Creative Scotland’s response echoes Chris Grayling’s in the Seaborne Freight ‘no ferries’ debacle.”

Creative Scotland (CS) has admitted an error in funding Scottish Review of Books (SRB) Limited as a ‘not-for-profit’ company limited by guarantee. The funding was granted despite CS knowing SRB was a company limited by shares and that a series of conflicts of interest meant the ‘review’ is effectively the promotional wing of one of Scotland’s dominant publishers.

That same publisher – Birlinn – has separately received more funding than any other from CS – £0.4 million via 49 grants. In 2017, CS handed the £1.7 million company £44.5k even though it had made sizeable profits.

The revelation follows a Freedom of Information request by Strident and subsequent complaint to the arts body.

Conflicts of interest

More than half of SRB’s directors have conflicts of interest arising from their financial relationships with Birlinn.

Birlinn’s marketing director is SRB’s Chair and its sole Person of Significant Control; SRB’s online editor is a Birlinn employee who also works for the Chair’s publicity company (which derives income from Birlinn); and SRB’s editor is a Birlinn-published author who series-edited its 22 Muriel Spark republications, which (along with his own book) SRB has heavily promoted.

CS claims it was aware of the conflicts of interest and judged that they did not ‘contravene funding criteria’. What it does not seem to have done is assess the appropriateness of it funding a book publisher to effectively control Scotland’s main book review. In the documents obtained via FOI, at no point is editorial independence even considered.

Failure to reform as a charity

SRB has, since 2016, told CS of its intention to reform as a charity. In January 2017 its Chair said it would happen within 12 months. Yet SRB remains a company limited by shares. In 2017/18 it made a profit for its shareholders.

Had CS required SRB to reform as a charity as a condition of funding (something CS has resisted), SRB’s trustees would have been required to manage their conflicts of interest. The key directors, including the Chair, would have found that extremely difficult.

In not requiring SRB to reform as a charity, CS has ensured that the conflicts of interest are a matter only between SRB’s shareholders – the very people benefiting from those conflicts.

Attempting to unknow what it knows

Strident has repeatedly made CS aware of serious errors and omissions in SRB’s Companies House filings.

CS knows that:

  • SRB’s capital has been misstated since 2009;
  • SRB has allotted shares but not accounted for their ownership;
  • neither of SRB’s supposed shareholders has been notified to Companies House as a Person of Significant Control (PSC) despite their >25% shareholdings requiring them to be; and
  • SRB’s company secretary has been dormant for 2 years.

CS has contended that it is entitled to rely on SRB’s Companies House filings even though it knows of these errors and despite being made aware that SRB has failed to respond to two written requests from Companies House asking it to correct its filings.

Normally CS would be perfectly entitled to rely on the Companies House filings. Indeed it should be entitled to do so – that is the point of such filings.

However, CS cannot unknow what has been made known to it, especially when the evidence provided is a matter of public record, as in the SRB case.

In funding SRB despite being aware of numerous contradictions in the filings, CS could not say for certain who it was funding or how solvent the company was. It has also given the green light for other applicants to make incorrect filings safe in the knowledge that CS will rely on whatever is submitted.

It has also given the green light for other applicants to make incorrect filings safe in the knowledge that CS will rely on whatever is submitted.

Choosing to ‘unknow’ known risks could even breach The Principles of Public Life in Scotland.

MSP shareholder did not register interest

In its response to Strident’s complaint, CS has indicated it will continue to ignore a notified breach of the MSP Act 2006 when assessing funding applications from SRB.

The company is 33% owned by a former SNP MSP who has never declared his shareholding to the Scottish Parliament, as required by the Act. He has benefited from his company receiving c.£0.2 million of funding from CS in addition to its other income sources.

Worrying response to whistleblowing

In a worrying indication of its approach to whistleblowing, CS has, in its response to our complaint, tried to imply that Strident is somehow at fault for having raised these matters and for having pursued the FOI requests that have uncovered CS’s shortcomings.

As a publicly-funded body, CS must be open to reasonable criticism and must not allow funding decisions to be influenced by such criticism.

Strident has an application currently under consideration by Creative Scotland. We are posting this statement now, conscious that doing so later could be portrayed by CS as sour grapes were our application to be rejected.

We are concerned that exposing CS’s shortcomings will prejudice our application.

‘Human error’ or flawed policy?

CS has tried to dismiss as ‘human error’ its misrepresentation of SRB’s status. The implication is that this has been a one off.

Strident contends that the SRB case is symptomatic of a pattern of failings that stem from flawed CS policies. In particular, from:

  • failing to ask if applicants need the funding they are applying for;
  • failing to take account of all previous funding provided to an applicant; and
  • failing to adequately address conflicts of interest.

We call upon CS’s board to address these issues.

Distorting Scotland’s publishing sector

Strident’s publisher Keith Charters says, “Creative Scotland’s response echoes Chris Grayling’s in the Seaborne Freight ferry contract debacle. It is blaming processes for arriving at decisions the person in the street can see make no sense. It needs to focus on achieving outcomes supported by processes. Management has to intervene when processes are failing to generate appropriate decisions.

“Creative Scotland does many good things. However, it is distorting the publishing sector by allowing public money to fund shareholder wealth and by failing to properly address the effects of conflicts of interest.

“The problem will persist until Creative Scotland recognises that its role is to curate the publishing and wider creative sectors – so that good work emerges consistently. Assessing projects in isolation – focusing on process rather than impact – has in some instances resulted in funds being squandered on those who least need them.”

Possible solution?

‘Scottish Review of Books can be a force for good, but only if editorially independent. A possible solution would be for it to operate under the auspices of Scottish Book Trust, which is a charity. That would help resolve the conflict of interest issue.’