and the two of the biggest are to IBM and Serco.

The IBM UK Greenock operation is offered a £1.35m Regional Selective Assistance grant from the Scottish Government to safeguard 613 jobs. IBM will create no new employment. IBM employees in Greenock staff multilingual contact centres for clients all over Europe or are engaged in e-business. The US International Business Machines, reported a net income of $10.4bn (about £5bn) for 2007 and $98.8bn revenue. Its assets are $120.4bn. IBM is to spend about $400m (about £200m) on its computing centres in Raleigh, North Carolina, and in Tokyo that deliver programmes to customers over the internet.

Another grant for  £5.1m grant is to Serco, the management service company of 55,000 employees and a £2.5bn turnover of more than £2.5bn. Serco is contracted to work for the National Health Service, among other government agencies. Serco has accepted the money, promising to create 650 jobs in the IT and outsourcing sector. According to Serco's 2007 results  on its website, it reports revenues of £2.8bn, up 10.3% from 2006 and an increased pre-tax profit up 17.3% to £123.2m in 2007.

The awards to IBM and Serco, writes Douglas Hamilton in The Herald would seem likely to re-ignite the debate about the government at Holyrood handing out taxpayers' money to large, profitable corporations.

But there is precedent. In 2006, HSBC, one of the world's biggest banks, drew a £1m grant from the Scottish Executive, after likening the award to claiming "an OAP bus pass" despite being able to "afford to pay the full fare." The comment was made as it unveiled record annual British banking profits, with an 11% rise in pre-tax profit to $20.97bn. HSBC received the handout, paid for by Scottish taxpayers, to locate a fund management unit in Edinburgh, creating 257 jobs, under the RSA scheme.

Asked whether acceptance of the grant was morally wrong in light of the bank's record profits, Douglas Flint, HSBC's Scots-born finance director, told The Herald: "I don't think it is immoral. Is it immoral to claim an OAP bus pass if you can afford to pay the full fare?"

The government explanation in its latest RSA report is  "Encouraging investment and job creation is an essential ingredient of achieving increased, sustainable economic growth in Scotland," according to Mather. "The latest quarterly report demonstrates that Regional Selective Assistance is an important tool in helping business projects come to fruition at a time of global economic uncertainty.

"RSA complements other initiatives by the Scottish Government to create the more competitive business environment this country needs. Other economic policies introduced, such as cutting and scrapping business rates for 150,000 businesses, will help breathe new life into Scotland and see the benefits of growth felt in all communities."

Regional Selective Assistance is the main Scottish Government scheme of financial assistance to industry. It provides discretionary grants to investment projects that will create and safeguard employment in the Assisted Areas - areas designated for regional aid under European Community law.

The government said in the report that "payment of RSA is made in instalments, typically over several years as job and capital expenditure targets are met. Not all projects will proceed, and nor do all accepted offers result in full payment, as projects are sometimes scaled down or abandoned before payments are made".








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