Humza Yousaf has defended a decision by Scotland’s state-funded investment bank to put £9million into the disastrous deposit return scheme despite the potential loss of every penny.

The First Minister said the Scottish National Investment Bank (SNIB) had been “right” to loan the money to the scheme’s administrators Circularity Scotland Limited.

The firm collapsed in June with debts of more than £86million and assets of just £2.1m.

The SNIB today published its accounts for 2022/23 which showed the value of its loan to Circularity Scotland was now potentially worth £0, or nothing at all. 

The bank said it had already reduced the value of its investment to £4.5m in March 2023, because of problems over the depository return scheme (DRS) going live in August. 

READ MORE: SNP MSPs to meet tonight to decide Fergus Ewing sanction

In April this year, it was confirmed the scheme would be delayed until March 2024, only for the UK Government to insist on changes which the Scottish Government rejected.

Faced with the prospect of the DRS taking until 2025 to begin, the drinks companies involved withdrew their support from Circularity Scotland and it collapsed.

The SNIB said this “post balance sheet event” was not reflected in its accounts, but admitted its investment into Circulairty Scotland Ltd was “now valued at a range of between £0-£1m”. 

The DRS was supposed to improve recycling and reduce litter by adding a 20p returnable deposit to all drink bottles and cans sold in Scotland.

However many small businesses warned they could not afford the extra cost to them, and the UK Government refused to let it include glass, fatally undermining it.

Mr Yousaf was asked about the DRS and SNIB at his bi-annual meeting with Holyrood’s committee conveners.

Claire Baker, the Labour convenor of the Economy and Fair Work Committee, asked the First Minister what lessons had been learned about the influence of Government policy on the bank’s decision-making.

Mr Yousaf said the bank’s decision to loan the £9m to Circularity Scotland Ltd had been taken independently by the £2bn organisation and praised its chair and chief executive.

READ MORE: SNP civil war in East Kilbride as MSP urges party members to unseat MP

He also said the bank had to be able to make “calculated risks” based on its expertise, and said they had done a “good job” leveraging private investment.

He went on: “In terms of lessons learnt in relation to deposit return scheme and Circularity Scotland, There are a number of lessons, undoubtedly, to learn. 

“I'm happy to give very detailed written correspondence to Claire Baker, but what I would say is that it’s a source of great frustration. 

“I won't go over all of that history of where we are with the deposit return scheme and where we've ended up. 

“But the Prime Minister's most recent announcements give me little hope at all that there will be a UK aligned scheme by the time that the UK Government had suggested there would be in 2025. “So we've had our own scheme virtually torpedoed and no UK scheme in sight. 

“So I think it was right that SNIB invested. It was a decision, obviously, for them to invest in Circularity Scotland at the time. 

“I'm just frustrated that we have ended up in the position that we are in and unable to take forward a Scotland-only scheme that was ready to go and would have, I think, been very helpful in relation to reducing litter on our streets.”

The DRS was piloted by Green minister Lorna Slater, who faced calls to resign after it ran into problems.