We sit in a brief period of calm, between the Chancellor’s UK Budget last Monday and Holyrood’s Scottish Budget on 12th December.

We now know that Derek Mackay will have a certain amount of leeway, thanks to the extra largesse doled out – primarily to the NHS in England – by Chancellor Hammond. But we also know that he will have tough decisions to make. How should he allocate the nigh on £1 billion additional funds available – how much to the Scottish NHS, how much to police, education, local authorities, etc.? In addition he will need to decide how to react to the increase in the threshold for higher rate income tax down south. Will he simply ignore that change and leave more Scottish tax payers liable to the distinctly higher rate; and if so with what implications?

But we also know that the foundations upon which the Hammond hand-outs were built are somewhat shaky. This generosity was only possible because the Office for Budget Responsibility decided that the previous estimates for the Budget deficit were too high – not because the economy is performing better than expected but simply because revenues have been outperforming expectations.

What changed one way this Budget could easily change the other way next time. What has been given could be taken away. Further, if we end up with a hard Brexit, as sadly seems increasingly likely, then the whole of the UK Budget will have to be thrown to one side and a new and much tougher version created. Either eventuality would mean that the extra £1 billion for Scotland could vanish like snow off the dyke.

This all suggests that Mr Mackay should place as much emphasis as possible on enhancing Scotland’s economic performance. That is the route to sustainable and self-generating improvements in the public finances. In his Budget statement Mr Hammond said he wished to unleash and stimulate business investment. That makes every sense as the way forward to enhanced productivity and stronger and better balanced growth. The Bank of England’s latest Inflation Report once more underlines the continuing weakness across the UK in terms of both business investment and productivity. However, the UK Chancellor announced only minimal steps to progress his desire for more business investment. Perhaps Mr Mackay can do better.

That leads me to a conundrum. Mr Mackay’s answer will be to emphasise the creation of a new Scottish National Investment Bank (SNIB to its pals) aimed directly at supporting business investment and enhancing such investment in terms of quantity and quality. Whilst wholly supportive of the targets for SNIB and wishing it all the best, I am still struggling to work out exactly how it can best work to achieve these lofty and crucial objectives.

To yield benefits for our economy SNIB investments should be ‘additional’ and provide positive returns. Being ‘additional’ involves doing something that already available private funds would not achieve. However, available evidence suggests that a big problem constraining investment in Scotland is not limits on the supply of capital for such investment but rather a lack of demand from Scottish business for funds.

Lack of demand may be because potential investors in the business community are not aware that appropriate funding for desired investment would be available. Hence one very positive role for SNIB would be to assist small and medium sized enterprises to develop their investment plans and then to access suitable funding from existing sources. In this context the new bank may find reason to co-invest alongside existing institutions, but the key problem does not appear to be a shortage of such funds per se.

No doubt SNIB will be set a target return on its investments, related to the cost of its capital. It is suggested that it might have a different risk profile from other investors, but nevertheless to be successful it will need to achieve a decent overall return so as to be able to continue its operations in future years.

The consultation documents point to ‘mission-related’ finance as one proposed activity. Fine, but given the required financial returns, careful selection will be crucial. SNIB will not be able to invest in activities with a high risk of failure; nor those for which returns can only be expected after a substantial number of years. Such investments, and indeed investments to seek to rescue failing companies, may be appropriate for the enterprise agencies – if instructed by Government – but not for SNIB.

So the new institution must seek out gaps in the existing supply of funds for business investment; areas where investments are likely to yield an acceptable return but for one reason or another existing investors are reluctant to tread. It must seek to enhance the volume of investment in Scotland, in enterprises which will add value across our economy. It must work closely with other lenders in Scotland, and indeed with the British Business Bank which is funded by the UK Government for activities across the UK, and which has a very similar remit to that proposed for SNIB.

This will require clarity of strategic thought and carefully evaluated actions – involving skilled and dedicated staff. Success must be measured by the additional benefits resulting from SNIB activities, not just the activities per se. Helping investors to find funds from other sources will certainly prove of more value than investments by SNIB which do no more than displace funds from such other sources.

Jeremy Peat is visiting professor at the University of Strathclyde.