A bank set up by Nicola Sturgeon has ploughed £50million of public money into a firm linked to a tax haven.
The money has been handed to asset managers Gresham House to invest in a forestry fund aimed at "high-net-worth" clients seeking "tax efficient structures".
The company has admitted owning a management company in Guernsey – widely regarded as a tax haven – and chairman Anthony Townsend was named in the Paradise Papers as having previously been a director of an offshore firm in the Isle of Man.
Gresham House claims its forests will help capture 1.2 million tons of carbon emissions.
But opposition politicians have questioned the Scottish National Investment Bank's (SNIB) deal and environmental campaigners have raised concerns over its green credentials.
Labour MSP Monica Lennon said: "People who work hard and willingly pay their tax in the hope that it will be used to provide decent public services will be appalled to think their money could be handed to a firm that specialises in helping extremely rich people avoid paying tax.
"There needs to be proper scrutiny of the SNIB and the investments it makes.
"The £50million Gresham House deal is concerning.
"When companies operate in the UK but also have subsidiaries offshore which can help them legally avoid tax, it impacts on all of us.
"It means that governments may not have enough money to fund the NHS, teach our children and give pensioners a decent pension.
"The SNP have a dire record when it comes to pumping our money into the private sector – from the Ferguson shipyard and Prestwick Airport to disastrous private finance schemes to build hospitals, the amounts of public money squandered are mind-boggling."
Investment in commercial forestry opens access to a number of tax breaks in the UK.
There is no income tax, corporation tax or capital gains tax in relation to growing timber.
Gresham House boasts that it should provide income "free of tax" and qualify for 100 per cent relief from inheritance tax once held for two years.
The £4billion firm's website states: "We understand that many clients want to pass on as much of their wealth to family as possible.
"Forestry funds are accessible to high-net-worth, professional and sophisticated clients via inheritance tax efficient structures".
Environment campaigner Jamie McIntyre said: "There are lots of ways that the Scottish Government could have invested in rewilding and community forestry projects, so it is odd they have chosen to do it this way.
"They claim they want to encourage others to invest in forestry through the Gresham House deal but this is not for ordinary people – it is for very wealthy people.
"There are issues with public money being invested in a sector already supported by public grants, generous tax arrangements and the murky world of carbon offsets – the environmental credentials of which are highly debatable."
Townsend was on the board of Rea Brothers (Isle of Man) Ltd and Companies House records show he is also a director of Hansa Capital, which is based in Guernsey.
A spokeswoman for Gresham House insisted the banker was no longer a director of Rea Brothers and confirmed Gresham's offshore subsidiary.
She said: "Regarding Anthony Townsend's Isle of Man connection, this is historical and relates to a period dating back to the 1970s when Mr Townsend served on the board of Rea Brothers Group and was a non-executive director of various of their companies including Rea Brothers (Isle of Man) Ltd until the sale of the whole group to Close Brothers Plc in 1999."
She added: "Gresham House Investment Management (Guernsey) Limited ("GHIM") is a wholly owned subsidiary.
"A range of investors including local authority and corporate pension schemes and private clients invest in Gresham House forestry funds."
The SNIB was formally launched in November 2020.
Chairman Willie Watt said: "Our investment assessment and approval process is in line with peers, both commercial investors and other development banks.
"In relation to Gresham, the bank invested alongside two public sector pension funds, whose underlying members share our commitment to a low-carbon future. Together, we represent the majority of the funds."
Last year Watt claimed the £2billion of public cash promised to the SNIB over 10 years was "insufficient".
He said he wanted to be able to earn the right to "borrow on our own balance sheet".
The Sunday Mail revealed in February 2020 how shamed former finance minister Derek Mackay allowed Watt to be appointed without the oversight of ethics watchdogs.
He approved an "unregulated" selection process despite the firm Watt previously led being fined £8.6million in the UK and America over a conflict of interests scandal.
Meanwhile, Benny Higgins – the Government's chief adviser to help set up the taxpayer-funded bank – was eviscerated in 2015 for spending £18,000 on taxis in eight months while CEO of Tesco Bank at a time the supermarket was firing frontline staff.
Scotland's public appointment ombudsman had to stand aside from overseeing Watt's appointment after Mackay – who was forced to resign after sending hundreds of inappropriate texts to a schoolboy – let Higgins head an unregulated interview panel.
MSPs passed legislation to set up the SNIB in January 2020 and ministers have committed to putting £2billion of public funding into it over the next decade.
The Scottish Government said: "The bank makes independent investment decisions and its pay framework and levels of pay of the bank are in agreement with public sector pay policy.
"Some grades and roles are adapted to enable the bank to recruit effectively within a highly paid sector."
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