Economics of Independence Scotland's Economy

Business for Scotland challenges the CBI to come clean

Nosheen Mobarik: appointed to the Better Together Board while CBI Scotland Chair.

Nosheen Mobarik: appointed to the Better Together Board while CBI Scotland Chair.

Business for Scotland has published a report and written to John Cridland Director General of the CBI challenging him to answer the many questions that have arisen from the CBI’s political campaigning.

Commenting on the release of the report by Business for Scotland on CBI activity and a letter to CBI Director General John Cridland, Business for Scotland Chairman Tony Banks said:

“It is now clearly not sustainable for any neutral public or private sector member with a Scottish interest to remain in the CBI by the end of this week. The legal position is clear. The CBI has behaved disingenuously and been exposed. They are now facing the consequences.

The CBI is nothing more than a wing of the No Campaign and membership fees have been spent on No vote campaigning against the interests of Scottish democracy. All members of the CBI, anywhere in the UK and particularly if they receive public funding, should now, at the very least, be seen to ask serious questions even if we already know the answers.”

In a letter to John Cridland, Tony Banks challenges the CBI on three points:

1) to outline the funds it has spent on independence activities,
2) to outline the process of consultation which led Mr Cridland to claim a “mandate” from the CBI membership,
3) to outline the number of members the CBI has in Scotland.

Mr Banks asks whether the CBI Scotland dinner on the 28th of August would provide a balanced platform in terms of the independence debate.

Full report on CBI Scotland

Last week the CBI registered with the Electoral Commission to campaign against Scottish independence. Registration is only for the purposes of spending money.

This report outlines the repercussions of this decision and highlights questions which remain unanswered.

1) The CBI in Scotland has suffered at least 20 resignations or complaints from associated members. No members have given their public support for its decision.

2) There remains no evidence that CBI members were properly consulted on this decision. Sources in the CBI say there was no vote or discussion over the decision to register.

3) The CBI refuses to disclose its membership numbers in Scotland. A CBI Scotland council member, Anthony Rush, has stated that he is unaware of whether CBI Scotland has more than 100 members.

4) The CBI’s reports and research have failed to analyse the many opportunities of independence for Scotland’s economy. Nor have they considered how the economic powers of independence should be used in the interests of the private sector whether they are in favour of independence or not. This is against the interests of members and demonstrates an entirely an one-sided view of the debate. Thus they have been identified as actively campaigning by the Electoral Commission.

5) CBI Scotland’s Director Iain McMillan has a long history of opposing economic powers for Scotland, including devolution in its entirety.

6) There remain unanswered questions on the legality of the CBI’s decision and over the truthfulness of previous claims to being a ‘neutral’ business organisation.

7) Business for Scotland has surveyed 27 members of CBI in Scotland. Over 90% of the organisations who replied stated that they were neutral on the issue of Scottish independence. Any journalist could conduct the same exercise. It is very easy to establish the majority view of CBI members in Scotland or as Scotsman Business Editor Terry Murden called it yesterday “the prevailing view”.

The CBI’s decision to campaign against independence has been made on behalf of these organisations. There is no obvious mandate from its membership for this position.

1. The crisis in CBI Scotland so far

As of Thursday 24th April, 18 businesses and organisations in Scotland have resigned from the CBI. 2 other organisations have criticised the lack of consultation. It is likely that more will resign in the following week.

The CBI ended up having to register as a campaign organisation after requests from Business for Scotland to the Electoral Commission. In 2012, it became clear to Business for Scotland that the CBI could no longer pretend to be a neutral organisation. In 2013. the CBI formalised its position in public and went about spending money to campaign against independence. Acting as a campaign group during the regulated period while failing to register is illegal. However, behaving and registering as an element of the No Campaign would contradict the neutral position of members in Scotland. Moreover, as this report highlights in section 6 the legality of CBI campaigning without a resolution even in advance of the regulated period is in question. Unless members were switched on to the media everyday they may not have realised the extent to which CBI was now actively campaigning against independence, no longer even pretending to have a neutral position. The registration process has brought matters to a head in a very public way.

As a result, numerous private and public sector organisations have resigned their membership.

As of Thursday these include: Scottish Enterprise, Visit Scotland, Highlands & Islands Enterprise, Skills Development Scotland and the Scottish Qualifications Authority; the universities of Aberdeen, Glasgow, Edinburgh, Strathclyde, Glasgow Caledonian, Heriot-Watt, Highlands and Islands, Dundee and Robert Gordon; Balhousie Care Group, STV and Aquamarine Power, as well as the Law Society of Scotland.

Select, a trade organisation for electrical workers with 12,500 registered business members with CBI, have called for a review of the decision on independence.

Scotland’s electricians, educators and lawyers have all left the CBI. Its accountants (ICAS) are considering their position. As are other sectors of Scotland’s private sector.

Paul Foley, a director of Kynesis Consulting, said his business was “unaware of any formal consultation process to access the views of CBI’s Scottish members.” He also said “I find it very disappointing and quite irritating.”

The decision also prompted a wave of criticism in the media and from business figures. Scottish entrepreneur John McGlynn said “CBI should have remained impartial and merely asked pertinent questions of both sides.” It follows similar concerns raised in 2010 by Scottish entrepreneur Jim McColl OBE when the CBI criticised the proposition for more powers for Scotland, again without any mandate from its members.

The Sunday Herald editorial stated: “The CBI is now facing a wave of understandable and inevitable resignations of its members and the worst crisis in its history.”

Tony Banks, Chair of Business for Scotland, wrote in the Sunday Herald that the CBI “is now completely out of kilter with its own membership, which it has effectively hijacked on this issue…This is arrogant, dishonest and foolish – not to mention counter-productive.”

2. What consultation was there with CBI Scotland members?

Members of the CBI in Scotland have challenged the organisations leadership for failing to consult on the issue of Scottish independence.

Last month the launch of a CBI report was overshadowed by a failure of its leadership to consult Scottish members on both the opportunities and risk of constitutional change.

The CBI Director General John Cridland, live on STV’s Scotland Tonight programme on 25th March, claimed he had a mandate from members and the CBI Scotland Council. There is significant evidence to suggest otherwise.

Terry Murden, the Business Editor for the Scotland on Sunday, said:

“Twice [Cridland] refused to say either yes or no, his evasiveness giving the impression that there had been no consultation. His answers deserve closer scrutiny.” (1)

Tony Banks, Chairman of Balhousie Care Group, Chairman of Business for Scotland and previous a CBI member, was not made aware of any consultation.

He has called for the CBI to produce evidence of consultation, such as board minutes or a motion supported at board level.

The CBI in London claim that there were “soundings” of membership through an unidentified process. No evidence has been produced to this effect. Clearly the 20 resignations or complaints in Scotland suggests that members were not consulted on the policy and campaigning activity or informed of a pending registration.

On Wednesday 23rd April, Terry Murden reported that his sources in the CBI confirmed there had been no council vote on the decision to register or even a discussion. (2)

3. How many members does the CBI have in Scotland?

There is a great deal of uncertainty over who the CBI represents.

In January, the Telegraph reported that the CBI had 24,000 members in Scotland, employing 630,000 people. (3)

On April 23rd, the Scotsman reported the CBI’s claim of 24,000 members in Scotland, yet said this amounted to 500,000 employees.

This is vastly different from available public information, which can only identify fewer than 100 members based in Scotland.

CBI Scotland council member Anthony Rush admitted that he did not know whether CBI Scotland had any more than 100 members. (4)

A previous investigation found that the CBI has only 1,800 member companies in the UK as a whole. (5)

The majority of CBI members were trade associations.

As only a proportion of these members will be headquartered in Scotland, it is highly likely that Business for Scotland (membership 1,820 on Thursday 24th April) has a higher membership in Scotland (although it should be noted that individual businesspeople particularly from the small and medium-sized enterprise sector as opposed to companies join Business for Scotland. All of them sign a declaration in favour of Scottish independence and the organisation resolved at its inception to campaign for independence in the interests of Scotland’s business community).

BBC journalist James Cooke has requested information on the CBI’s membership in Scotland. He has yet to receive a reply.

This raises questions over the legitimacy of the CBI as an organisation which claims to be “the voice of business”. It undoubtedly represents many organisations based in London. However, it has little claim to represent to views of business in Scotland or to represent a substantial stake in the future of Scotland’s economy.

4. The CBI has not engaged in the opportunities for business in an independent Scotland

CBI reports do not consider the opportunities of independence. Instead, the business group composed a list of concerns which were near identical to releases from the UK Treasury. (6) For instance last year’s annual CBI Dinner in Edinburgh featured Douglas Alexander MP, introduced by Nosheena Mobarik. His speech focused on negative claims concerning independence without a right of reply or balance.

This anti-independence campaigning has failed to enhance the debate.

Business for Scotland has outlined multiple areas where control over decision making will benefit Scotland’s economy.

These include, but are not limited to: A) control over the tax system to make it simpler and support key growth sectors, B) improve labour relations through a national convention on employment and a social model to engagement, C) promoting positive inward migration to benefit universities and businesses, D) a stronger industrial policy to support growth in engineering, construction and SME manufacturing, E) increasing exports through an expanded Scottish trading network, F) an independence dividend of resource reallocation in Westminster defence, administration and political costs of at least £3 billion over the next parliament, G) investigation of the benefits of a high wage economic model, whereby reduced inequality can boost business demand, H) investment in childcare services to reduce labour market barriers, I) a cohesive social security system which suits Scotland’s economic and social needs, & J) an approach to research and development to boost business innovation in areas of economic strength in Scotland.

These are 10 substantial opportunities which each require closer scrutiny and analysis. These opportunities are not restricted to the proposals of any particular political party or the current Scottish Government’s White Paper.

Independence is the opportunity of a lifetime to make economic decisions in Scotland’s interest and in reflection of Scotland’s distinctive economic characteristics, challenges and opportunities. independence will substantially benefit business in Scotland especially when compared to the UK’s economic model whereby both investment and growth is focussed on London and the South-East of England.

5. Iain McMillan and CBI Scotland have repeatedly failed to represent business in Scotland

Iain McMillan, Director of CBI Scotland, has opposed every move for greater economic powers for Scotland. (7)

He opposed the establishment of the Scottish Parliament, the Calman Commission proposals and now the proposal for Scottish independence. (8)

This has led to previous criticisms of Iain McMillan for misrepresenting the views of CBI members and for misrepresenting the views of business in Scotland. (9) (10)

6. Questions over the legality of the CBI’s political expenditure

Over the past year leaders of the CBI and CBI Scotland have made numerous political statements against Scottish independence. These have included statements in the media and to CBI events.

Iain McMillan, CBI Scotland Director, said “our Council’s position on behalf of members is that Scotland’s economy and its businesses will fare better with Scotland being part of the United Kingdom than Scotland leaving the United Kingdom”. (11)

In 2013 the Chair of CBI Scotland, Nosheena Mobarik, was appointed a Director of the Better Together anti-independence campaign board.

CBI Director John Cridland appeared on Scotland Tonight in March 2014 defending the CBI’s position on independence, yet refused to disclose any consultation with members.

This concerned a report ‘The Scottish Government’s plans for independence’  and attached press release entitled ‘Scottish Government’s economic plan for independence does not add up’. (12) (13)

The report was political. It stated that the report “confirms the CBI’s view that the best way to deliver jobs and prosperity to the people of Scotland is for it to remain part of the UK”.

Throughout this period Business for Scotland highlighted this campaigning to the Electoral Commission and called for the CBI to register as a campaign body.

Eventually the Electoral Commission called on the CBI to register, and the CBI Director John Cridland stated this was done to continue “normal activities” and ensure “compliance”.

However, this raises further legal questions.

Does the Electoral Commission consider publishing high-profile reports against independence to be political expenditure? If so, did the CBI hold a general meeting to approve this political expenditure?

Part IX of the Political Parties, Election and Referendums Act 2000 states:

“The general purpose of section 139 and Schedule 19 is to require directors of companies to seek the approval of the company in general meeting to the making of political donations to political parties or organisations or to the incurring of expenditure for political parties.” (14)

It continues:

“As a result of the Act the detailed arrangements will continue to lie with the directors, but it will not be lawful for such action to be taken unless approved in advance by the company in general meeting.”

The definition of political expenditure under Part IX Section 250 (d) is:

“any expenditure incurred by a company – in respect of the preparation, publiction or dissemination of any advertising or other promotional material which could reasonably be regarded as intended to affect public support for any EU political organisation, or…to influence voters in relation to any national or regional referendum”. (14)

The CBI Director John Cridland said “Simply to do our normal activities, including events and public statements we were advised we needed to comply with Electoral Commission rules because we have a position on the issues…It is a compliance issue.” (15)

If CBI ‘normal activities’ are required to be registered to the Electoral Commission for purposes of compliance, did the CBI follow electoral law in campaigning work so far in the referendum? Did the CBI pass a motion at a general meeting to approve political expenditure?

Furthermore, even if there is doubt that this body of law applies, the Companies Acts make clear unless you are a newspaper company, authorisation is required under Section 366 before you can incur any political expenditure:

“Political expenditure” for these purposes is expenditure incurred by a company on activities on the part of the company that are capable of being reasonably regarded as intended to influence voters in relation to the referendum. There is no “referendum period” for the purposes of this provision – so arguably on the assumption there is no resolution CBI may well already have broken the provision. (16)

The route to this position for the CBI is different from normal companies because the CBI is what is known as an ‘unregistered company’. It is not registered under the Companies Act 2006 as it is a Royal Charter Company. However, Charters from 1926, 1965 and 1977 are attached as background. Schedule 1 to The Unregistered Companies Regulations 2009 applies the provisions of the Companies Act 2006 in relation to political donation and expenditure to unregistered companies, such as Royal Charter Companies: (17)

The provisions are basically applied in whole with some adjustments to reflect that fact that there have been statutory instruments made under the 2006 Act which are simply applied to unregistered companies by the 2009 regulations. Section 366 is therefore what matters in terms of a requirement for authorisation and definition of political expenditure in Section 365 and CBI would seem to be in some difficulty to do very much unless they have a resolution.

7. CBI members in Scotland survey

25 formally taking a NEUTRAL stance

  1. Robert Gordon University
  2. Scottish Power
  3. Glasgow Caledonian University (has now resigned)
  4. Scottish Television (has now resigned)
  5. Alliance Trust
  6. Clydesdale Bank
  7. Scottish Enterprise (has now resigned)
  8. Standard Life
  9. Kynesis (Director highlighted lack of consultation)
  10. SELECT (has complained)
  11. Liddell Thomson
  12. ICAS
  13. Visit Scotland (has now resigned)
  14. Millsteam Associates
  15. Balhousie House Care (has now resigned)
  16. Ledingham Chalmers
  17. Maclay,  Murray and Spens
  18. Morton Fraser
  19. The Law Society of Scotland (has now resigned)
  20. Barclay’s Wealth
  21. Aquamarine Power (has now resigned)
  22. John G Russell
  23. Memex Technologies
  24. Scottish Leather Group
  25. Edrington Group

2 No vote supporters 

  1. M Computer Technologies (owner sits on board of the No Campaign)
  2. Balmoral Group (Chairman is a supporter of the No Campaign)

In comparison, Business for Scotland has over 1,820 individual members mainly from Scotland’s Small and Medium Enterprises sector.

Every member of Business for Scotland has signed a declaration demonstrating their support for independence. The Business for Scotland membership is also vetted through the organisation’s research team.

The number of CBI members in Scotland remains unknown. Of the few identifiable CBI members in Scotland, the vast majority have taken a neutral position on the referendum.

Sources

Source (1): http://www.scotsman.com/news/comment-temperature-rising-on-independence-paper-1-3356358

Source (2): http://www.scotsman.com/news/terry-murden-spotlight-on-cbi-after-no-backing-1-3383821

Source (3): http://www.telegraph.co.uk/news/politics/10545120/CBI-chief-accuses-SNP-ministers-of-reprehensible-attempt-to-discredit-him.html

Source (4): http://www.scotsman.com/news/opinion/letters/business-needs-snp-answers-1-3264960

Source (5): http://www.foe.co.uk/sites/default/files/downloads/hidden_voices.pdf

Source (6): http://www.cbi.org.uk/media/2631703/cbi_analysis_-_scottish_government_s_independence_white_paper.pdf

Source (7) Opposition to devolution

http://www.bbc.co.uk/news/special/politics97/devolution/scotland/news/290897.shtml

Source (8) Council position is against independence, claims McMillan.

http://www.scotsman.com/news/scottish-independence-will-be-management-buy-out-1-2773456

Source (9) Misrepresentation: “Barclays Wealth, Edrington, Aquamarine Power and the Law Society of Scotland all publicly denied Mr McMillan’s claims.”

http://newsnetscotland.com/index.php/scottish-politics/4163-cbi-scotland-chief-comes-under-fire-as-businesses-refute-referendum-claims

Source 10) Criticism: “The CBI has fewer than 10% of business leaders in its membership. How can you make a statement like that? It is just ridiculously misleading,” Jim McColl, Chairman of Clyde Blowers.

http://www.heraldscotland.com/news/home-news/scotland-s-richest-man-rounds-on-cbi-chief-over-tax-powers-1.1032644

Source (11) http://www.scotsman.com/news/scottish-independence-will-be-management-buy-out-1-2773456

Source (12): http://www.cbi.org.uk/media/2631703/cbi_analysis_-_scottish_government_s_independence_white_paper.pdf

Source (13): http://www.cbi.org.uk/media-centre/press-releases/2014/03/scottish-governments-economic-plan-for-independence-does-not-add-up/

Source (14): http://www.legislation.gov.uk/ukpga/2000/41/notes/division/5/9

Source (15): http://www.cbi.org.uk/media-centre/news-articles/2014/04/john-cridlands-bbc-scottish-referendum-interview/

Source (16): http://www.legislation.gov.uk/ukpga/2006/46/part/14

Source (17): http://www.legislation.gov.uk/uksi/2009/2436/schedule/1/made

About the author

Gordon MacIntyre-Kemp

Gordon MacIntyre-Kemp is the Founder and Chief Executive of Business for Scotland. Before becoming CEO of Business for Scotland he ran a small social media and sales & marketing consultancy.

With a degree in business, marketing and economics, Gordon has worked as an economic development planning professional, and in marketing roles specialising in pricing modelling and promotional evaluation for global companies (including P&G).

Gordon benefits (not suffers) from dyslexia, and is a proponent of the emerging New Economics School. Gordon contributes articles to Business for Scotland, The National and The Huffington Post.

14 Comments

  • Is there anyone else think that as with the change of tack to rule out a CU, the CBI’s disastrous decision may have had a certain ex chancellor behind it.
    Would like to think that he was LOL.

  • Tell you what. Wouldn’t want to be unsure of procedure in any dealings with Gordon McIntyre Kemp. Good stuff.

  • In a further dramatic move, the CBI have now decided to unregister. Now how will they justify the stream of anti-independence propaganda.

  • Once again Gordon an excellent report highlighting the need for all organisations to become much more transparent in their public dealings and pronouncements. Then we are more likely to trust them and the individuals who speak on their behalf. We need to somehow enshrine this approach into the new constitution. Well done!

  • We were reading earlier about the Royal Charter. There is some information on them on the Privy Council website, but we’re sure that the Royal Charter requires political neutrality.

  • Very well done. CBI has never been impartial, never weighed up both sides of the argument when it came to increased powers for Scotland, but has always been vociferously against any increase of democracy in Scotland.

    So you can only conclude that those companies and organisations who have joined the CBI have long been in agreement with their political stance.

    The BBC have been forced to suspend their membership, but to many of us this is not enough. A broadcaster that claims to be impartial, and which is in receipt of a large amount of taxpayers’ money should not be using any of that to pay its membership through the back door letterbox of what is in effect the satellite of a political party. This also applies to any other publicly funded body.

    We want a more inclusive, more responsive democracy in an independent Scotland, and BfS has made a significant start on that road by calling the CBI and its members to account.

  • if we achieve independence as i am sure we will the people of scotland will owe a massive debt of gratitude to business for scotland for the time and work dedicated to the yes campaign and i for one will always feel obligated and proud of the excellent way they have set out to achieve this opportunity for me my friends and my country

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