PRAISE be: the Scottish Government has announced a bold intervention in the economy. Namely, the creation in due course of a state-owned Scottish National Investment Bank (SNIB) to provide “a new approach” to investing in manufacturing and infrastructure.

A detailed blueprint for such a bank is already in existence, published jointly by the left-leaning New Economics Foundation and the Common Weal independence think-tank.

I for one am a huge fan of a SNIB. A locally controlled investment bank is the vital cog needed to transform the Scottish economy into the sustainable, wealth-creating and wealth-sharing entity we so desperately need. Yet it is precisely because I know the necessity of creating the SNIB that I want to pose some hard questions.

Let’s start with the most basic question of all: what is the SNIB actually going to do? Ask existing bankers in Scotland, and they will tell you there is no shortage of funding locally – just a shortage of innovators wanting to borrow. This is nonsense. For starters, the lending practices of the big retail banks have destroyed swathes of small businesses since the crash of 2008.

RBS, though its notorious and mis-named Global Restructuring Group, saw many viable customers put into liquidation unnecessarily – with the bank acquiring much of these assets.

More to the point, we are not talking about operating loans but about risk capital. Scottish firms need investment of sufficient scale and long-term enough to turn high-tech start-ups into global success stories – firms big enough to provide tens of thousands of local jobs.

It is this kind of investment we lack. Consider this example. In 2006 at the Growing Business Awards, Edinburgh-based chip designer Wolfson Microelectronics was named company of the year and David Milne, its co-founder, was named entrepreneur of the year.

Here was the ideal basis to create a global player in high tech. Alas, Wolfson is no more. In 2014, it was bought by a Texas-based company, Cirrus Logic, for £291 million. Here’s the weird thing: Cirrus Logic has never paid a dividend to shareholders since it was founded in 1984. Instead it ploughs all earnings back into either research or buying other companies. Cirrus shareholders rely solely on the value of their equity going up.

That is what I call long-term investing, otherwise known as “patient” capital. Which means Cirrus and its like can snap up technology as they wish. That, folks, is what we are up against. We haven’t even mentioned US entrepreneurs like Elon Musk, who burned $3 billion in cash in the first nine months of 2017 on his Tesla electric car business. There is no way that Scotland can compete with these guys simply by relying on conservative, commercial banks.

We could give up and just create a business model based on selling more Wolfsons to the Americans and Chinese. But that will only make a few Scots rich and leave the rest of us serving in the local supermarket.

We could follow Ireland and reduce business taxes to a pittance, to attract foreign investment. But without sufficient tax revenue, how will we pay for our NHS? Besides, I doubt if Ireland’s low-tax regime will survive EU intervention.

Which brings us back to an interventionist investment bank – one that can operate at scale. I accept that individual Scottish companies with good ideas can access investment locally. But we need to up our game and take risks long-term, knowing that some will fail. Our present funding set-up does not allow that. So we need an investment vehicle that is committed to returning a profit overall, but which has the patience and nerve to bet the farm on individual entrepreneurs.

The man tasked with “developing the Bank’s precise remit, governance, operating model and approach to managing financial risk” (to quote the official Scottish Government press release) is Benny Higgins, currently the head of Edinburgh-based Tesco Bank. Given what we need, I have to say I am a trifle perplexed by the appointment of Mr Higgins.

I have nothing against Mr Higgins personally. He is a very capable guy – though he leaves Tesco Bank after a very costly (for the firm) cyber security breach. I am more concerned that he does not come from the investment banking world. He has spent his entire career in the retail banking; ie lending to individual consumers. Tesco Bank provides niche consumer products: credit cards, personal loans, savings accounts, domestic mortgages and foreign currency for travellers.

Investment banking is an entirely different universe from retail lending. It covers financing the needs of companies, underwriting big infrastructure investments, providing or securing venture capital, managing sovereign wealth funds, collaborating on government bond issues, orchestrating and financing corporate mergers and acquisitions; and operating generally in the bond and share markets.

My concern is that Benny Higgins will propose a model of an investment bank that is too risk-averse. I’m also worried it will be run by traditional commercial hands who are afraid to lean against market trends. In the next global recession – there is always a next global recession – the SNIB needs to up its investment level, not reduce it. Which means the bank’s mission statement has to be clear and watertight and that its supervisory board must not be stuffed only with bankers.

Where will the SNIB get its funds? In their blueprint, the New Economics Foundation and Common Weal suggested the Scottish Government should kick off the SNIB with a public injection of capital. Some of this would be cash up front (£225m) and some as a guarantee of money to be called only if necessary.

The combined cash and guarantee would give the SNIB the security against which to raise larger working funds by issuing its own bonds in the financial markets. That could comfortably raise £3 to £4 billion, to get things rolling.

However, even these numbers are small relative to the massive investment Scotland needs to make. Last year, little Ireland recorded the largest ratio of investment to GDP in the whole EU – a whopping 29 per cent. The UK (and Scotland with it) came third lowest in its investment ratio, at a mere 16.7 per cent. Ireland plans to pour £70bn into infrastructure investment alone in the next decade. Here we prefer consumption to investment.

That has to change. Just to get Scottish GDP growth up to, say, three per cent a year is going to need at least an extra £20bn more in capital investment over current rates, in the next ten years.

Finally, one problem the SNIB will have if it is to make loans is that it will need to be licensed by the Financial Conduct Authority (FCA), the main bank regulator. Getting a licence is not so easy. There is, of course, a quick way of getting round these difficulties: buy a small investment bank that already has the requisite licences in place.

The SNIB is clearly an idea whose time has come. Even the Labour Party – north and south of the Border – has endorsed such a project. Conclusion: let’s not be picky about who thought up the SNIB, instead let’s get together and make it work pronto before Brexit unhinges the Scottish economy.