Scottish Parliament, 30 October 2008

383 contributions from 81 members. The official report.

Official Report 30 October 2008

Rising Cost of Living

Alex Fergusson (None, Galloway and Upper Nithsdale)

Good morning. The first item of business this morning is a Liberal Democrat debate on motion S3M-2780, in the name of Jeremy Purvis, on a helping hand with the rising cost of living.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

This debate is taking place at a time when the country is in recession. The economic situation is unprecedented under devolution, and the Parliament is required to respond accordingly.

Last year, as in previous years, the Scottish Government suggested to the Finance Committee and other parliamentary committees that if budget amendments were proposed, the proponent should identify and put forward equivalent savings. That was the advice to Opposition parties and subject committees. It is seemingly also the stated position of all the other parties that are represented in the Parliament, which I am delighted are united.

Members will recall that, during last year's budget process, the rule was observed in the breach rather than in the adherence. The Conservatives argued for an accelerated tax cut and increased expenditure on police and drugs policies. They did not identify how their proposals would be funded, and—critically—the Government did not ask them to make detailed proposals on areas in which budget cuts could be made so that there could be tax cuts. What was good enough for them last year with respect to business taxation is seemingly not good enough for them this year with respect to personal taxation. [Interruption.] The minister says that the Government should identify the sources of funding for proposals. We will come to that in a moment.

This week, the Conservatives are arguing for national insurance cuts and a VAT holiday, with no costings attached. Their proposed tax cuts come with not a single penny of explanation; I suspect therefore that there must be resistance to them in Scotland.

On 17 January this year, the BBC reported that Stewart Hosie had reaffirmed his party's policy of cutting corporation tax by 10 per cent. He strongly reasserted that policy. Let us be clear: according to the Government expenditure and revenue in Scotland figures that the Scottish National Party has published, that would equate to a £756 million reduction in this year's Scottish budget; yet the SNP is attacking us for seeking broadly the same for individual households, rather than for big businesses.

No different principle is involved. Last year, an Opposition party made suggestions about the budget and did not say where the funding would come from, and the Government accepted its suggestions without asking it to identify the funding. Indeed, during First Minister's question time in September, Annabel Goldie announced the Conservative party's policy of cutting everyone's council tax bill by £150. She said:

"In these rough economic times, real help is needed as soon as possible. When will the First Minister find this money so that we can pass it on to those 2 million households?"—[Official Report, 11 September 2008; c 10739.]

What was good enough for the Conservatives last month is seemingly not good enough for them this month. The Conservatives are now arguing for a national insurance cut and a VAT holiday, with no costings attached. Just so that we are clear, that would mean a negative Barnett consequential of up to £200 million for the devolved budget this year.

Members will recall the Cabinet Secretary for Finance and Sustainable Growth saying on the BBC that the changes made to last year's budget at the behest of the Conservatives represented the equivalent of one morning of one day's spend of the Scottish budget. However, the SNP described the tax cuts that it put in place for local government as the biggest for a generation. That perhaps means that the principle involved is no different, but the scale is. The cuts were not sufficient, as the First Minister called for further tax cuts on 20 September in The Scotsman. On 10 April 2007, it was proudly stated on the Edinburgh City SNP website, under a happy photograph of Kenny MacAskill—I suspect that such photographs are rare—that the SNP would

"cut the overall burden of local taxation by £450 million—the biggest tax cut in a generation—which will benefit pensioners and middle Scotland".

There was no indication of how funding for that would be provided. I hear the Government's Bruce Crawford saying that that is local taxation, but taxation is taxation. The Conservatives said in a recent debate that it was not houses that paid tax, but people, whether people in local communities who pay council tax or people paying Scottish taxation for the Scottish Parliament.

An official SNP press release on 31 July this year in the South of Scotland called for the nationalisation of all of the United Kingdom's energy generation companies. An estimated £20 billion spending commitment was proposed. That £20 billion was rather a modest figure compared with the £100 billion that the First Minister promised that he would have pumped into the Scottish finance sector on 17 September. We are talking about a nationalisation policy that Scotland could not afford and which it does not have the power to implement and about expenditure of three times the Scottish Parliament's budget by a Scottish central bank that does not exist—indeed, it was not the SNP's policy to establish such a bank.

Our policies look rather prudent in comparison. We know that the Labour Party's main tax policy in the past year was the rabbit-out-of-a-hat, headline-grabbing policy of abolishing the 10p tax rate. The rabbit would have hit the lowest paid hardest, and Labour soon discovered that it had myxomatosis; Scottish Labour front-bench members, who were hitherto silent, therefore lined up to shoot it. However, the net result is that the lowest paid in Scotland are still worse off under Labour.

On 29 September, The Scotsman said:

"The only serious budget proposal to boost the economy is a 2p income tax cut put forward by the Lib Dems".

Our proposals are a considerable response to the unprecedented economic and inflationary pressures on families and earners throughout Scotland.

Gavin Brown (Conservative, Lothians)

Unemployment is up by 19,000. How will a 2p income tax cut help the 19,000 people who have just lost their jobs?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

The Conservatives should support a local income tax, which is a fairer tax that is based on the ability to pay. Such a tax would, of course, provide much-needed support for earners who pay income tax, those who are not earning and those who are on lower incomes, such as pensioners. I am talking about a tax package that is right for the economy, the low paid and hard-working families in Scotland. I would have thought that the Conservatives would jump at such a package.

On 14 October, Ireland put in place an austerity budget. [Interruption.]

Alex Fergusson (None, Galloway and Upper Nithsdale)

Order.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Ireland is now, like Norway—although not Iceland, of course—the example that we must follow, and it is putting up tax at a time of recession. Ministers' salaries were also cut by 10 per cent there. SNP ministers now claim that Irish families are 40 per cent wealthier than their Scottish counterparts, but they neglect to say that SNP ministers will be 40 per cent wealthier than their Irish counterparts.

This year's budget is 0.3 per cent different from the published spending review last year. Our policies would make a 3 per cent difference to the budget. Money would be put back in people's pockets. Our proposals are a proper response. Efficiency savings in the infrastructure programme have been identified, unnecessary and too expensive quangos that have been established would be eradicated, and financial consultants, with whom the SNP seems to be obsessed, would be got rid of. We have identified savings and taken the right approach, which I hope members will unite around. It is better to put money back in people's pockets. We have proposed a proper response to the economic situation. We should help earners, the low paid and the economy.

I move,

That the Parliament notes with grave concern the rise in the cost of living and the impact of the credit crunch on families, individuals and small businesses in Scotland; believes that the Scottish Government should use the substantial levers at its disposal to give practical help; disagrees with the policy stated in the Draft Budget 2009-10 that "the Scottish Government will not use the existing tax varying powers in 2009-10", and believes that all parties should work to secure a 2p reduction in the basic rate of Scottish income tax, which would deliver more than £300 per year into the pay packet of the average Scottish earner and a significant fiscal stimulus to the economy.

John Swinney (Scottish National Party, North Tayside)

I read with great interest Mr Purvis's article in The Scotsman of 29 September 2008. That article purported to give more detail about the proposal that was made by his party leader—who has now left the chamber—to reduce taxation in Scotland in the fashion that Mr Purvis has suggested. Taking the most generous approach that I could to the Liberal Democrats' analysis, I estimated that there were a couple of ideas in the article that might have paid £100 million at most. Therefore, a £700 million question remained to be answered.

Of course, it started off not as a £700 million question, but as a £400 million question. At first, the Liberal Democrats thought that a 2p cut in taxation would cost £400 million, and overnight they had to cobble together another fag packet to work out that it would cost £800 million instead. That leaves a gap of £700 million to be filled.

When I saw the debate that had been scheduled for Liberal Democrat time, I expected that we would hear from Jeremy Purvis a seven-minute explanation of where the £700 million would come from. That would have meant perhaps £100 million every minute. However, if I was calculating properly, we got about eight seconds—or perhaps, more appropriately, seven seconds—on where the money was coming from. Mr Purvis's explanation did not even get anywhere near the £100 million that I, at my most generous, could estimate in his article in The Scotsman of 29 September.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Will the member give way?

John Swinney (Scottish National Party, North Tayside)

I will give way in one moment.

Opposition parties who wish to change the Government's budget proposition to that magnitude have a duty to use the proper process and to argue how they intend to raise the £800 million.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

I ask the cabinet secretary to confirm two points. First, is it still SNP policy to cut corporation tax by 10p? If it is, what is his estimate of the revenue that would be required to compensate for that?

Secondly, what did he ask for from the Conservatives last year in the budget process, when they called not only for increased expenditure, but for a business tax cut? He asked for nothing—not in committee, nor in the chamber—and yet he worked with them to deliver their proposals. Why will he not do the same today?

John Swinney (Scottish National Party, North Tayside)

I make two points in direct response to Jeremy Purvis's questions. First, he will be aware that this Parliament does not have the power to cut corporation tax, and therefore—much to my regret—we cannot advance that proposition in the budget. Secondly, with regard to the proposition from the Conservatives last time round, we were dealing—as I think Mr Purvis rather unkindly reminded me—with changes at the very margins of our budget.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

So the issue is not the principle, but the scale.

Alex Fergusson (None, Galloway and Upper Nithsdale)

Order. Mr Purvis, you have had your intervention.

John Swinney (Scottish National Party, North Tayside)

The scale is one of swingeing cuts in public expenditure that Jeremy Purvis has spectacularly failed to explain to the Parliament in today's debate.

The right thing to do in these difficult economic circumstances is to act within the powers of the Parliament, and that is exactly what the Government is doing. We took steps—[Interruption.]

Alex Fergusson (None, Galloway and Upper Nithsdale)

Order. I am sorry to interrupt the cabinet secretary, but we cannot have conversations taking place among front benchers at the same time as we are having a debate. I ask members to desist.

John Swinney (Scottish National Party, North Tayside)

We took steps last year that were not supported by the Liberal Democrats to get on the side of people in their communities. We froze the council tax in partnership with local authorities, for which we got no support from the Liberal Democrats, and we took action to reduce business rates for 150,000 companies in Scotland—we got no support for that from the Liberal Democrats, but they were quick to circulate press releases claiming the credit for it and advancing the argument.

In light of the current economic situation, the Government has taken action to respond to the changing circumstances. We have reshaped our capital expenditure programme to advance £100 million of affordable housing investment and we have intensified activity and support for homecoming Scotland 2009. We are examining all aspects of Government activity, particularly in planning and regulation: we held a planning summit on Tuesday to encourage a process of greater alignment within the agencies to ensure swifter action on planning. We have re-examined the programmes on energy efficiency and fuel poverty, and we are putting an extra £10 million into the free central heating programme to assist its expansion.

We are increasing advice to businesses and individuals. At the procurement conference yesterday, we set out a fantastic new tool to encourage Scottish companies to access Government contracts through the new public contracts Scotland portal, which was fantastically well received. I am delighted to announce that the Scottish manufacturing advisory service is to be expanded by Scottish Enterprise to ensure that more companies are able to gain access to high-quality advice on business development in manufacturing.

Scottish Enterprise is beginning to recruit seasoned manufacturing professionals to double the size and capability of the Scottish manufacturing advisory service, to ensure that more and more companies are able to gain access to quality advice. SMAS has offered such advice to countless companies, which has already delivered more than £25 million of value-added productivity in the Scottish manufacturing sector. Through better financial advice, we will also support individuals in these difficult times.

When its budget proposals are considered in Parliament, the Scottish Government will advance a package of measures to address the real needs of families and businesses in Scotland. We need productive suggestions about how we can take that further, and the Government remains willing to listen to the suggestions of other parties about how we can make a greater impact, within the limited powers that the Scottish Parliament has. The Government will focus on that, and we will not be distracted by initiatives from the Liberal Democrats that carry no substance, and which have been brought to the chamber in a shabby fashion without any detail behind them. We will continue to deliver for the people of Scotland.

I move amendment S3M-2780.1, to leave out from first "believes" to end and insert:

"agrees that the Scottish Government should use all of the levers at its disposal to give practical help; calls on the Liberal Democrats to set out in detail the £800 million of cuts to public services that they would make to fund their proposal on income tax and believes that until these cuts are identified and are open to scrutiny the Liberal Democrats and their proposal have no credibility, and further believes that, as part of the forthcoming budget process, the Liberal Democrats should bring forward detailed proposals of where they believe cuts should be made."

David Whitton (Labour, Strathkelvin and Bearsden)

As members know, we are here today to debate a motion that Jeremy Purvis has lodged, on behalf of the Liberal Democrats, called "A Helping Hand with the Rising Cost of Living". That helping hand—a call for the Parliament to use its tax-varying powers—would deliver a 2p cut in income tax.

To be fair, we knew that it was coming: Tavish Scott caused consternation at his party's recent conference when he announced that master plan during his first speech as the Liberal's Scottish leader. We know that it caused consternation, because Nick Clegg, the United Kingdom Liberal leader, wanted a 4p cut—he obviously wanted a bigger helping hand. The problem is that it was unclear whether Mr Scott's 2p was included in Mr Clegg's 4p, or whether Scotland would get a massive 6p reduction. When Mr Scott was asked to clarify matters, he said that

"you could add the two together",

but they could also be taken apart.

We know, of course, that there was a caveat to Mr Clegg's proposal: it depended on the Liberals being in power at Westminster. Given that, according to the current ratings, there is not a snowball's chance in somewhere of that happening any time soon, Mr Clegg could have promised anything at all, as he knows that he will never be in a position to be asked to deliver it.

It is clear that Mr Scott is a bit more optimistic. He thinks that members in this Parliament will vote for the proposal. He may—who knows?—already have done a deal with the SNP to get it through, especially as the SNP wanted a penny for Scotland not that long ago. We on the Labour side of the chamber did consider lodging an amendment, but we decided that we should simply oppose the motion, as we do not believe that it will deliver what Mr Purvis claims that it will.

According to the Liberal Democrats, their 2p cut would save the average family £300 a year, so the scale of their massive "helping hand" is around £6 a week per family. However, we need to ask at what cost that would come. The Liberal Democrats have not mentioned—and Mr Purvis did not mention—the estimated £30 million a year that the scheme would cost to administer. There is also the question of finding the £800 million from the money that is available to pay for services such as education, social work, health and services for the elderly. We do not know—because the Liberal Democrats have not told us—which services they would cut, as Mr Swinney has just said, to pay for their largesse of £6 a week. Apparently, they would cull a few quangos and make some efficiency savings in infrastructure projects—perhaps Mr Purvis is not so keen on the Borders rail link after all.

In truth, the motion is a political stunt, just like the next motion that we are going to debate, on HBOS. Anyone would think that there is a by-election going on.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Will the member give way?

David Whitton (Labour, Strathkelvin and Bearsden)

I have only four minutes—Mr Purvis has had his say.

I understand that a certain Mr Clegg is going to be in Glenrothes this morning. I would not be surprised to hear that the press release has already been written and is winging its way to the Fife Free Press, the Glenrothes Gazette, the East Fife Mail and The Courier, decrying all the other parties for snubbing Mr Purvis and his master plan.

The way to help hard-pressed families and to give Scotland a helping hand has already been outlined in Labour's 15-point plan—I would be happy to give Mr Purvis a copy for his consideration. Among the plan's highlights are an immediate review of Mr Swinney's £30 billion budget to prioritise job creation; unblocking the public building pipeline by putting the Scottish Futures Trust on hold and returning to either public-private partnerships or traditional procurement practices; beginning immediately to establish Labour's proposal for a Scottish responsible credit initiative; and fast tracking upcoming public construction projects—such as the Raith interchange—which would involve building rather than blocking much-needed infrastructure, as the basis for job creation.

Scotland needs such things to give it a helping hand: practical, sensible measures, rather than a cheap stunt that deserves to be defeated when we vote later today.

Derek Brownlee (Conservative, South of Scotland)

There is a case for saying that, at a national level, tax cuts can be funded by borrowing or by increased revenues as a result of the Laffer curve. Mr Swinney made that case only a few months ago, during a moment when his back benchers were not listening. However, for the devolved Scottish Government, tax cuts can mean only one thing—lower spending. Those words are not often heard in this Parliament and are not frequently uttered by the Liberal Democrats. Truly, these are historic times. To be fair, Tavish Scott has been seen wielding an axe, but never in the direction of public spending.

There is a case for tax cuts—we made it last year, when the Liberal Democrats opposed them—but to assess their impact, we need to know the alternatives and the economic consequences of the alternatives. So far, all that we have heard from the Liberal Democrats is what we once heard, albeit in a rather different context, from Margaret Thatcher: "There is no alternative." We have no idea what would be cut to pay for Tavish Scott's increasingly expensive trip to the seaside last month.

Would £800 million plus the administration costs be cut from the budget for local authorities, which the Lib Dems complained was too low only a few months ago? Would it be cut from the health service or the police? What would the Lib Dems cut? Only a few months ago, the self-same Tavish Scott made a demand of the Cabinet Secretary for Finance and Sustainable Growth, asking whether he would

"state here and now that his unspecified savings ... will not adversely affect the delivery of front-line services in the health and education sectors and across councils?"

Mr Scott added:

"Parliament deserves an answer".—[Official Report, 6 February 2008; c 5872.]

His question was about the Government's efficiency plans, which, to be fair to Mr Swinney, run to 222 pages—a whole 222 pages more than the plans outlined by the Liberal Democrats.

However, members can relax, because the Lib Dems have an answer. On 14 September, Mr Scott told Glenn Campbell:

"I know as a former minister that while current ministers may say there is no fat in the system at all ... that is absolutely not true."

That might explain why, as a minister, he told the Finance Committee:

"I will duck ... the issue of public sector efficiency."—[Official Report, Finance Committee, 15 November 2004; c 1916.]

We know how the Liberal Democrats, with their new-found love of tax cuts, voted on the budget. They voted against tax cuts for small businesses and against the council tax freeze. We did not know at the time, but we know now just how deeply it must have hurt these ardent tax cutters to vote in such a way. With tax cuts so firmly ingrained in their political psyche, it must have pained them to vote against such cuts, so much so that, when it came to the final vote, they could only bring themselves to abstain. Now, it all makes sense.

Let us not forget the other actions during the budget process by this party of prudence, which has newly taken to lecturing anyone who will listen—in addition to the press, Parliament and the public—on the need for cost savings in Government spending. What did they do when confronted with a series of amendments? They voted for all the additional spending and against all the spending reductions.

We believe that tax cuts should be funded. We do not believe that the Scottish variable rate should be changed on a whim to produce a temporary change in the tax rate. If there is scope for temporary tax cuts, council tax or business rates could be cut much more readily. The Liberal Democrats' proposal is for temporary, unfunded tax cuts. How ironic it is that, less than a week before the United States presidential election, the Scottish Liberal Democrats have decided to adopt George Bush economics. From the words of Margaret Thatcher to the policies of George Bush in less than two months—it's a rollercoaster ride with the new Lib Dem team. Who can tell what they will say next? More to the point, who cares?

Members should support the Government amendment and wait with bated breath for detailed proposals from the Liberal Democrats, which have been sadly lacking so far.

Malcolm Chisholm (Labour, Edinburgh North and Leith)

I think that the Liberal Democrats' proposal is the worst and most irresponsible proposal that we have heard in the 10 years of budget debates in the Scottish Parliament. I say that for three reasons.

First, it takes no account of the opportunity cost of imposing a 2p tax reduction. I was astonished that Jeremy Purvis spent five minutes telling us why he did not feel obliged to tell us where he would find £800 million of savings. He argued that the SNP and the Conservatives have been a little irresponsible in some of their pledges about tax cuts, but that is no excuse for being irresponsible in bringing forward the current proposal. We read about problems with health spending in the Highlands and we are told that there is a black hole in the council finances in Edinburgh, and that is just in this morning's papers. Given that there are pressures on budgets, how on earth can the Liberal Democrats seriously propose £800 million of cuts at this time? In fact, they are not doing that. They are being dishonest, because they refuse to say where they would cut budgets to make room for the proposed tax cut.

What we need to do is to bring forward infrastructure spending, because that is the most effective way of dealing with the looming problem of unemployment and introducing compensatory spending into the economy. We need to look at the budgets again, as David Whitton suggested. In particular, we should bring forward more money for affordable housing. In doing so, we will take up a great opportunity not only to help the economy but to fulfil our historic pledge on homelessness. That is an example of the economic measures that we need at present. We should not cut budgets and make work on capital infrastructure even more difficult.

That is the main practical reason why a Parliament that does not have borrowing powers cannot afford to cut income tax by 2p. The second reason is the wider macroeconomic arguments. I refer Jeremy Purvis to an interesting paper called "If, When, How: A Primer on Fiscal Stimulus" by Douglas W Elmendorf and Jason Furman, which I found through Googling their names yesterday. It is well worth reading. One of the conclusions in that recent paper, which takes account of global economic circumstances, is that reducing tax rates is among the most ineffective or counterproductive options.

There is certainly an argument for helping the most hard-pressed, and the Westminster Government has increased the winter fuel payment for all pensioners and the child element of child tax credit from April. We need targeted measures to help those who are on low pay or out of work. That is a legitimate fiscal stimulus, but cutting taxes across the board is not an effective way in which to stimulate the economy. It is economically wrong as well as practically impossible, I would say, because of the effect that it would have on the Scottish Government's budgets.

The third reason why the proposal is wrong is that it is politically inept. We all know that debates take place about expenditure in Scotland and the Barnett formula. What message would it send out if we in the Scottish Parliament said, at this of all times, that we can afford to cut income tax by 2p in the pound? We know the conclusions that people in the rest of the United Kingdom would draw about public expenditure in Scotland. However, that is not the most important reason why the proposal is wrong. The main reasons, as I said, are the effect that it would have on vital spending programmes in the Scottish budget and the fact that it is misguided because it is not the most effective way in which to counter the threat of unemployment.

Let us bring forward the spending programmes and get on with the work on infrastructure. We should not be distracted by what is in effect a political stunt.

Stuart McMillan (Scottish National Party, West of Scotland)

Sometimes I ask myself, "What is the point of the Lib Dems?" Having read the motion and listened to the speeches so far, I am none the wiser.

It is obvious that people the length and breadth of Scotland are struggling to make ends meet due to the increasing cost of living, which is primarily due to the rising costs of food, energy and petrol. Only this week, a poll found that 72 per cent of families are finding it more difficult to pay bills compared with this time last year. That being the case, and given that prices have increased dramatically in the past year, it is reasonable to suggest that the Lib Dems should have backed the SNP's proposal for a fuel duty regulator during the most recent budget process at Westminster. At that time, unfortunately, they did not understand the logic of the proposal or the need to put money into people's pockets. It is good to acknowledge that even the Tories now realise that the fuel duty regulator is a worthwhile policy, despite their having voted against it at the time.

The motion proposes that all parties should work towards a 2p tax cut using the Parliament's tax-varying powers. That is a laudable aim, I suggest, but have the Lib Dems thought through the implications of their policy? The debate about whether the cut would cost £400 million or £800 million will continue long after this morning, but it is legitimate to ask how many people would be forced into the dole queues by the £800 million cut. How would it be funded? It would certainly increase unemployment, but would it also lead to cuts in the central heating scheme or prevent the Scottish Government from investing £100 million in affordable housing? Would it be funded through the demutualisation of Scottish Water, which would probably result in increased charges for customers? Would it be funded through the scrapping of drug and alcohol programmes? The potential for the Lib Dem cuts to adversely affect the Scottish population is staggering. I am sure that people will not be duped by such utter nonsense.

The UK leader of the Lib Dems also wants a 4p tax cut, so in Scotland we would have a 6p cut in income tax. Our public services would be absolutely decimated. Iain Gray is trying to take the food out of children's mouths, but the Liberal Democrats seem intent on increasing poverty and deprivation and on starving the public sector. Within the limited powers of this Parliament, the SNP Government has already put money back into people's pockets, with a council tax freeze, the phasing out of prescription charges, the scrapping of bridge tolls and the introduction of a small business bonus scheme.

Of course, further action is needed. A reduction in the cost of energy and fuel prices would certainly help. Energy prices have increased by 38 per cent in 2008 alone and the price of petrol has risen by 22 per cent over the past year, although I accept that the prices at the pump have decreased somewhat in the past couple of weeks.

If the Lib Dems want to help hard-pressed families in Scotland, they need to put pressure on the UK Government to work for lower energy prices, lower petrol prices and lower food prices and to back measures such as the fuel duty regulator. Anything less is just playing the electorate for fools.

As I said at the outset, I often ask myself, "What is the point of the Lib Dems?" Unfortunately, their irrelevance still knows no bounds.

Wendy Alexander (Labour, Paisley North)

I will change the tone slightly by congratulating the Liberal Democrats on securing the debate. I do not sign up to their proposed response to the credit crunch, but I cannot fault their determination to debate the issues of the day. That is in stark contrast with the SNP, which seems to want to avoid any parliamentary scrutiny of its economic plans. Instead of bold or brave government, there has been a series of guerrilla media announcements over recent weeks.

The Parliament returned from the summer recess in the first days of September, and the SNP did not want to discuss the darkening economic situation. The first fortnight of business passed, and there was no debate. Then, the Government had no alternative but to publish the budget. Instead of the usual statement to Parliament, however, it claimed that there was no need to make one. Another week went by and Lloyds TSB made its bid to take over HBOS. That finally prompted a solitary statement and a carefully planned subject debate, which conveniently allowed the Government to evade bringing a motion before the Parliament.

Another two weeks passed, and the spivs and speculators were overtaken by the global financial crisis, but still no debate was deemed necessary.

Three weeks ago today, on the eve of the global financial crisis, the SNP had us discussing a register of tartans. Now, three weeks later, despite the entreaties of Opposition business managers and pleas from various parts of the Parliament, there is still no Government-sponsored debate scheduled at any time on the Government's response to the credit crunch.

Bruce Crawford (Scottish National Party, Stirling)

Business managers bring various proposals to the Parliamentary Bureau, but I do not recall at any stage requests from any business manager for a substantive debate on the economy. Ms Alexander might not have been here yesterday, but John Swinney announced that we will bring just such a proposal to the bureau next week—a proposal for a debate very soon, in our time, on the economy.

Alex Fergusson (None, Galloway and Upper Nithsdale)

It would be helpful if, when you continue, Ms Alexander, you could address the motion more directly.

Wendy Alexander (Labour, Paisley North)

Sure. I listened very carefully to what John Swinney said yesterday, and he simply said that the Government was thinking about it. Ten weeks on, and we have still not had a Government-sponsored debate on the situation. Imagine the reaction of the Scottish Government if, over the past 10 weeks, the Prime Minister and the Chancellor of the Exchequer had given but one statement to the House of Commons and had relied on Vince Cable to prompt a debate on the issue that is on everybody's lips.

Keith Brown (Scottish National Party, Ochil)

On a point of order, Presiding Officer. Is it not necessary for the member—especially three minutes into a four-minute speech—to address the motion that is before us?

Alex Fergusson (None, Galloway and Upper Nithsdale)

That is for me to decide, Mr Brown. I have asked Ms Alexander to address the motion and, in the one minute of her speech that remains, I hope that she will do so.

Wendy Alexander (Labour, Paisley North)

I commend the Liberals for discussing the issue that is on everybody's lips; I question why we appear to be the only Parliament in the entirety of the western world that, 10 weeks on, has not got round to debating the implications of the credit crunch. No wonder that causes some discomfort to those who have promoted it. There has been an overspun and overhyped six-point plan, and I have one comment for ministers on it: if it is so robust, why are they so scared of debating it in the Parliament?

In my final moments, I will turn to the Liberals. At least they are willing to debate the subject that is on everyone else's lips. In this party, we think that there are better ways to support the poorest pensioners, the most vulnerable children, unemployed people and the people who are most likely to be victims of the credit crunch, but the Liberal Democrats deserve credit for doing something that the Government has manifestly failed to do, leaving us isolated in the western world.

Keith Brown (Scottish National Party, Ochil)

I will now address the motion. One of the most memorable contributions to any debate this year was by Mike Russell on 29 May. Referring to the debate at the time, he said:

"it was one of those occasions that do the Parliament no good whatever. Let us be ruthlessly honest about it: this was political theatre for those who are paid to be here."—[Official Report, 29 May 2008; c 9221.]

When I saw today's motion from the Lib Dems, I was instantly reminded of the idea that this is political theatre for those who are paid to be here. Furthermore, it is political theatre at its most depressing level. In the 18th century, theatre was considered disreputable among the upper classes, and acting was considered to be lying—a ritualistic deception.

We might look at the motion and think that the Lib Dems need both an economics lesson and a history lesson. The crucial period in history, in this context, was not hundreds of years ago, but just a few months ago. That was when the Lib Dems joined the Labour Party's knee-jerk chorus that SNP members were villains and misers and, even worse, that the Scottish Government was supposedly perpetrating the most painful cuts since the French revolution. That was when the Lib Dems shouted for more money for universities, more money for housing, more money for class sizes and more money for hospitals—more, more, more. An observer would be forgiven for thinking of those times as the good old days.

Now, suddenly, the Lib Dems want to throw away £800 million pounds like a rattle from a pram. I said in the past that when the Lib Dems speak in the chamber they often act as if they are still in coalition with the Labour Party. Perhaps the previous speech demonstrated that. It is also demonstrated by the fact that when Lib Dems speak in the chamber they frequently look across to the Labour benches for approval. It reminds me of children showing off to their parents. Now they have perhaps started growing up, and here we are in Holyrood, caught in the midst of their adolescent rebellion. The Lib Dems say that the change is not that they have been hit by political growing pains; they say that it is the big bad wolf come a-knocking, and that the UK economy has suddenly turned out to be a house of straw.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Will the member give way?

Keith Brown (Scottish National Party, Ochil)

I am sorry, but I have only four minutes for this speech.

Alex Fergusson (None, Galloway and Upper Nithsdale)

There is a bit of time in hand should you wish to take an intervention, Mr Brown.

Keith Brown (Scottish National Party, Ochil)

I am delighted to do so.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Thank you. In the spirit of consensus, I point out that our two parties agree on local income tax. The SNP will provide nearly £300 million for a national subsidy of that policy. Will Keith Brown explain, from his party's point of view, where that money is coming from?

Keith Brown (Scottish National Party, Ochil)

I will come to local income tax; Jeremy Purvis can be confident that it will be totally costed in the budget. He should have no fears about that. As I was about to say, I am not here to defend any chancellor of the past 10 years, not even by the hairs on Jeremy Purvis's chinny chin chin, but his is the wrong answer to a very real menace. As Jeremy Purvis should be aware, the Scottish Government cannot just put £800 million pounds on its national credit card, like Westminster can—although we might be forgiven for thinking that that is what got us into this mess in the first place—and £800 million of cuts would have a very real effect on those people whom the Lib Dem motion professes to help.

I agree with Jeremy Purvis that local income tax would in effect be a massive tax cut, just like the freezing of council tax, the introduction of the small business bonus scheme—the Lib Dems voted against both those measures—and the Government's moves on prescription charges. I know that, the Government knows that, and I think that even the Lib Dems know that. That is why this debate is political theatre. The Lib Dems are reading lines that many of them do not believe. Theatre is about the willing suspension of disbelief.

There are plenty of people who are looking for safety right now, as they face a new age in the UK economy—a UK economy that has been completely misrun by the Labour Party. An unfunded, unrealistic 2p tax cut is designed to play to people's fears and cynically win their votes. As has been said—by Malcolm Chisholm, I think—the Lib Dems know that this is never going to happen, which is why they have put it forward. Their 2p tax cut policy has been drafted on the back of an envelope and it is intended to go no further than the front of an election leaflet. Today, the Scottish Parliament will see that childish act for what it is. I have every confidence that the Scottish people will, too. I am sure that this never occurred to the Lib Dems, but I am sure that that will also be true for the people of Glenrothes.

Des McNulty (Labour, Clydebank and Milngavie)

It is unfortunate that the format of the debate means that there has been only one speech from a Liberal Democrat. During Jeremy Purvis's opening speech, I was confused about what he was trying to convey. When I read the motion, I thought that he would explain two things. First, I thought that he would explain the Liberal Democrats' handbrake turn. A party that wanted to increase taxes in the previous two general elections now apparently wants to reduce taxes. What is the party's attitude towards public services and why has it changed in the twinkling of an eye? I thought that that would be explained, perhaps to an audience that is more sceptical than was the audience at the seaside during the Liberal Democrat conference.

Secondly, I thought that Jeremy Purvis would want to explain where the money would come from. John Swinney's amendment places Jeremy Purvis in some difficulty, because it rightly calls on the Liberal Democrats

"to set out in detail the £800 million of cuts to public services that they would make to fund their proposal on income tax".

Jeremy Purvis, like John Swinney, is a former member of the Finance Committee, so he knows the protocol of the Parliament. If a party makes a spending recommendation, it should identify the proposal's implications—that is the accepted format.

The Liberal Democrats have not explained why they have changed their basic philosophy. Nor have they offered an analysis of what their policy would mean. I regret that their approach is all too familiar in parts of Scotland. People in Aberdeen and Edinburgh, who have the misfortune to suffer a Liberal Democrat-led administration, are experiencing significant difficulties with service reductions as a result of those administrations' decisions. If the Liberal Democrats' policy were to be adopted, the misfortune would not be confined to Aberdeen and Edinburgh. What would we say to health service users in Highland, Glasgow and other parts of Scotland, who I presume would lose out on resources if less money was available to the Scottish Government?

The Liberal Democrats have given us little to go on with their proposal—other than a headline—so all that we can do is consider what the Scottish Government should do. David Whitton made important points in that regard. We need to progress capital expenditure and deal with the problems that will potentially affect the construction industry in Scotland. The Government has made much of the £100 million that it will bring forward for affordable housing. That is a valid aspiration, but we need the money to be committed in practice. I would like the Government to make progress on that.

I would also like the Government to say how it will ensure the continuity of Scottish Water's capital programme between the current quality and standards phase and the next one, so that there is not the interruption that often happens at the cusp between the end of one phase and the start of another. There are vital transport projects, such as Glasgow crossrail and fastlink in my area—I am sure that members can identify such projects in their areas. I hope that the Government will put forward not just proposals that it might have made before the credit crunch as part of its strategic transport projects review but revised proposals that take account of the urgent need to get on with projects and ensure the continuity that the construction industry desperately needs.

There are practical steps that the Government can take as an appropriate response to the credit crunch, but a 2p reduction in income tax is not one of them.

Alex Fergusson (None, Galloway and Upper Nithsdale)

We come to closing speeches. Due to a reduction in the number of speakers in the next debate, we have a little time in hand, so I can offer closing speakers an extra minute, should they choose to take it.

Gavin Brown (Conservative, Lothians)

It has not been a great morning for the Liberal Democrats so far. It is fair to say that they have not found universal support in the Parliament for their proposals—and I am talking about support from their own back benchers, let alone from the other parties in the Parliament.

The policy had an unhappy start. When it was announced, like a rabbit being pulled out of a hat—to use Jeremy Purvis's phrase—we were told that the policy would cost £400 million. However, 24 hours later, we were told that it would cost £800 million. The Liberal Democrats excused the mistake by saying that Tavish Scott had been standing in front of the sea in a bad light and had been short of time. There we have it. Tavish Scott got away with his mistake only because it was overshadowed a day later when Nick Clegg said that he thought that the state pension is approximately £30 per week.

The policy does not even have the support of Vince Cable, the man who most Liberal Democrat members of the Scottish Parliament wish was the leader of the Liberal Democrats. When he was asked what he thought of the policy, he said that he was not sure how it would operate, as he had been in India and had not had a chance to check the fine print. A day later, when he had had a chance to check the fine print—I presume that that did not take long—he said:

"They would only be able to cut taxes in Scotland if they found cuts in public expenditure."

That is the clear UK Liberal Democrat position and that is where the problem lies. In general, Conservatives favour tax cuts—of course we do; we always have done. We will seriously consider any fully costed proposal for a tax cut. Mr Purvis said that our council tax discount is not costed, but it has been clearly costed at £281 million and is based on efficiency savings that the Government claimed that it could find. Although he does not realise it, Mr Purvis implicitly accepts that figure because, if he does not, there is a serious gap in his local income tax plans. Our policies are costed; the Liberal Democrats' policies are not.

The Liberal Democrat proposal would lead to cuts in services, but we do not know what they would be. We have heard the proposal about the Scottish Futures Trust, which would save about £14 million. We have heard about the skills body that suddenly the Liberal Democrats do not like and think is unnecessary. The problem is that the cost of the skills body is almost identical to the cost if it were located in Scottish Enterprise. It was moved out for strategic reasons, but returning it to Scottish Enterprise, as I presume the Liberal Democrats want to do, would not save a huge amount of money. The big, rabbit-out-of-the-hat idea is that the rest of the money would be found from unexpected extra Barnett consequentials, according to a Lib Dem press release. The policy has been shown to be a sham.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

Will the member give way?

Gavin Brown (Conservative, Lothians)

I was in the final 30 seconds of my speech, but the Presiding Officer said that I could have another minute or so, so I will take an intervention from Mr Purvis.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

The Government's efficiency plans for the £14 billion infrastructure programme stand at around 1 per cent over the period. What do Conservatives think that the efficiency savings should properly be? Should they match the approach to revenue spending and be nearer to 3 per cent, or should they remain at 1 per cent?

Gavin Brown (Conservative, Lothians)

The difference between the Conservatives and the Liberal Democrats is that we will not take a stab in the dark and jump in with an answer without considering details and figures.

John Swinney (Scottish National Party, North Tayside)

Will the member give way?

Gavin Brown (Conservative, Lothians)

I see that the cabinet secretary is desperate to intervene.

John Swinney (Scottish National Party, North Tayside)

I am grateful to Mr Brown.

If the Government undertook to achieve the kind of efficiency savings in its capital programme that Mr Purvis talked about and tried to use the money to fund other spending programmes, to ensure that there was revenue support for local authorities, we would be breaching Treasury rules.

Gavin Brown (Conservative, Lothians)

I am a staunch unionist and I certainly would not want the cabinet secretary to breach Treasury rules.

The Scottish Conservatives have taken a positive stance this year and did so last year. We voted in favour of and pushed for the acceleration of the small business bonus, we pushed hard for and voted for the council tax freeze and we are pushing for a £150 council tax rebate. All three policies are underpinned by full costings. We will vote against the Liberal Democrat motion.

Alex Fergusson (None, Galloway and Upper Nithsdale)

I call David Whitton, who has up to five minutes.

David Whitton (Labour, Strathkelvin and Bearsden)

Thank you, Presiding Officer, although it really is a task to speak for five minutes on the Liberal Democrats' argument because we have not heard much of an argument to defend their motion. However, we can go back over some of the comments that have been made this morning.

I am grateful to my colleague Malcolm Chisholm, who is more learned than I am and has served in this place and another place for more years than he perhaps cares to remember. He described the motion as the worst and most irresponsible ever brought to this Parliament. Given his senior status among our ranks, I take his words as worth listening to.

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

The motion on Trident might have been that.

David Whitton (Labour, Strathkelvin and Bearsden)

Does the member think so? That comment was from a sedentary position, but never mind.

I think that I heard Stuart McMillan make a strange observation about Iain Gray trying to take the food from starving children. I am not sure where he got the starving children from, but if he was referring to the SNP's free school meals policy, we know from yesterday that a large number of local authorities in Scotland are wondering where they will get the money from. Just like Oliver, they are holding out the bowl and asking for more. Keith Brown, also on the SNP benches, spoke about a suspension of disbelief on tax cuts of 2p, but the SNP wants the whole of Scotland to suspend disbelief that it can get through its new 3p nat tax that will somehow be the answer to Scotland's prayers.

The Liberal Democrats want a 2p cut in income tax but, as we have heard in the debate, they support the introduction of the SNP's local income tax, which at the beginning will be 3p. They seem to want to cut 2p with one hand and add 3p with the other. However, as Keith Brown mentioned, we need to suspend disbelief, as the proposals could go even further. At least the SNP is consistent: it proposes a 3p increase. The Liberal Democrats want each local authority to set its own rate, so the tax could be 3p, 5p, 10p or even more. If the actions of the Liberal councillors in my area are anything to go by, who knows?

I said earlier that we in the Labour Party had published a document called "Helping Scotland weather the international economic storm", and we heard reference to some of the practical suggestions in it. The document was sent to Mr Swinney, who I hope has had time to consider the proposals.

I spoke about prioritising job creation and reviewing Mr Swinney's budget. Labour will certainly support the Scottish Government in reviewing budget allocations that give priority to job creation, investment and skills. I also spoke about unblocking the public building pipeline by putting the Scottish Futures Trust on hold. The lack of detail and action on the Scottish Futures Trust is making our construction industry nervous. Many have said in evidence to parliamentary committees that they are facing a black hole, as the Confederation of British Industry Scotland and Scottish house builders put it.

That means that the SNP has a duty to consider the situation and make proposals on infrastructure spending. We have helpfully suggested the Raith interchange as an example. The Scottish Government allocated funding in the strategic spending review in 2007 to the Raith interchange as costing between £20 million and £100 million to be funded by a non-profit distribution model. As I understand it, the money is in the budget, but the project has stalled. I hope that Mr Swinney can give us some guidance on whether it can get moving again.

We want more spending on those of our schools that are in what is called class D condition, which includes Lasswade high school and Elgin academy. The school building programme has stalled while the country waits for details of the Scottish Futures Trust, which means that children are being educated in less than good surroundings.

Stuart McMillan (Scottish National Party, West of Scotland)

Does the member accept that there was a joint announcement last week by Inverclyde Council and the Scottish Government on building four new schools?

David Whitton (Labour, Strathkelvin and Bearsden)

I was not aware of that announcement, but my point is that those schools should have been started by now. If they had been, the construction industry might be receiving the boost that it deserves.

I agree with Gavin Brown that this has not been the Liberals' finest hour. We will not support their motion.

Bruce Crawford (Scottish National Party, Stirling)

Through freezing the council tax and introducing the small business bonus scheme, the Scottish Government has already taken significant steps to make Scotland the lowest-taxed part of the UK. As John Swinney and others said, the Liberals chose not to support those measures during last year's budget process. Having refused to back the measures, how on earth can they expect to be taken seriously with the ill-thought-out nonsense that they dreamed up in a panic as their poll ratings tumbled?

As Derek Brownlee, Malcolm Chisholm and Keith Brown said, unlike reductions in income tax and other taxation at the UK level, which could be financed through borrowing or other measures, a cut in the Scottish variable rate would automatically mean a reduction in public services in Scotland. What would the real impact of the Liberals' ill-thought-out proposals be on real people and real businesses? What impact would they have in the home and on the high street?

The Liberals have made a headline-grabbing announcement, but they are not prepared to say where the cuts will fall. It took Jeremy Purvis nearly six minutes of his speech to begin to address his party's proposals. Given his obvious nervousness and discomfort about them, I genuinely feel sorry for him. He has been badly exposed by his leader.

As we all know, the Liberals' proposals would require public expenditure in Scotland to reduce by £800 million. Politics is about choices, and the Liberals have chosen to propose slashing public spending in Scotland by unprecedented levels. They have also chosen to take no responsibility for the inevitable consequences of their choices. Will they tell us where the axe would fall? Would it fall on the central heating scheme, at a cost of £46 million, or on the Borders rail link, at a cost of £115 million? Would it fall on the Inverness bypass, at a cost of £120 million, or on the accelerated affordable housing finance, at a cost of £100 million? Even if we took all those projects together, that would not secure even half of the £800 million that was needed.

Would the axe fall on the £168 million of additional funding that Jeremy Purvis claims that he wants to see allocated to Scottish universities?

Jeremy Purvis (Liberal Democrat, Tweeddale, Ettrick and Lauderdale)

May we be clear about this? Is the minister saying that he is opposed to using the Scottish variable rate to reduce taxation as a point of principle, or is it simply a process issue? If it is a process issue, I invite him to operate in the same way as the Government did with the Conservatives last year: let us have discussions about it. Is it a point of principle or process?

Bruce Crawford (Scottish National Party, Stirling)

While the Scottish Government is reducing council tax and business rates without the Liberals' support, I do not give much credence to anything that Jeremy Purvis says. The truth is that he is not being straight with people. He knows that there would be £168 million of cuts to universities, on top of other cuts, to pay for the Liberals' tax proposals.

To see the full extent of the Liberals' breathtaking hypocrisy and the contempt with which they are treating the citizen, we need only look at their website this morning. They want

"more investment in early years education"

and, under the heading of positive policies for young people,

"new investment in clubs offering sport, leisure, music, art and environmental activities during evenings, weekends and school holidays."

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

Keep going, Bruce; this is good stuff.

Bruce Crawford (Scottish National Party, Stirling)

I will keep going; do not worry.

The Liberals want investment in research to "multiply threefold". They also want

"an increase in modern apprenticeships ... more investment in improving school meals ... a major programme of investment in Scotland's community health facilities with 100 new and refurbished local health centres across Scotland"

and

"more investment in diagnostic equipment and staff".

If the Liberals are to be honest about their position, they must remove that stuff from their website today. They cannot possibly afford all those policies.

The front page of the website features a plea from Liam McArthur for more support for the pig industry. That is quite laudable, and we are doing what we can in that regard, but—at the very time when the Liberal Democrats are seeking to reduce public expenditure—he criticises us for not spending enough on this area. He might be talking about the pig support package, but the Liberal Democrats' proposals are more like a pig in a poke.

The Liberal Democrats have chosen their path, which leads to electoral oblivion. I wish them well in that quest; they have made a great start.

I will turn to more serious matters in the little time that I have left. No one in Scotland can have failed to notice the rapid pace of inflation, which currently sits at a 17-year high of 5 per cent—many Scots are actually finding it to be higher than that. A third of Scots households are expected to enter fuel poverty this year following dramatic rises in energy costs, and many families are facing huge rises in their grocery bills, with staples such as bread up 41 per cent this year. That is why the Scottish Government, across a range of areas, has announced package after package to help people in these difficult times. We are on the side of people in their homes and in the high street.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I thank Wendy Alexander for pointing out to the chamber that it has taken the Liberal Democrats to focus the attention of the chamber on the economy and the credit crunch and our solution to the current problems, and that, to do so, we had to use our own debating time, of which we get only four sessions a year. We should not look at other issues—even important ones, such as the British-Irish Council—when the whole country is talking about the credit crunch and families and individuals are tightening their belts. It has taken the Liberal Democrats to bring the matter to the chamber.

Jeremy Purvis opened the debate by identifying the hypocrisy of the SNP and Conservative alliance, which has, this year, called for tax cuts for businesses without identifying where the money for that would come from but opposed Liberal Democrat plans to cut personal taxation because it says that it does not know the details of the proposal. What a pathetic excuse.

John Swinney quoted from The Scotsman, and I would like to quote The Scotsman back at him. In today's edition, that well-known SNP supporter George Kerevan has a major article in which he says that that the key is

"consumer spending not public spending".

He writes:

"The best way forward in current circumstances is to cut income tax ... This is instant, bolsters consumer confidence and does not distort resource allocation ... A tax cut is also theoretically possible in Scotland, where the Scottish Government could use its devolved powers to slash the basic rate of income tax by up to 3p in the pound. Given that the Scottish Lib Dems are already on record as supporting a 2p cut, there would be a majority in Holyrood for such a move."

Of course, that would be the case only if the Scottish Government had the political will to use our powers here in the Scottish Parliament.

John Swinney (Scottish National Party, North Tayside)

Will the member give way?

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I am just getting started; I will give way later on.

John Swinney (Scottish National Party, North Tayside)

I think that that was a selective quote.

Alex Fergusson (None, Galloway and Upper Nithsdale)

Order. I have previously asked front benchers not to make sedentary interventions.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I have to select quotes—I would love to quote the entire article. I recommend that Government members read the article, as it is very educational.

I remind everyone, including Bruce Crawford, that the 2p income tax cut means £800 million less spending, which is only 2.7 per cent of the £30 billion of the Scottish budget.

To be fair to David Whitton, Labour does not want to see tax cuts for everyone. His speech was, therefore, no surprise, so I do not criticise him for that.

John Swinney (Scottish National Party, North Tayside)

As Mr Rumbles now has about four minutes of speaking time left, would he like to use the entire remaining time to tell us where he is going to find that £800 million?

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

The position that we are in is precisely the position that the cabinet secretary was in last year when he entered into negotiations with the Tories about tax cuts. The pot cannot call the kettle black.

Derek Brownlee said that tax cuts were from the George Bush stable. I will quote again from George Kerevan's article, which I also recommend that the Tories read. He writes:

"Europe is presently going nuts over an Obama presidency but Obama's main policy plank is an income tax cut. So why not here?"

The Tories are still stuck in cautious, pre-recession mode and are paying a political price in the polls for having nothing to say about cutting taxes. That should be enough time to spend on the Tories, but I will stay with them a little longer, as it is impossible for me to deviate at this point.

Gavin Brown, as ever, is completely at sea on this issue. In the Tories' debate on 2 October, he said:

"Mr Rumbles ... charged round the lobby telling everyone that he would intervene during every speech by a Conservative member to ask about tax cuts—it would have been a good idea not to talk about such plans to Conservative researchers."—[Official Report, 2 October 2008; c 11407.]

I have news for Gavin Brown. It was Tory researchers who suggested that that be done because they are so embarrassed at the position of the Conservative MSPs, who should be joining the Liberal Democrats on this matter. I would welcome them joining us in advocating personal tax cuts.

Alex Johnstone (Conservative, North East Scotland)

Would the member take a word from a Conservative?

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I think that we have heard enough from the Conservatives but, as I have time, I will give way.

Alex Johnstone (Conservative, North East Scotland)

Will the member accept that the only principle by which his proposal could reinflate the economy of Scotland is that of trickle-down economics, which would mean that he—as a Liberal Democrat—is fundamentally suggesting that the poor should live from the crumbs from the rich man's table?

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

That is an appalling thing to say. The Liberal Democrats are in favour not of trickle-down economics but of Obama economics.

I well remember that when I asked, during that debate on 2 October, whether the Conservatives were interested in tax cuts, Alex Johnstone shouted out that they were not. That resonated across the chamber.

At a time when the nation is in terrible economic circumstances and every family and individual is having to tighten their belt, it is the duty of the Scottish Government and MSPs to tighten our own belts and challenge the ever-growing budget that we spend, which is made up of taxpayers' hard-earned cash. If the SNP Government can cut taxes for businesses, which it has, it can cut taxes for low and middle-income taxpayers as well. Other Governments across the world are cutting taxes to put money back into taxpayers' pockets. Indeed, it is the first thing that Obama says that he wants to do when he becomes president. The UK Government refuses to do it, however, and now the Scottish Government refuses to do it as well.

Today, the Liberal Democrat motion gives us an opportunity to help people across the country. We should take that opportunity at decision time.

HBOS

Alex Fergusson (None, Galloway and Upper Nithsdale)

The next item of business is a debate on motion S3M-2779, in the name of Tavish Scott, on the importance of HBOS to the Scottish economy and jobs.

Tavish Scott (Liberal Democrat, Shetland Islands)

The Liberal Democrats welcome the opportunity to initiate—in our parliamentary time—another debate on the economic issues that confront Scotland. We believe that it is the right thing to do. We remain disappointed that other parties—including the Government, which has much more parliamentary time—have not yet managed to do that. We encourage them to take our approach in the coming weeks, because we should consider the future of our economy in great detail as the pace of change that we face continues.

There are few occasions in history when global events have happened quite so quickly and have changed so thoroughly the world and the way in which we see it. The backdrop is one of global economic chaos. Stock markets and people's pensions have lost nearly half their value—more than that in places such as India. There is real concern about whether we face downturn, recession or depression. Things have moved fast—that is the point of today's debate. Decisions that seemed clear cut on 18 September are not so obvious now—that is why we lodged the motion that we are debating today. We have included the words suggested by my good friend Mr Alex Neil in order to gain maximum support for our case.

We say that the Parliament should unite to save a 300-year-old national institution—to save not just a bank, but the jobs in that bank and all the jobs that rely on the scale of the Mound's operation. I refer to the sandwich shop that serves staff through the working day, the taxi companies that cross the capital and towns throughout Scotland, and the cleaners and many more who keep the bank operating. We should unite not just for the thousands of HBOS staff but for the many thousands more who depend on the banking sector and on HBOS, in particular.

John Park (Labour, Mid Scotland and Fife)

Has the member had any dialogue with staff representatives on the content of his motion?

Tavish Scott (Liberal Democrat, Shetland Islands)

I have talked to many members of banking staff over the past few weeks, both within and outside my constituency, where a bank branch will probably go if we follow the Labour Government's current proposals. I am sure that John Park does not wish that to happen. I assure him that I have met banking staff to discuss the matter and will continue to do so.

This morning we argue that we should say no to the takeover of HBOS by Lloyds TSB. A few short weeks ago the takeover was the only game in town—the UK Government was correct to make that case at the time. However, in those few short weeks the global banking system has changed more than it has changed in a generation. The UK Government now needs to change. On 8 October, it decided to create taxpayer-funded banking institutions. That decision was right, but it means that today the Government should re-examine what is in the best interest of taxpayers, because now we are shareholders in those institutions. Small businesses and customers rely on local banks, with competition in high streets and towns across Scotland.

On 22 September, party leaders joined the Government and the Scottish Council for Development and Industry here in Edinburgh. We were united then in saying that Scottish banking expertise, the tens of thousands of banking jobs and the strong Scottish financial sector are huge arguments in favour of retaining an HBOS headquarters here in Scotland. The First Minister made those arguments; I supported them in September, and I support them absolutely today. That should now mean that HBOS is retained as an independent bank, in Scotland, for the long-term benefit of the Scottish economy. The action of the UK Government can make that happen. Our First Minister should be meeting the Prime Minister and the chancellor.

One issue that has not changed is the impact of the situation on customers. From day 1, I warned about the impact of a loss of competition on the high street. I want us to stand up for the individuals and small businesses that will face loss and threat as a result. Let us look at what the Federation of Small Businesses is saying. Its members—small businesses in Scotland—are saying that they have seen increases in the cost of borrowing facilities from the clearing banks. More than half have seen an increase in payment times from invoicing to full payment, putting their cash flow at risk. Small businesses are being asked to secure overdrafts and loans on their homes. Banks are shortening business lending review dates. One small firm that is involved in the tourism industry told the Federation of Small Businesses:

"Our bank facility has recently been up for review at the moment. The bank has informed us that in addition to them taking a £150 'renegotiation' fee they are going to increase our overdraft rate from 2.5% over base to 6.95% over base."

This morning the president of the National Farmers Union Scotland said on the radio that banks are shortening credit and pulling in overdrafts on farm businesses across Scotland. The last thing that businesses need is a collapse of competition in banking that will threaten their access to the overdrafts and borrowing that keep them going in tough weeks and months. That is the impact of what has happened.

Since the Government announced its support for the takeover in September, everything has changed. Now the Government also needs to change. The UK Government has nationalised Northern Rock, bailed out banks and even subsidised the losses of Icelandic banks, so why should we wipe out Scotland's bank? The collapse of competition in banking is already biting small business. Unless Parliament unites and the UK changes its policy, there is a real danger that more Scottish businesses will enter the jaws of bankruptcy. What was urgent for the short term in September was swept away by the transformation of banking in October. We need to look again at those decisions and to take the route that gives strength to the Scottish economy in the long term. That is the case for an independent HBOS in Scotland. The Scottish Government should make that case in the Scottish Parliament today and to the Prime Minister and the chancellor. We should unite to support that case today.

I move,

That the Parliament gives a general welcome to the measures taken by the UK and other governments to tackle the current banking crisis; considers, however, that the recapitalisation plans announced by HM Treasury in October 2008 have fundamentally changed the landscape under which competition rules were waived to enable a merger between Lloyds TSB and Halifax Bank of Scotland (HBOS); further considers that inconsistent statements have come from the UK Treasury about whether or not the banks would independently have access to the recapitalisation funds; believes that this ambiguity is not serving anyone's interests in the present environment; further believes that losing HBOS corporate headquarters and jobs in Edinburgh would seriously jeopardise the city's position as a financial centre; sees no reason why HBOS should not be able to access UK Treasury recapitalisation and, therefore, liquidity funding on the same independent basis as other major banks, and, with this in mind, considers it a very real possibility that an independent HBOS solution could be found that may well be in the best interests of shareholders, employees, customers and the Scottish economy at large.

Derek Brownlee (Conservative, South of Scotland)

All members want to ensure that Scotland retains as many jobs as possible in the financial sector and that as many decision makers in the sector as can be are based in Scotland. We are all concerned to ensure that, if the merger proceeds, Scotland retains as much as it can. There is cross-party consensus on the importance of the financial services sector to the Scottish economy and to our long-term prospects.

Initially, there was a great deal of cross-party consensus on the subject that we are debating. Perhaps it was unrealistic to expect that that should remain for long. In his speech, Tavish Scott talked about the events of the past few months, which are certainly unprecedented. He said that decisions that appeared appropriate on 18 September have been overtaken by events. That may be true, but it is worth considering that, given that the situation has changed so quickly over the past six weeks, it may yet change significantly over the next six. This is truly an unprecedented situation.

Regardless of whether it is borrowed from Alex Neil or is the Lib Dems' own work, the language of the Lib Dem motion is, in part, reckless and unwise. Whatever the consequences of the merger of Lloyds TSB and HBOS may be, the suggestion that it seriously jeopardises Edinburgh's "position as a financial centre" is a gift to our competitors and does a gross disservice to the many other financial institutions in Edinburgh that will remain here regardless of whether the merger proceeds.

Alex Neil (Scottish National Party, Central Scotland)

Is the member aware that this morning an eight-person senior management team for the merged organisation was announced? Only one member of the team is from HBOS and all will be based in London—not one will be based in Edinburgh.

Derek Brownlee (Conservative, South of Scotland)

I move on to the consequences of our supporting the motion tonight.

Scotland and Edinburgh have a successful track record in attracting investment in the financial services sector. We have won against competitors within the United Kingdom and overseas. If, for whatever reason, we support Tavish Scott's motion tonight and the merger proceeds, imagine what our competitors will say when in future we argue the case for investment? Does anyone think that, if the Scottish Parliament—and, possibly, the Scottish Government—believes that Edinburgh's status as a financial centre is seriously jeopardised, that will help to protect and attract Scottish jobs? That is one reason to reject the Lib Dem motion, but there are others.

Some have argued that there are alternatives to the merger—that another party might step in or that HBOS could survive as an independent entity. Mr Scott has made the latter argument today. Although there has been much speculation about an alternative suitor, so far it remains just that—speculation. We must consider what would happen if the merger fell through without the emergence of a new party and HBOS remained an independent entity. In all candour, no one can be sure what would happen, but further falls in its share price, a collapse in investor and depositor confidence and—ultimately—nationalisation cannot be ruled out. That, too, should give members pause for thought before they support the Liberal Democrat motion.

Tavish Scott (Liberal Democrat, Shetland Islands)

The UK Government has made available £57 billion of his and my money—taxpayers' money—so I presume that Derek Brownlee would concede that his suggestion that that the bank would simply collapse and disappear is not the case.

Derek Brownlee (Conservative, South of Scotland)

The point is that if the bank were nationalised there would be serious implications for the taxpayer. I will elaborate on that point in a moment.

Questions have been asked about whether Government support would or should be available to Lloyds TSB and HBOS independently if the merger was not in prospect. That is a reasonable question, although it remains hypothetical. It is important that the UK Government should have a plan B if the merger does not proceed for whatever reason. Some people tell us that HBOS could remain an independent entity because the Financial Services Authority says that it is financially sound. However, the FSA said the same thing before the merger was proposed and, only a few weeks ago, the voices that now pray in aid the FSA were berating it for being asleep on the job and failing to regulate properly.

To offer an independent HBOS the same recapitalisation package as the combined Lloyds TSB-HBOS might be enough, but it might also not be sufficient and the taxpayer's exposure might be significantly higher. Suspending the competition rules does not require the merger to proceed, but it permits it to do so. Shareholders retain the final say. If the HBOS board believes that there is a better alternative, it can advocate it and, if the shareholders believe there is one, they can vote for it.

The Conservatives do not believe that politicians should interfere in commercial decisions taken by financial institutions and shareholders unless there is no other option. Others may take a different view. That is their right, but they ought to remember that it is as easy to lose business confidence as it is to win headlines. In a few months' time, the Lib Dems will be chasing different headlines, but our financial sector will still be dealing with the consequences of whatever decisions are taken in the next few weeks, including those made in this Parliament. Supporting the Lib Dem motion may win favourable comment in some newspapers and might even win public support, but it is not a risk-free option by any stretch of the imagination. It is quite the reverse.

I move amendment S3M-2779.1, to leave out from first "considers" to end and insert:

"reaffirms the importance of the financial sector to the Scottish economy; notes that the boards of both Lloyds TSB and Halifax Bank of Scotland remain in favour of the merger and that shareholders will soon have the opportunity to vote on the proposal, and believes that decisions on the future of individual institutions should be made by shareholders, not politicians."

Patrick Harvie (Green, Glasgow)

In recent weeks and months, we have heard members from all political parties and people from outside politics express their concern about the financial crisis, particularly the proposed merger between HBOS and Lloyds TSB. Tavish Scott is right to assert the need for debate. The concern about Scotland's economy and jobs is genuine and widely shared. The Greens share it too. Unlike Derek Brownlee, I do not feel the need to oppose the motion if it reaches the vote unamended, but to come to the Parliament merely to emote together without addressing the deeper causes of the financial crisis that we face is pointless. It amounts to little more than a group hug on the deck of the Titanic. It might feel like it helps a little bit, makes us feel a bit better and gives us some comfort in the short term, but it does nothing to change the problem that is at the heart of the crisis.

We can understand why the Government sees the need to bail out some of the major banks. Sadly, however, the bailout amounts to an attempt to refloat the same failed model of deregulated financial services that has been supported by all other political parties in this Parliament and at Westminster. Attempting to tweak and reboot the system that has crashed without finding out what went wrong in the first place simply will not cut it. However, the recognition is growing that reshaping our economy is as important for our financial system as for our society and environment.

The question at the heart of the matter is whether Government has the guts to challenge the perverse notion that growth is as essential as the air that we breathe and that we must aspire to unbridled economic growth. That notion is a fundamental flaw in the Scottish and UK Government approaches. Gordon Brown tried to encourage us to think that he had abolished boom and bust; what he meant was that he thought that he had abolished bust and could have boom for ever. The Scottish Government's central purpose—that is how it describes it, but I describe it as a central contradiction—of sustainable economic growth amounts to the same: more stuff for ever!

Growth is an exponential function and cannot be continued for ever without causing a collapse. The Prime Minister, the First Minister and others know that their action in response to the current crisis is only a short-term solution—it aims to get everybody back to business as usual as soon as possible. The bottom line for both Administrations is that the demented pursuit of economic growth must be protected at all costs. In effect, the captain of the Titanic is trying to set sail for the next iceberg. If members regard the financial sector as the engine of the Scottish economy, that course of action should give no comfort to the people who work in the engine room. Tim Jackson, an adviser to the UK Government on sustainable development, wrote recently in the New Scientist:

"With the environmental situation reaching crisis point, however, it is time to stop pretending that mindlessly chasing economic growth is compatible with sustainability. ... Figuring out an alternative to this doomed model is now a priority before a global recession, an unstable climate, or a combination of the two forces itself upon us."

In his opening speech, Tavish Scott described a 300-year-old institution, but HBOS is not the same as the Bank of Scotland any more than Lloyds TSB is the same as the Trustee Savings Bank. Before the mergers—and, indeed, before the latest proposed merger—we had organisations that began as different beasts and operated on a more socially sustainable and socially just basis.

I do not have time to go into the detail of that argument and I think that members are familiar with it. The essential purpose of Government in responding to the current economic crisis must be to assert that the future of the financial sector in Scotland should be based on the old-fashioned values of sustainability and thrift, which are more important now than they have ever been.

Jamie Stone (Liberal Democrat, Caithness, Sutherland and Easter Ross)

Will Patrick Harvie give way?

Patrick Harvie (Green, Glasgow)

Do I have time for an intervention, Presiding Officer? I apologise. I will attempt to address Jamie Stone's remarks in my closing speech.

I move amendment S3M-2779.2, to leave out from "gives" to end and insert:

"recognises the need for short-term action by the United Kingdom and other governments to tackle the current banking crisis; rejects, however, any effort simply to refloat the failed model of deregulated financial services, which has been supported by Labour and Conservative UK governments and by Labour/Liberal Democrat and SNP administrations in Scotland; calls on the UK and Scottish governments to commit to a future for the financial services sector that is based on sustainability and self-reliance rather than the impossible objective of limitless economic growth fuelled by reckless lending and excessive leverage, and, in the short term, demands that an element of democratic control be exercised over the lending and investment activity of banks that have been bailed out by taxpayers' money to ensure that economic, social and environmental sustainability are prioritised through that activity."

John Swinney (Scottish National Party, North Tayside)

I welcome the debate. It follows the statement that the First Minister made to the Parliament on 24 September on the Lloyds TSB takeover of HBOS, which was followed by a debate in Government time. As I made clear to the Parliament yesterday, the Government will take to the Parliamentary Bureau proposals for further debates on the wider economy, although we used the opportunity of yesterday's debate on the British-Irish Council and the earlier Liberal Democrat debate this morning to set out our points on that matter.

Wendy Alexander (Labour, Paisley North)

Will the cabinet secretary cast any light on why, over the past 10 weeks, his Government has initiated no debate on the impact of the credit crunch on Scotland? I think that that is a unique position in the western world. Perhaps he could clarify that.

John Swinney (Scottish National Party, North Tayside)

Perhaps Wendy Alexander did not listen to what I said. I just mentioned that we had a Government debate on 24 September that examined many of the issues and that those issues have been discussed in the Parliament.

The Scottish Government has a duty to work at all times to protect the Scottish interest. We have set out our position on the transaction that Lloyds TSB proposes. Our preference would be for HBOS to continue as an independent organisation. The fears about the effects of a merger on jobs and decision making, including the concern about the lack of competition, are well known. Equally, however, we have a responsibility to put to Lloyds TSB the case for retaining jobs and decision making in Scotland, which is the focus of what the Government has done in recent weeks. As members know, we encouraged a dialogue with other parties through the Scottish Council for Development and Industry. That was warmly supported by other political parties, which we welcome, and we continue to operate on that basis to ensure that the Scottish interest is protected.

Jamie Stone (Liberal Democrat, Caithness, Sutherland and Easter Ross)

Will the cabinet secretary give way?

John Swinney (Scottish National Party, North Tayside)

I ask Jamie Stone to forgive me, but I have to make some progress.

Lloyds TSB is, of course, pursuing a legitimate interest in the transaction. It is entitled to pursue its interest, and the Government will continue to engage in dialogue with its senior management and leadership—as the First Minister did—to ensure that the Scottish interest is protected.

We have already referred to the fact that the Lloyds TSB transaction is the only game in town.

That remains the case, but the circumstances have changed significantly in the intervening period. That is why the First Minister wrote to the chancellor to ask a number of questions about the Lloyds TSB transaction and, in particular, to establish what conditions would be available if other bidders decided to enter a contest to engage in the takeover. The First Minister asked for details of the terms of the recapitalisation of HBOS and Lloyds TSB. He asked whether the competition law concessions that the UK Government announced in September would be available to any other credible bidder. He also asked whether the recapitalisation of HBOS was in any way conditional on the merger going ahead and, if so, on what basis. The chancellor has replied to that letter and I would like to share the contents of his helpful reply with the Parliament. The correspondence will be available in the Scottish Parliament information centre in due course.

Although the chancellor does not answer all the questions, his response is a helpful intervention. In it, he makes clear:

"When the recapitalisation scheme was triggered the boards of both HBOS and Lloyds TSB had decided it was in their interests to merge, and it was in the expectation of the merger going ahead that the FSA made the assessment of each bank's recapitalisation requirements. If for any reason the merger did not go ahead, the FSA would need to re-assess both banks to determine the extent to which each would need to recapitalise."

That would take place within the context of the Government's recapitalisation scheme.

The chancellor has made an important statement that opportunities exist for other propositions to be considered, and we will continue to have dialogue with him to ensure that those propositions are fully and properly considered by the UK Government.

John Park (Labour, Mid Scotland and Fife)

Like many other members, I think that it is absolutely right that we are having this debate, which follows on from the statement that we had a month or so ago. It is right that people can look to the Parliament and see that we are discussing issues that really concern them.

We cannot deny that HBOS and Lloyds TSB have made a significant contribution to the Scottish economy in recent years. That contribution should not be underestimated. I am sure that all members will agree that no matter what happens in the future—as John Swinney outlined, other possibilities exist—we want that contribution, whether by both banks or by a joint bank, to be sustained for as long as possible and to continue to be as big as it has been in the past.

The discussions that we have in the Parliament in the coming period must be about securing Scottish jobs. The Parliament must listen to and respect the views on the proposed merger of shareholders and, most importantly, the workforce. There are well-established industrial relations structures in place in both organisations, and we should respect them and listen to what the workforce has to say. We should remember that many members of HBOS's workforce are shareholders, too.

This week, along with Iain Gray, I met officials from Accord and Unite who represent HBOS workers. They have significant concerns. Although we can hold debates such as today's, we should not forget that the workers are the people who really matter and the people to whom we should listen first and foremost. They are the people who will do everything that they can, whether as union reps or individuals workers, to maximise employment opportunities in Scotland. We must remember that, as shareholders, many of those workers will have a direct say in what happens to HBOS.

As we all know, HBOS provides 16,000 jobs across Scotland. Lloyds TSB is a big company, too. There are huge centres of employment in Edinburgh and Glasgow and smaller but not insignificant centres of employment in Motherwell and Dundee. I am acutely aware of what those jobs mean for the local economies and can remember HBOS setting up call centres in my constituency. I know many of the workers who could be affected by the merger.

Many of those jobs are part time, flexible and relatively well paid. They provide a level of flexible working that has greatly improved standards of living across Scotland. Above all, the development of such jobs in Fife over recent years has facilitated the restructuring of our economy. In the coming months and years, regardless of how the proposed merger develops—even if HBOS and Lloyds TSB remain separate institutions and the recapitalisation scheme that has been put in place helps other banks—I have no doubt that we in Scotland will go through a period of significant change in our economy.

We will support the measures that the Scottish Government is taking to maximise the number of jobs in Scotland in the current crisis, but it must place a renewed emphasis on helping workers who might face redundancy in the future. There are vacancies in a number of key sectors, and we should not lose sight of the fact that people in the banking sector have transferable skills. The PACE—partnership action for continuing employment—teams do a valuable job, but I urge the Scottish Government to beef up support for those who face unemployment. There is no reason for it not to take a proactive stance on the matter, and I encourage it to do so. In addition, I believe that all banks, not just HBOS and Lloyds TSB, have a moral obligation to their workforces to ensure that redeployment, retraining and other opportunities are available.

We are a little concerned about the Lib Dems' motion, which we think does not focus on a number of the issues that Derek Brownlee mentioned or on some of the workforce's concerns. It looks as if the only deal on the table is the proposed merger with Lloyds TSB. We will listen closely to the workforce but will not support the motion, which iterates some matter-of-fact statements about the merger. I am not sure that any member can say for certain that they know what will happen. The workforce in the financial services sector faces a difficult period and its members need our support as a Parliament and as parliamentarians on a day-to-day basis.

Alasdair Morgan (Scottish National Party, South of Scotland)

We move to the open debate. Speeches should be of around four minutes.

Pauline McNeill (Labour, Glasgow Kelvin)

It is said that a week is a long time in politics but, as we have come to appreciate over the past few months, it is clear that a day is a long time in the banking sector.

As the member for Glasgow Kelvin, I represent Glasgow city centre, to the western edge of which, between Finnieston and Anderston, lies the international financial district, which is often nicknamed the "Square Kilometre" or, as I prefer to call it, "Wall Street on Clyde". In developing a district that we hope is to become the third-largest financial quarter in the UK after the City of London and—of course—the city of Edinburgh, Glasgow City Council adopted a visionary strategy. Glasgow's financial district has a strong reputation. Of the 10 largest general insurance companies, eight have a base or their headquarters there. The current global financial situation will not give the district the certain future that it was on course for, so there is a lot at stake for the Glasgow economy. There will, of course, be a wider impact, given that Glasgow and Edinburgh are the twin economic drivers of the Scottish economy.

There are too many branches of the Bank of Scotland in my constituency to count. Like many other members, I am a customer of the Bank of Scotland and have a strong affinity with it on account of its good products, good services and strong Scottish identity. The Liberal Democrats have chosen to debate whether HBOS can have a future that is different from the one for which it is on course. I believe that the debate should not be about who cares most about retention of HBOS as a Scottish bank; it should be a serious debate about how we can preserve the Scottish interest. That should be measured by how we can best safeguard the best terms for ordinary account holders and Scottish businesses and, as John Park outlined, Scottish jobs.

The motion is written in cautious language—indeed, the Liberal Democrats are not its authors—but in the current climate it is fair and legitimate to raise the issues that it raises. However, it is risky for politicians to assert that they have the right answers for the current situation. Although the whole country has lost confidence and trust in the banking sector's ability to make sound decisions we must, as Derek Brownlee said, support the decision-making processes that exist so that we arrive at the solution that will best safeguard the future of HBOS and all its interests.

Tavish Scott argued that we should take the route that gives strength to Scottish banking interests. I do not disagree, but I do not think that the motion focuses 100 per cent on that option; I believe that it leaves questions. I am sure that, ultimately, those who take the decision will be—they should be—well aware of the demands that we continue to make on Scottish jobs. On that issue, we must be heard. When the time comes to stand up for those interests, Labour will not be slow to do so. We are only at the beginning of the process—there is a long way to go.

The Parliament and all the parties must unite around the demand to protect Scottish jobs and Scottish interests. Although we have a difference of opinion about the conclusion, we must stand together on that point.

If the merger proceeds, the new body will almost certainly be a strong institution, and it will represent almost one third of the UK savings and mortgage sector. HBOS shareholders will have a 44 per cent share of the new company and, arguably, a strong share in the future of the company. The Bank of Scotland is a powerful brand. As Eric Daniels, chief executive of Lloyds TSB said, it has international iconic status. To some extent, we must trust market forces and the HBOS brand.

It is absolutely correct for the Government to call for decision making to remain in Scotland and for Bank of Scotland bank notes to continue—I support that approach. However, in the current financial situation, Parliament has a responsibility to use its powers—as it is expected to do—to assist people in these difficult times. The First Minister must spend less time on the UK stage and a bit more time at home. If the Government were to design an action plan, not only will it get the support of other parties, but people will feel that Parliament is taking its responsibilities seriously. If the Government takes that approach, it will have Labour's support.

Alex Neil (Scottish National Party, Central Scotland)

I congratulate the Lib Dems on copying my motion word for word and suggest that if they made more of a habit of that, their standing in the opinion polls might rise substantially.

On the face of it, the debate is about banks: in fact, it is about people. Up to 40,000 people could lose their jobs as a result of the merger. We all know and expect that there will be significant job losses in the banking sector, and the two banks that are involved in the merger will not escape that. However, on top of the natural—if you like—job losses that will result from the financial tsunami, there will be many thousands of unnecessary job losses as a result of the merger. Those job losses will not occur only in Edinburgh and Halifax, and I am as concerned about job losses in Halifax and elsewhere south of the border as I am about job losses north of the border. If Lloyds TSB's corporate policy of offshore and backroom activities is carried through, many thousands of jobs will be lost in Scotland, and many of those will be in Fife.

The two unionist parties say that politicians should not interfere, while the reality is that the merger has been driven by two politicians: Gordon Brown and Alistair Darling. Now that we, as taxpayers, have a major investment in both banks, including £7 billion in Lloyds TSB, we are entitled as shareholders to require them at the very least to minimise job losses and the damage that they can do unnecessarily to people's lives.

Let us not kid ourselves by hiding behind the idea that this is a decision only for the private shareholders. It is a decision that affects the public interest and, especially since recapitalisation, the public interest should be properly represented, which means that the UK Government must act. With all due respect to John Park, he did not mention that Gordon Brown has it in his power to stop the merger going ahead.

There are three possible scenarios for the future of HBOS. One is to allow the merger to go ahead, which is the worst possible scenario from the point of view of competition, and the impact on Scotland and on every high street the length and breadth of the UK. It is what the Labour and Tory parties have been arguing for this morning. Many of Mr McLetchie's constituents will be directly affected by the merger that he supports, so I hope that he can explain to them why he did not defend them.

John Park (Labour, Mid Scotland and Fife)

Will the member take an intervention?

Alex Neil (Scottish National Party, Central Scotland)

I do not have time, unfortunately.

The second scenario is for someone from outside the UK to come in and take over HBOS, which would be better than the first scenario. Coming from outside the UK, the chances are that they would keep HBOS's headquarters in Edinburgh. Not only that, but by taking over HBOS entirely, or a bit of HBOS—particularly the "BOS" bit—they would reinforce those headquarters. I and many others have been working towards that solution. We have said from the beginning that if there is to be a takeover, it would be better to have a takeover from outside the UK, from an institution that does not have its headquarters in London.

The third, probably optimal, solution is to allow HBOS to remain as an independent organisation. According to Hector Sants, the chief executive of the Financial Services Authority, that is a perfectly workable solution. The decision on the merger lies with Gordon Brown and Alistair Darling. Every unnecessary P45 that is issued as a result of the merger will have their signatures on it, as well as those of their Tory poodles.

James Kelly (Labour, Glasgow Rutherglen)

I welcome the opportunity to take part in the debate, which addresses some important issues. There is no doubt that many of us have HBOS employees, shareholders and mortgage holders in our constituencies, and that we see the extent of the impact on the Scottish economy of the crisis.

It is disappointing, therefore, that nothing has really been achieved as a result of Alex Salmond's meeting with Lloyds TSB in London the other day. It appears that the iron laddie has been patted on the head and sent homewards. That is reinforced by this morning's announcement on the stock exchange that many of the senior positions at Lloyds TSB have been filled. Indeed, the crisis has raised questions about Alex Salmond's credibility. At the start of the crisis, he told us that in an independent Scotland, he would come up with a mythical £100 million from a Scottish central bank, and that he would reduce corporation tax. That is one to tell to the fairies at the bottom of the garden, particularly as one of Mr Salmond's economic advisors recently told us that a move to independence would result in a shortfall of £1.1 billion.

I disagree with Alex Neil's comments about Gordon Brown and Alistair Darling. Recently, they have exhibited strong leadership and have very much steadied the ship. The people of Scotland are looking for practical advice. I will offer some suggestions. First, the Scottish National Party Administration could ditch the local income tax policy. If it is trying to attract jobs and investment to Scotland, it should not introduce a policy that would make Scotland the highest-taxed part of the UK. In addition, the SNP should abandon the discredited Scottish Futures Trust. Here we are, 18 months into the Administration, and no finance has come forward from the trust and it is not funding any capital investment programmes. The Government should speed up the capital investment programme and projects such as the Raith interchange.

In addition, the Government should ensure that it pays its bills on time. Recent analysis of the consolidated accounts for last year shows that rather than meeting the 100 per cent target for paying bills, the Government was paying its bills only 93.6 per cent of the time, thereby putting business cash flows under pressure.

It would also be practical to introduce incentives to council tax payers to introduce microgeneration into their homes. That would encourage business innovation, help to stimulate growth and encourage the economy. Those are important matters.

The merger is an issue for the shareholders. However, if HBOS were to stand alone, a greater amount of money might have to be invested in recapitalisation, which could undermine shareholder confidence. We do not want to end up in a situation that is worse than it was a month ago.

This is a time for practical suggestions, not for punditry or posturing. Parliament has to give practical suggestions to the Scottish people today.

Rob Gibson (Scottish National Party, Highlands and Islands)

When Tavish Scott spoke to the motion, he talked about the backdrop of economic chaos in the world. We are talking about one of the worst-ever experiences at the end of a trade cycle, which has developed into a banking crisis of massive proportions.

I am old enough to have been involved in the battles when the TSB tried to stop the Lloyds takeover. I was also active in the SNP when we had to try to save the Royal Bank of Scotland from takeover by various other banks. Lessons can be learned from that process, and they will have to be learned quickly in Scotland, in Britain, in Europe and elsewhere.

In this debate, we can acknowledge the way in which deregulation of banking in the 1980s has led to many of the problems that companies now face. The companies all took the bait in pursuit of the kind of profits that seemed possible from the derivatives markets. Countries now have to sort that out. In the 1980s, Norway and Sweden sorted out their banks after deregulation, which showed what small countries can do when they have the powers.

I want to talk about the European situation. There has been a big silence from Gordon Brown and company, after years of lecturing Europe about deregulation. Internal market commissioner Charles McCreevy of the European Commission said:

"I would like to have by the end of this year concrete proposals as to how the risks from credit derivatives can be mitigated."

This Parliament, our Government and others have to feed into the European debate. Smart regulation will liberate us from the pitfalls of the past.

I was amazed by John Park's suggestion that everything is fine and dandy and that Gordon Brown and Alistair Darling are serving Scotland well. I have to disagree. In The Herald last week, Eamonn Gallagher wrote:

"It was extraordinary that in the midst of an international financial crisis—and even as his own country is slipping into recession—Gordon Brown chose to argue that somehow global banking problems mean that Scotland should dare not consider questions of good governance any further. Is this not a rather curious assertion from the man who has held the reins of financial power in the UK for the past 11 years? The argument seems to be: 'Things have gotten really bad on my watch—best to let me keep handling things.'"

The question now is whether this Parliament can state that there are ways of applying Government controls to enhance the ability of HBOS to survive as HBOS rather than as part of a merged company. What issues arise as a result of European competition rules? No one has discussed those yet.

The scenarios that my colleague Alex Neil laid out have to be considered seriously. We have to give HBOS the space to rebuild. We have to allow liquidity for it to rebuild the real economy in the place where the Bank of Scotland was based for so many centuries and we have to secure the jobs in the bank to support the real economy. The wider economy will benefit from clear-headed thinking. This debate is not just about the immediate prospect of a merger but about learning lessons on the way in which banking has to be regulated. There has to be a European framework for that, and Scotland will have to have a direct say in that framework.

Members should support the motion. It is the only proposal that allows us to consider the options and allows us not to accept the way in which Scotland has been downplayed. Mr Brown has said that he can deal with a recession, but he caused many of the conditions in this country that have led to the problems for HBOS and many others in the real economy. Members should support the motion and reject the amendment from the Tories.

Sarah Boyack (Labour, Edinburgh Central)

It is a real pity that Rob Gibson and Alex Neil did not listen to John Swinney when he quoted from Alistair Darling's letter. It is easy to score petty political points in a debate such as this, but if we are really debating the future of the banking system, let us listen to what the bankers have been saying, let us understand the dynamics of the system and let us have a much more critical and honest discussion of why the banks in this country have gone wrong over the past few years. Let us have that discussion; let us not have simple points scoring.

Corporate social responsibility should not just be a paragraph at the end of an annual report; the idea should inform the values that all our banks work to uphold. Gordon Brown was right to criticise excessive short-termism, the culture of massive bonuses and the lack of long-term investment, which are not in the interests of ordinary shareholders. As John Park said, those shareholders are the staff of the banks and are among the thousands upon thousands of Scottish consumers who have shares as part of their pensions packages. All our local authorities have pensions tied up in the banks.

There are huge issues to be debated. However, as Pauline McNeill said, the debate has been about how much we care for HBOS. That is not what the debate should be about. It should be about what the Scottish Parliament can do to support the people who are currently in charge of the banking system, to work with the UK Government, and to work with the trade unions, so that we can ensure that the maximum number of jobs stay in Edinburgh and Scotland, and so that we can ensure that the maximum amount of headquarters functions stay in Edinburgh. We should also be considering what we can do to support the banking sector in Scotland—not just to stay here, but to attract more jobs and to invest more. We have to be positive about what Edinburgh and Scotland can offer and not simply adopt a defensive posture. These are tough times, but people expect us to do what we can and not just to moan. We have to get on to the front foot.

The Scottish banking system is part of our identity—there is a lot to be proud of. The system is linked to our legal and higher education institutions. As an Edinburgh MSP, I completely understand how tough the past few years have been. We have had the Lloyds TSB shake-up, we have had demutualisation of Standard Life and, most recently, we have had the takeover of Scottish & Newcastle. Times have been tough for our major traditional companies in the city. It is not our job to tell them exactly how they should operate or how they should be structured: our job is to support them and to work with the UK Government to ensure that the framework is right. Parliament has to do what it can in terms of investment, in order to keep Edinburgh attractive and to maintain relations between Glasgow and Edinburgh and the rest of central Scotland. People have to want to invest here.

Robert Brown (Liberal Democrat, Glasgow)

Will the member take an intervention?

Sarah Boyack (Labour, Edinburgh Central)

No, thank you. I have only one minute left.

No bank will invest out of sentiment, but they will invest if we have good schools, good public transport and good housing to offer to their staff. They will invest if we have high-class transferable skills, and if we give people the confidence to work in the industry. That is why I want the Scottish Government to do more on investment and it is why we do not want the local income tax, which would set us back. It is why we have been so angry about the lack of progress in investment and about the diversion that has been caused by the Scottish Futures Trust. We need practical investment.

It was an irony to hear Mike Rumbles quoting from George Kerevan and posing consumer expenditure and public expenditure as alternatives. Surely we need both. Consumers will be confident if they have jobs and if they can afford to pay their mortgages or rents and their taxes.

We need to invest now to make a difference, so I call on the Scottish Government to consider housing in particular. The SNP-Liberal council here in Edinburgh has a new plan to ensure that we can invest in housing, but it will require investment from the Scottish Government. We have to put the £100 million that Alex Salmond launched a couple of months ago in context. We have criticised the announcement for not involving real money. We need huge amounts of money in Edinburgh every year—£83 million in 2009-10 and £95 million in 2010-11. That would give local companies the money to invest. They are not getting the money from the banks now, so we need to play our part in ensuring that the money comes through the public sector. That is what the Scottish Government should focus on.

Patrick Harvie (Green, Glasgow)

Before I begin my winding-up speech, I cannot help but observe that it would have been nice if the member who lodged the motion for debate had stayed in the chamber for longer than a few minutes at the beginning of the debate.

The debate has been characterised in part by an emotional attachment to what Tavish Scott described as "a 300-year-old national institution". I agree with Sarah Boyack that the debate should not be about simply how much we care. Nevertheless, I could have an emotional attachment to a financial sector that was characterised by the values that I described in my opening speech. I am thinking of institutions such as the old Halifax Building Society, which began as a prudent building society that operated for the mutual benefit of local working people, and the Trustee Savings Bank, which was an aggregation of small savings banks that was run by trustees according to democratic and philanthropic principles. I could have an emotional attachment to that kind of financial sector—one that was not dominated by a few megabanks but was composed of many smaller institutions rooted in local communities.

As well as the emotional attachment, the here-and-now issue of jobs has characterised the debate. I apologise to Jamie Stone, who is just leaving the chamber, for not being able to take his intervention when he wanted to mention jobs in his constituency. Many communities, not just those in Edinburgh, are affected by the current situation. I argue that there could be not only more jobs, but more satisfying jobs in an alternative financial sector that was composed of smaller institutions rooted in communities and motivated by those communities' values.

John Park rightly talked about the need to work with representatives of the workforce. Those people are elected to advocate for their members' interests, so it is right that we should regard their views. However, there is another argument to make about democratic control of newly public assets. Alex Neil urged us to use such democratic control to protect jobs and nothing else. I agree with that as far as it goes, but we would serve Scotland's long-term interests better by ensuring that our banks—they are now, in large part, directly our banks—put sustainability, self-reliance and the community values that I mentioned ahead of executive pay and the interests of hedge funds and shareholders.

If the public are to own a substantial share of the banking sector, we should ensure that those assets work in our interests by shifting money away from the polluting technologies of the previous century and toward the renewables technologies of tomorrow. At a Sustainable Development Commission event last night, Ian Marchant argued that the financial crisis requires a specifically green investment-led recovery. James Kelly's remarks in support of investment in microgeneration are quite compatible with that vision of a green-investment led recovery. Therefore, I fully expect Labour to support the Green Party's proposals on the budget that are designed to achieve just that.

We also need financial institutions to give priority to that agenda not only by shifting their investment, but by developing financial products that make it affordable for householders and businesses to retrofit their buildings. All that would mean that something far more substantial would emerge from the present disaster than simply the protection of existing jobs. The rebuilding of our economy could be based on those sensible values and provide a genuinely sustainable future for us all.

David McLetchie (Conservative, Edinburgh Pentlands)

I welcome the fact that the Liberal Democrats have allocated part of their business time today to a debate on the future of HBOS and its significance to the Scottish economy. HBOS has 17,000 employees in Scotland, many of whom are resident in Edinburgh and in my constituency, as Alex Neil pointed out. Along with the bank's shareholders, savers and customers—both private individuals and businesses large and small—they are genuinely worried about their jobs, mortgages, savings and business loans.

Although the debate is commendable, I am concerned that it may advance a false prospectus. Essentially, the Liberal Democrats and the SNP are trying to suggest that there can somehow be a painless escape for HBOS from its present situation if only the chancellor does not make a merger with Lloyds TSB a condition of Government financial support and, instead, offers to recapitalise an independent HBOS. The subtext is that, if that were to come about, not only would every job be safeguarded, every business be financed, every mortgage be extended and every pound of savings be assured, but Scotland would still have a major bank headquarters here in our capital city. If that happy state of affairs could be assured, I would be the first to sign up to the proposition. However, I fear that that may not be the case.

First, given the financial state of HBOS, could a recapitalisation be achieved for the same amount of taxpayers' money as would be expended following a Lloyds TSB-HBOS merger? Or would we end up with a wholly nationalised bank? Secondly, would the capital investment that was made by taxpayers be more or less secure in a single entity than in a merged operation? Before the SNP or the Liberal Democrats rush to thwart or denounce a merger of HBOS with Lloyds TSB, they must get answers to those questions.

We need to know—and have not yet heard—what alternatives the private sector offers to the Lloyds TSB bid. For weeks, we have been constantly told that there are any number of white knights who are ready to ride to the rescue. Alex Neil has raided his piggy bank, and Tavish Scott and the Liberal Democrats are keen to follow suit. But are those white knights real or illusory? Is there any hard cash, or is it just hot air?

In The Scotsman yesterday, I read the headline, "Buyers line up for parts of HBOS empire". It appears that the HBOS subsidiaries Clerical Medical and Insight Investment are being eyed up. Eagerly expecting more hard news and details, I read on. On page 4, I was told that there are two obstacles to that:

"First, the pricing of financial assets and businesses in today's turbulent conditions would present a major problem. Secondly, while rival UK insurers might be interested, firms in the sector face pressures of their own and do not have the cash for a bid."

The article continued:

"In addition, raising finance from banks in the current conditions would be virtually impossible."

It seems that those particular white knights do not have the money, cannot borrow the money and do not even know what price to pay—and that is meant to be the good news.

As matters stand, and as many members have commented, a merger with Lloyds TSB is the only offer on the table. Everything else is a mixture of speculation and wishful thinking. If anyone out there has a viable, realistic alternative, they should come forward. The Government and the directors of HBOS would be obliged to give serious consideration to any such proposal, and I would be the first to criticise them if they failed to do so. However, it appears that, until a white knight with deep pockets puts his head above the parapet, there is no alternative. It would be wrong and a cruel deception for Parliament to pretend otherwise.

John Park (Labour, Mid Scotland and Fife)

We have had a useful discussion. I mentioned that I had been in contact with union representatives earlier this week, and I will highlight some of the concerns that they raised with me. The unions have a number of general concerns, but there are three main concerns that we need to take on board and do something about as a Parliament.

The first main concern is the potential for the offshoring of jobs. One of the partner banks has that as a policy whereas the other does not. The second main concern is over pension guarantees and the future of pensions. That would be a concern for workers in any company that was going through a merger. The third main concern is over bonuses. When we talk about bonuses in the financial services sector, everybody thinks about the executives. However, we must remember that there are people who work in the banks who rely on bonuses as part of their salary package, along with the share-save schemes and other options that they may have.

Alex Neil (Scottish National Party, Central Scotland)

I absolutely agree with the member about the concerns that have been raised. However, given that, if the merger goes ahead, the Government will control 43 per cent of the shares, has Mr Park put those concerns to Gordon Brown and Alasdair Darling? If so, what are they going to do about them?

John Park (Labour, Mid Scotland and Fife)

Mr Neil has stolen my thunder yet again. I was just about to say that I made a commitment to the people I spoke to—who, I point out, were not union general secretaries, but local shop stewards and representatives—that I would put their concerns directly to the Treasury and the Scotland Office and ask for their comments. I have done so today, and I am sure that the Scottish Government will want to do the same.

When, at the very beginning of the debate, I asked Tavish Scott whether he had had dialogue with representatives, he said that he had spoken to individuals in various bank branches and different areas of the company. However, we must recognise that, like the Parliament, the unions have to take a wider view, not just represent the views of individuals. The unions are quite clear that, at the moment, the current option is the least worst one; indeed, that is what they have said to me in the meetings that I have had with them.

Although I welcomed Derek Brownlee's comments about jobs and although he made many good points in his speech, his amendment mentions nothing about the workforce having a say in what will happen. Patrick Harvie made a valid point about regulation, and I have no doubt that there will be structural change in the financial services sector and that more robust financial regulation will be introduced in the future.

Patrick Harvie (Green, Glasgow)

Will the member give way?

John Park (Labour, Mid Scotland and Fife)

I am sorry; I must get on. I will say, though, that it is only right that such change happens. After all, the landscape in Scotland has completely changed.

Mr Swinney highlighted the importance of working together on this issue, and I am pleased that he mentioned the correspondence that he had received from the Chancellor of the Exchequer. That shows clearly that we can work together— which is, after all, what the people expect the Parliament to do.

Pauline McNeill talked about standing up for Scottish interests. We on this side of the chamber will certainly do so, no matter whether the issue concerns backroom functions, Scottish jobs or anything else.

I admire Mr Neil's passion; however, he needs to speak directly to workforce representatives on these matters. In my regular discussions with those representatives, there has not been much support for some of the proposals that he has highlighted.

Finally, as Sarah Boyack pointed out, the skills and talent that we have in Scotland give us a competitive advantage. Of course, we also have a productive and efficient workforce.

It is absolutely right for the Parliament to focus on the jobs issue in this debate. Indeed, I cannot reiterate that point enough. It is up to the Parliament and parliamentarians to maximise the debate's impact and ensure that we secure the maximum number of Scottish jobs.

Jim Mather (Scottish National Party, Argyll and Bute)

I appreciate the speeches that have been made from all sides of the chamber in this important debate and will reflect on them as I sum up on behalf of the Government.

As many members have pointed out, the Bank of Scotland is one of the cornerstones of our nation's economic life, and the detrimental impact on the Scottish economy of any loss of decision-making functions from or employment in Scotland would reach far beyond Edinburgh into every part of the country. In the current climate, that impact would most certainly not be painless.

This Government has been doing everything possible to secure the best deal in the event of the merger going ahead. The First Minister made early representations to the management of Lloyds TSB and HBOS and those lines of communication very much remain open and active. However, our overriding consideration must be to get the best deal for Scotland in line with the broad, worthy goals of avoiding job losses and contraction; retaining key decision-making functions in Scotland; and creating a climate that will allow our banking sector to play the fullest possible and most positive role in the new beginning that will follow the impending recession. I believe that all that is best served by retaining in Scotland HBOS's competitive presence as the Bank of Scotland.

David Whitton (Labour, Strathkelvin and Bearsden)

For the sake of clarity, will the minister confirm whether the ministerial team agrees with Mr Neil's suggestion that we seek a solution to this problem from the middle east?

Jim Mather (Scottish National Party, Argyll and Bute)

We continue to press for the best possible opportunities that might emerge and will consider every proposal on its merits. However, there is a compelling reason to pause for consideration. Since the merger proposal was first announced on 17 September, the international financial landscape has changed dramatically. On 19 September, the short selling of UK financial stocks was banned; on 3 October, the UK increased its deposit insurance coverage to £50,000; on 8 October, the UK Government announced its credit guarantee scheme and plans to recapitalise the UK's major banks; and yesterday we had the successful take-up of HBOS's £2.4 billion two-year bond scheme. That is not to mention the material movement in share prices and the growing realisation of what all this could mean for Scotland. The UK Government must now confirm whether recapitalisation funds would be available to HBOS as an independent institution.

In that respect, I am pleased by Alasdair Darling's letter, which leaves the door open. The letter says:

"If for any reason the merger did not go ahead, the FSA would need to re-assess both banks to determine the extent to which each would need to recapitalise."

That sends a clear message to the shareholders of Lloyds TSB and HBOS. In addition, we must have either the early and open publication of the Office of Fair Trading's report on the proposed merger or—at the least—an interim report.

Our duty in the meantime has been to work positively on both scenarios. That is what we are doing: the amicable meeting that the First Minister had on Tuesday morning with Sir Victor Blank, Eric Daniels and Archie Kane of Lloyds TSB was the continuation of that process. The Lloyds TSB integration team know that this Government and its agencies can offer the type of location and other targeted assistance that will help with any integration process that might come to pass. The response so far has been encouraging and, throughout the process, we will continue to defend Scotland's interests. Indeed, a strong business case is being made to those managing the merger to retain jobs and headquarters functions in Scotland and a promotional booklet in that respect will be lodged in the Scottish Parliament information centre for members to take a look at.

In the current climate, we welcome Lloyds TSB's assurance in its acquisition document that

"the management focus is to keep jobs in Scotland".

In response to John Park, I point out that the First Minister has had very useful meetings with Unite and Accord.

The question remains whether the merger between HBOS and Lloyds TSB should go ahead. As we know, it remains the preferred option of both banks, but as the Cabinet Secretary for Finance and Sustainable Growth and I have made clear, the Scottish Government's job is to ensure that, no matter whether the final outcome is a merger or some other alternative, as many as possible of the decision-making functions and jobs are retained in Scotland. That means that the UK Government must reassess the merger in the context of the new financial regime. The merger might have made sense six weeks ago, but when we take into account long-term public interest considerations, past experience and the indication that even the chancellor is recognising the force of these arguments, it might no longer be the best option.

My plea to members and, in particular, the Conservatives is that we consider what has happened with previous mega-consolidating mergers. As research and intelligent opinion have made clear, such mergers have rarely benefited shareholders and have almost never—absolutely never, I would say—benefited customers, employees, suppliers, taxpayers or the communities that they serve. Such a situation is very different from what is happening in Norway, Sweden and Finland, which are properly moving towards regulation and are developing proper levels of corporate social responsibility.

Ross Finnie (Liberal Democrat, West of Scotland)

In summing up, I will try to distil the debate to its key elements.

The Liberal Democrats have some sympathy with the Green party's amendment. We certainly support any call for the introduction of a very different regulatory regime and agree that certain issues must be examined seriously. However, that debate is for another day. This debate is on the urgent issue of HBOS's future and what the proposals might mean for its employees, shareholders and everyone else who is associated with the bank.

As for the Conservative amendment, I must be honest and say that we have no difficulty with the proposition that shareholders should decide on the proposals. However, in response not only to David McLetchie but to John Park, I make the point that the Liberal Democrats believe that employees are being asked to vote on a false prospectus. At no time have we suggested that there are any easy options and solutions to this difficult proposition.

That is not the language that we are using and it is not what we are saying in this debate.

John Park (Labour, Mid Scotland and Fife)

I do not know whether the Liberal Democrats have had any dialogue with the workforce representatives. I am sure that those representatives will have information at hand on the matter. Does the member think that it is possible that members of the workforce might know what they are going into, given that many of them are shareholders, which is why they are taking a particular approach to the merger?

Ross Finnie (Liberal Democrat, West of Scotland)

I will explain why I think that shareholders are being asked to vote on the basis of a false prospectus. I do not think that all the information has been made available to anybody. The Liberal Democrats accept that the false prospectus was created, curiously, in good faith. It was created by the Government, which asked, "How do we save HBOS?" and said, rightly, that it would support the HBOS-Lloyds TSB merger not just implicitly but explicitly by undertaking to waive competition considerations. However, that failed. The second question that the Government asked was, "How do we save the UK banking system"? Its answer was to introduce a recapitalisation support package, which appears, by and large, to have succeeded.

Our contention is that, given that the politicians and the Government created that false prospectus, we are entitled to ask whether it is still legitimate today. We can now move forward. We can ask the Government to ask different questions, rather than just, "How do we save HBOS?" Having saved the banking system, what sort of system does the Government want? What kind of financial centre do we want to see in Edinburgh and in London? Are we content that a near duopoly should exist? Should we encourage alternative bidders or should we signal to the market—to allow the market to decide—that, under recapitalisation, HBOS might survive as a separate institution?

Of course, the Liberal Democrats believe that it would be better for Scotland and for the UK's financial services sector if HBOS were to remain an independent institution that was allowed to trade its way out of the present difficulties and restore value to all aspects of its business. However, that is not quite the issue. The issue is, as John Swinney said, if the Treasury has not ruled out the question of recapitalisation on its own, it has to be more explicit about that.

The motion asks the Westminster Government to confirm that HBOS would be eligible for support. Shareholders and employees would then have a proper choice. They could vote to be subsumed into Lloyds TSB. They could make their own judgment about whether that would be a better or a worse option. They would know that the deal would involve a fire-sale price and terms and a massive dilution of shareholders' interests. Nevertheless, that would be a decision for the shareholders to make.

It is nonsense that we have to have another bidder before there is a proper choice. We need the politicians who created these circumstances to create a genuine choice, so that the shareholders and employees could vote for HBOS to remain as an independent company, albeit with substantial Government support. The bank could be allowed to add value to its employment and its shares going forward. We believe that the Scottish economy, Scottish financial services and the wider UK economy would be improved immeasurably if that proper option were available to all parties.

We call, therefore, for the Parliament to allow that question to be put. We do not suggest that others will not have to come to a final view, but they cannot come to a view unless that opportunity is available to them. The only way in which it can be made available is if the Government signals that it is not just a question of backing a merger and that it is perfectly possible for HBOS to reconstruct itself to survive as an independent company. I hope that members will support the motion.

Question Time — Scottish Executive — General Questions

Alex Fergusson (None, Galloway and Upper Nithsdale)

I raised with all business managers before and following the recess the issue of the manner in which I expect questions to be asked, and the business managers should have informed their members of that. In the interests of fairness to all members, and in order to allow for as many questions as possible to be asked, I repeat that I expect members to keep their questions brief and in the form of a question, rather than a statement. In addition, I do not expect multiple questions to be asked. Although I have no desire to do this, should members fail to adhere to that guidance, I may be forced to stop the questioner. I also expect ministers to respond accordingly.

Pauline McNeill (Labour, Glasgow Kelvin)

To ask the Scottish Executive what discussions it has had with student organisations regarding alcohol policy and binge drinking in particular. (S3O-4619)

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

The Scottish Government has been engaged in a wide public consultation on its proposals to change Scotland's relationship with alcohol. As part of the consultation, the Minister for Public Health met representatives of the coalition against raising the drinking age in Scotland and the National Union of Students Scotland on 26 August.

We are pleased that CARDAS and NUS Scotland support our proposals to crack down on loss-leading and irresponsible promotions in off-sales and recognise the need for minimum pricing to be part of a comprehensive alcohol strategy.

Pauline McNeill (Labour, Glasgow Kelvin)

Is the cabinet secretary aware of the existence of Carnage, an annual event that is aimed at students which is, in essence, a giant pub crawl and which students themselves have questioned? One event is planned for my constituency this week. When there was one in Dundee, there were eight arrests. Does he agree that companies that might be seen to promote binge drinking should be included in the classification of irresponsible promotions in the context of tackling alcohol misuse? Will he agree to consider that matter?

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

Absolutely. I am happy to look at that. The issue is one of reconfiguring Scotland's relationship with alcohol. Pauline McNeill and I, and others who have been students, are well aware of the fun times that students have, but it is a matter of balance. It is clear that some aspects are totally irresponsible, and those who promote and suggest them should be brought to heel. I am more than happy to take on board the points that Pauline McNeill has raised. We are seeking to allow students to enjoy student life without endangering themselves or blighting the lives of others.

Ian McKee (Scottish National Party, Lothians)

What discussions has the Scottish Government had with residents groups and others whose lives have been rendered intolerable by binge drinking and associated disturbance?

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

I am grateful for that question. We have asked people to contribute their views on those issues to the consultation. I have met residents groups in my constituency, and I also had the opportunity, as did my ministerial colleague, to meet people in communities where action has been taken, such as Stenhousemuir, Armadale and Cupar, where there has been a substantial reduction in antisocial behaviour as a result of pilots to restrict the ability of people between 18 and 21 to buy alcohol in off-sales.

Murdo Fraser (Conservative, Mid Scotland and Fife)

The cabinet secretary will be aware that student organisations oppose his plans to raise the age at which alcohol can be purchased from off-licences from 18 to 21, as does this Parliament. When he cannot even persuade chief police officers in Scotland and 48 per cent of delegates at the Scottish National Party conference that the policy is a good idea, surely it is time that he showed some humility as a minister and agreed to withdraw the policy.

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

As Mr Fraser is aware, we are engaged in a consultation and we will respond shortly. I recall that earlier this year, NUS Scotland complained bitterly that student unions were facing collapse because students were preparing to fuel up—that seems to be a recent concept that has arisen since I was a student—and were buying their alcohol from off-sales. We have met NUS Scotland and CARDAS, but we do not forget that CARDAS in particular has taken funding from alcohol companies, which perhaps tempers how we view matters.

Duncan McNeil (Labour, Greenock and Inverclyde)

To ask the Scottish Government what efforts are being made to shorten police response times to non-emergency calls. (S3O-4618)

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

In September 2007, Audit Scotland, in its report "Police call management—An initial review", recommended that police authorities should regularly receive and scrutinise reports by chief constables on the effectiveness of local call management arrangements. My officials have written to the Association of Chief Police Officers in Scotland and the Scottish police authorities conveners forum encouraging forces to make information on non-emergency response times available to boards. Forces and boards both confirm that the subject is actively considered by boards.

Later this year, Her Majesty's inspectorate of constabulary for Scotland will publish its first annual report on the Scottish policing performance framework, which will for the first time report comprehensive police performance data on a national basis. It will include agreed national indicators for emergency calls. National indicators for non-emergency calls are being developed.

Duncan McNeil (Labour, Greenock and Inverclyde)

The cabinet secretary knows of the public's lack of confidence in and scepticism about the call management system because of the delays in responses, which can occasionally occur days after a problem was reported. I welcome what he said about information being brought together.

Does the cabinet secretary believe that the annual publication of national statistics on the time that the police take to attend all incidents—not just emergencies—would provide clarity and improve performance throughout forces?

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

Statistics are one factor. We seek to ensure that chief constables can meet their operational requirements. Police boards represent their communities and challenge chief constables and hold them to account on the operation of police forces. The role of the trident's third part—the Government—is important to funding and resources.

Statistics have a role to play, because we must be able to check against delivery, but they have difficulties. For example, a response time in a rural area of Northern Constabulary or of Lothian and Borders Police will be different from a response time elsewhere. I take on board the fact that statistics are an aspect, but they are only one part. The best way to proceed is to work together as communities with boards and chief constables to make Scotland safer and stronger.

Jamie McGrigor (Conservative, Highlands and Islands)

To ask the Scottish Executive, in light of further job losses at Scotland's largest Harris tweed mill, Kenneth Mackenzie, and the potential impact on home weavers in the islands, what action the Scottish Government can take to save this old-established industry for the Western Isles. (S3O-4585)

Jim Mather (Scottish National Party, Argyll and Bute)

Job numbers are a commercial decision for the company. Our enterprise agencies are in close dialogue with Harris Tweed Scotland, which owns the former Kenneth Mackenzie mill, to assist in any and all ways possible.

The Scottish ministers are committed to supporting a strong and vibrant Harris tweed sector and will work jointly with the Harris tweed industry liaison group to assist the sector's sustainable development and growth. In addition, our enterprise agencies are dedicating significant resources to helping the industry to compete. That includes capital investment, working to understand better the industry's economic impact, a skills audit and assistance with domestic and international marketing and promotion.

Jamie McGrigor (Conservative, Highlands and Islands)

Does the minister share the concern of businesspeople who are involved in the tweed sector that the industry's present structure and position are not conducive to attracting private equity? Given the importance of Harris tweed to the livelihood of many weavers in Lewis, and given the social aspects, will he reconsider the industry's demands for extra funding for the Harris Tweed Authority and a strategy to deal with mill financing needs that exceed what is available from private sources?

Jim Mather (Scottish National Party, Argyll and Bute)

I thank Jamie McGrigor for his supplementary question. We are working with the Harris Tweed Authority on marketing and promotional activity and on a range of initiatives to promote Harris tweed. We are working hard with the Harris tweed industry liaison group to bring the industry together more cohesively. We have three mills, which represents an advance. The skills and training audit will commence on 10 November. The Harris tweed investment fund is being discussed in detail; it might receive match funding from Harris Tweed Hebrides, which would be Shawbost in partnership with the Government. Sub-groups will meet on 4 November to consider fully the fund and other options. A new level of cohesion has been reached. We are keen to foster that and to work intensively to achieve the result.

Alasdair Allan (Scottish National Party, Western Isles)

What representations will the Scottish Government make to Her Majesty's Government about the failure of the benefits system to recognise that weavers who are left without work as a result of the downturn in the industry are unemployed? As a result of that anomaly, they cannot claim relevant benefits.

Jim Mather (Scottish National Party, Argyll and Bute)

I have made representations to the Secretary of State for Work and Pensions about enabling weavers who are adversely affected by a seasonal downturn in demand for Harris tweed to be eligible to claim unemployment benefit. I will continue to make such representations and I will keep Mr Allan updated on the outcome.

John Lamont (Conservative, Roxburgh and Berwickshire)

To ask the Scottish Executive when it will next meet representatives from Transport Scotland. (S3O-4576)

Stewart Stevenson (Scottish National Party, Banff and Buchan)

Transport Scotland is part of the Scottish Government and internal meetings take place in the normal course of its business.

John Lamont (Conservative, Roxburgh and Berwickshire)

I draw the minister's attention again to the temporary traffic lights on the A7 at Branxholm in my constituency, which have been in place for two years. When I previously raised the issue with him, he said that reasonable progress was being made to take them down. Despite that, the traffic lights remain. What does it say about the Scottish National Party's Scotland when temporary traffic lights on a major trunk route can stay in place for more than two years?

Stewart Stevenson (Scottish National Party, Banff and Buchan)

I am pleased to say that we expect the work to take place before the end of the year, which will allow the traffic lights to be removed. That contrasts markedly with temporary traffic lights on the A82 on the other side of the country that were there for well over a decade under the previous Administration. We are doing rather better than our predecessors.

Hugh O'Donnell (Liberal Democrat, Central Scotland)

To ask the Scottish Executive when it expects Scottish Enterprise to complete and publish details of any reviews of major projects that it is carrying out. (S3O-4665)

Jim Mather (Scottish National Party, Argyll and Bute)

Scottish Enterprise has a robust monitoring regime for all its major projects. It publishes a considerable volume of study and review material, which includes—when appropriate—the output of reviews and major projects.

Hugh O'Donnell (Liberal Democrat, Central Scotland)

It will come as no surprise to the minister that my concern is about the Ravenscraig project. Is he aware that shareholders in that project are close to deadlocking it legally, thereby scuppering the development, 3,500 homes, 12,000 jobs and an investment of £1.2 billion from the private sector? What steps is he taking to facilitate the project's expeditious progress?

Jim Mather (Scottish National Party, Argyll and Bute)

In the middle of our major event on planning this week, I took time out to meet the Capella Group's chief executive, Jim Fitzsimons, to discuss in detail the Ravenscraig project and that company's role in it. At that meeting, I agreed that we would bring all the main stakeholders together to discuss the way forward and consider all the proposed options.

Margo MacDonald (Independent, Lothians)

To ask the Scottish Executive whether it is satisfied that the requirements of core policing are not compromised by the practice of private hire of police personnel. (S3O-4574)

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

Yes—I am satisfied that the requirements of core policing are not being compromised by police forces charging for their services in appropriate circumstances. The police's primary duty is to protect the public and to ensure the safety of our communities. They also have a duty to ensure that local taxpayers are not called on to subsidise policing operations that do not benefit the wider community. That is why I consider it right that they should recover the costs of policing highly significant commercial events such as major sporting fixtures, pop concerts and film shoots. We are committed to increasing policing levels in our communities and we are supported in that by all Scotland's chief constables and police boards.

Margo MacDonald (Independent, Lothians)

I am still a little puzzled. I think that the cabinet secretary has told me that it is all right to police a pop concert if it is in the general community's interests, but I would have thought that that is not in the general community's interests and that security firms are much better qualified to do such work than are off-duty policemen, whose recreation time is eaten into, or policemen who are transferred from other core policing jobs.

Alex Fergusson (None, Galloway and Upper Nithsdale)

I am not sure whether there was a question, but the cabinet secretary might wish to comment.

Kenny MacAskill (Scottish National Party, Edinburgh East and Musselburgh)

Such matters involve a balance. We want events such as pop concerts and football matches to pay for policing because they are commercial. Equally, the police should go to remembrance Sunday, Boys Brigade and other events to ensure that the community provides benefit.

Private security firms have a role. The Parliament endorsed the Security Industry Authority and the Private Security Industry Act 2001, and the profession is now much better monitored and regulated. However, it is still inappropriate to hand over to private security firms what happens on the public street, which must remain a part of core policing. At a rugby or football game or a pop concert at Murrayfield, Hampden or elsewhere, Rock Steady Security and other private companies deal with many matters, but police are also present in many instances. However, external to stadia, it would be appalling to hand over to private security some activities that should remain a part of core policing.

Derek Brownlee (Conservative, South of Scotland)

To ask the Scottish Government what recent discussions it has had with HM Treasury. (S3O-4581)

John Swinney (Scottish National Party, North Tayside)

Scottish Government officials met with HM Treasury officials on 24 October 2008 to discuss a variety of issues.

Derek Brownlee (Conservative, South of Scotland)

That is a cryptic reply. I understand that interesting discussions have taken place on my favourite subject—a local income tax. Is it the Government's understanding that more people in Scotland will have to file an annual tax return under the local income tax than is presently the case?

John Swinney (Scottish National Party, North Tayside)

As Mr Brownlee will know, the Government is considering the contents of the consultation exercise on the local income tax proposal that we carried out earlier this year. When we have taken decisions on that consultation, we will set out proposals to Parliament and allow it to judge them. At that stage, I am sure that Mr Brownlee will get a detailed answer to the question, if that is required.

Jamie Hepburn (Scottish National Party, Central Scotland)

To ask the Scottish Government what benefits it believes may be derived from the phasing out of private cleaning and catering contracts in the NHS. (S3O-4645)

Shona Robison (Scottish National Party, Dundee East)

We believe that NHS clinical services should be provided by the NHS. Cleaning and catering services are regarded as core to the delivery of our clinical services, and as such are better provided directly by NHS staff.

Jamie Hepburn (Scottish National Party, Central Scotland)

Will the minister outline in a bit more detail how the initiative might improve the patient experience in the NHS?

Shona Robison (Scottish National Party, Dundee East)

I am happy to do so. It is clear to us that when cleaning and catering services are part of the NHS, it is easier to have control over them and they can be better integrated. That adds up to better patient care, a more seamless joining up of services and the ability to vary services within hospitals, particularly cleaning services, when required. Such services are better delivered as part of the NHS.

Mary Mulligan (Labour, Linlithgow)

To ask the Scottish Executive what measures are being taken to help home owners facing repossession. (S3O-4621)

Stewart Maxwell (Scottish National Party, West of Scotland)

We are building on the existing mortgage to rent scheme to develop a new home owners support fund, with a budget of £25 million over two years. Mortgage to rent helps people who have little or no equity to stay in their homes. A new mortgage to shared equity scheme will be launched early in 2009 to help home owners who have built up a level of equity in their properties. We are also launching a new awareness-raising campaign for the national debtline in November, to encourage people to take action at an early stage to address their debt problems.

Mary Mulligan (Labour, Linlithgow)

In a recent news interview, the Cabinet Secretary for Health and Wellbeing said that people who are in negative equity could apply for the Scottish Government's mortgage to rent scheme. Will the minister confirm that such people would need to find the money to make up the gap in the equity and that that could amount to hundreds, if not thousands, of pounds?

Stewart Maxwell (Scottish National Party, West of Scotland)

It is correct that people who unfortunately find themselves in negative equity can still apply for the mortgage to rent scheme. Some of the press comment about that was incorrect. Such people can negotiate their remaining debt with their lender to find a repayment package that suits. In some cases, lenders have written off the debt when it has been reasonably small, but in other cases people will have to find a way of paying the debt over a period. They took on the debt and it will remain with them. The major advantage of the mortgage to rent scheme is that the vast majority of people's debt can be paid off and they can stay in their home, which is very welcome.

Malcolm Chisholm (Labour, Edinburgh North and Leith)

What action will the Scottish Government take to put the onus on the courts, rather than individuals, to ensure that repossession is a last resort, especially given that individuals who exercise their rights under the Mortgage Rights (Scotland) Act 2001 do not normally have access to legal aid?

Stewart Maxwell (Scottish National Party, West of Scotland)

The Mortgage Rights (Scotland) Act 2001 provides significant protection for those who are at risk of repossession. Owners have the right to ask a sheriff to give them time to pay off arrears and lenders are obliged to comply fully with Financial Services Authority regulations.

The Scottish Government will urgently consider whether the act requires any additional provisions, and will keep the matter under close review. It is clear that there has been a lot of misinformation about the scheme of late. I quote Kennedy Foster of the Council of Mortgage Lenders, who made matters clear this week when he said:

"There has been much media comment that the new protocol introduced in England and Wales places Scottish borrowers who are in arrears with their mortgage and face repossession at a disadvantage. We do not believe this to be the case, as the protocol reflects the requirements which already apply on lenders in terms of"

mortgage conduct of business rule 13,

"which applies throughout the UK, as does our industry guidance".

First Minister's Question Time

Alex Fergusson (None, Galloway and Upper Nithsdale)

In the understandable absence of Iain Gray today, question 1 will be asked by Johann Lamont.

Johann Lamont (Labour, Glasgow Pollok)

To ask the First Minister what engagements he has planned for the rest of the day. (S3F-1115)

Alex Salmond (Scottish National Party, Gordon)

I welcome Johann Lamont to her place—I fully understand the reasons for Iain Gray's absence today.

I will have meetings later today to take forward the Government's programme for Scotland.

Johann Lamont (Labour, Glasgow Pollok)

We share on all sides of the chamber a commitment to seek to protect all those in Scotland who are facing the consequences of the global economic crisis. While the First Minister was down in London this week meeting the bosses of Lloyds TSB, Labour was meeting the unions that represent Scottish bank workers. Before he went to London, he said that his first priority was to protect jobs. What guarantees on jobs did he extract from the Lloyds TSB board?

Alex Salmond (Scottish National Party, Gordon)

I spoke to the unions that represent the bank workers before I went to meet the Lloyds TSB board. I cannot say that Lloyds TSB gave undertakings in terms of either numbers or decision making with regard to jobs in Scotland. The argument that it is putting forward is that until it goes through the merger process and the merger is complete, it is not in a position to look at the organisational structure of any merged organisation.

However, with regard to putting forward the case for Scotland, the operational excellence document to which the Cabinet Secretary for Finance and Sustainable Growth has referred goes through in great detail the substantially good reasons, in terms of quality of workforce and cost effectiveness, why the key functions of any bank—Lloyds TSB, HBOS or any other financial institution—should be located in the Scottish financial sector.

Johann Lamont (Labour, Glasgow Pollok)

I take it from his answer that the First Minister has as yet secured no guarantees in relation to employment.

The First Minister told us that the Lloyds TSB board would be

"left in no doubt of their obligations to Scotland in terms of employment and corporate presence."

What guarantees has the First Minister extracted from the Lloyds TSB board about corporate headquarters?

Alex Salmond (Scottish National Party, Gordon)

My answer is the same as the one that I gave to the member's first question.

I managed to catch some of the earlier HBOS debate, and I detected enthusiasm among members on the Labour benches about the merger between Lloyds TSB and HBOS. It is clear—as has been identified from the start—that there are serious concerns about the number of jobs not just in Edinburgh but throughout Scotland. There are also serious concerns about decision making in relation to locations and about competition affecting small businesses and economic welfare in Scotland. That is why some of us have been pursuing the arguments, rather than just accepting that the process that the Labour Party supports is inevitable. It seems entirely reasonable that the job of the First Minister of Scotland—and, I hope, the job of the entire Parliament—is to defend the Scottish interest as best we can, whatever the circumstances.

Johann Lamont (Labour, Glasgow Pollok)

I reassure Mr Salmond that he does not stand on his own in wanting to protect the interests of workers in Scotland. However, the fact is that he sought two guarantees and has secured none.

At the most recent First Minister's question time, Labour urged the First Minister to contemplate the possibility of changing his mind to protect Scottish jobs. Was the subject of the local income tax raised by him or the Lloyds TSB board at his meeting on Tuesday?

Alex Salmond (Scottish National Party, Gordon)

If the local income tax proposal is agreed to by the Parliament, it would benefit the vast majority of bank employees in Scotland, as it would the vast majority of the people of Scotland.

The question of guarantees is extremely interesting. Lloyds TSB indicated that it would follow what was stated in the letter of intent. That letter said that there was a focus on jobs in Scotland; that the Bank of Scotland headquarters will remain on the Mound; and that the note-issuing function will continue—in other words, that the Bank of Scotland will continue as an organisation.

However, those indications were made before the recapitalisation of the banks. Whatever our views about the best possible outcome for Scotland, is it not entirely reasonable that the major shareholder in any merged organisation, Her Majesty's Government—if you like, Alistair Darling and Gordon Brown—should make an indication as that major shareholder? Are they asking for jobs and decision making to be located in Scotland?

Johann Lamont (Labour, Glasgow Pollok)

I am not an economist, so I will keep it simple for the First Minister. First, it would be helpful if he could answer the question about whether the local income tax was discussed at the meeting. We are talking about what he can do, rather than what he singularly failed to do at his meeting. Throughout Scotland, in these difficult times, trade unions and businesses agree that the local income tax is a serious disincentive to jobs, business and Scotland's ability to attract corporate headquarters. I would be astonished if that was not discussed at the meeting.

Given the range of concerns about the impact of the local income tax on jobs in Scotland, even if it is too much to contemplate the possibility that the First Minister will change his mind and drop the proposal, will he at least, as a first step, consider the plea from the Scottish Chambers of Commerce? It states:

"We believe that it is entirely unacceptable for ministers to refuse to conduct research into the direct costs to SMEs of the administration of such a tax."

The First Minister tells us that he will "strain every sinew", but that is assertion and not action. In response to the concerns about the local income tax, will he at least commission research on the impact of such a tax? Will he swallow his pride and do that little bit to establish what his local income tax would actually cost?

Alex Salmond (Scottish National Party, Gordon)

We know exactly what the impact of the local income tax that we propose would be on the people of Scotland, which is why the overwhelming majority of the people of Scotland support it. I remind Johann Lamont of the details. Four out of five Scots will be either better off or no worse off under the LIT proposals, which is one reason why they are so popular.

In her question, Johann Lamont ranged far and wide. She said that she is not an economist, and I fully agree with that statement. Neither is John Park a footballer, but that does not mean that we cannot answer questions. Introducing a fair tax that is based on the ability to pay, under which the vast majority of people will be better off, is not just a good thing to do but an extremely popular thing to do.

Annabel Goldie (Conservative, West of Scotland)

To ask the First Minister when he will next meet the Prime Minister. (S3F-1116)

Alex Salmond (Scottish National Party, Gordon)

I have no immediate plans to meet the Prime Minister.

Annabel Goldie (Conservative, West of Scotland)

Our First Minister's priorities are revealing. Yesterday, when he could have been in London not just to meet but to question both the Prime Minister and the Secretary of State for Scotland, his priority was to campaign in Glenrothes and put his party before his country.

As the First Minister was in Glenrothes, however, he will understand the importance of doing everything possible to drive forward the local economy including, for example, improving transport infrastructure. His colleague Tricia Marwick has supported the Scottish Conservatives' calls for the A92 around Glenrothes to be dualled on economic and safety grounds. However, I am told that the Scottish National Party candidate for the Glenrothes by-election said at a hustings this week that such a move was "not a top priority". Where there should be clarity about a key transport project in Fife, there is now total confusion. What is the First Minister's position?

Alex Salmond (Scottish National Party, Gordon)

My position is that the strategic transport review, indicating the billions of pounds of investment going into infrastructure projects in Scotland, will be published shortly. It will be published for the whole country and it will indicate the better financial mechanisms that will allow that infrastructure plan to be pursued.

I hope that Annabel Goldie will join me in agreeing that there is a particular question about capital investment at the moment. I hope that members of all parties agree that capital investment should be taken forward. That view has been reflected, of course, in the Scottish Government's response to the economic situation.

The lack of clarity about the capital cover for the future of this spending review's capital plans is a serious impediment to that process. From next April, everything is to come on balance sheet. I welcome that step, but I am sure that the Parliament will acknowledge that clarity on capital cover for previous off-balance-sheet finance is crucial if we are to deliver the transport infrastructure projects and the range of capital investments that are vital for the Scottish economy.

Annabel Goldie (Conservative, West of Scotland)

If there is confusion in the SNP on roads, confusion does not begin to describe its attitude to buses. The people of Fife depend heavily on bus services that are operated principally by a long-established family firm and by Stagecoach—a name that is more than familiar to the First Minister.

On buses, I understand that the same SNP candidate said last night:

"I hope the party's not listening. Bus companies don't work when privately owned."

Oh really? Is that the SNP's position? Is that the First Minister's position? Is it goodbye to family firms and "Sling your hook, Mr Souter"? Are the days of Stagecoach in Fife over? What is the position?

Alex Salmond (Scottish National Party, Gordon)

The position is that the Government gives huge support to the bus companies of Scotland to allow every old-age pensioner in the country the free bus travel to which they are entitled. Annabel Goldie does not welcome every single thing that the SNP Administration does, but I am sure that she will join me as both of us look forward to the free bus passes that we will get in the not-too-distant future, with the SNP Government's guarantee of a bus pass for every old-age pensioner in Scotland, not just for a by-election and not just in Fife, but across the country. That is wholly to be supported and welcomed.

Tavish Scott (Liberal Democrat, Shetland Islands)

To ask the First Minister what issues will be discussed at the next meeting of the Cabinet. (S3F-1117)

Alex Salmond (Scottish National Party, Gordon)

As ever, the Cabinet will discuss issues of importance to the people of Scotland.

Tavish Scott (Liberal Democrat, Shetland Islands)

In the chamber in April, the First Minister spoke about the Human Fertilisation and Embryology Bill. This week, Cardinal Keith O'Brien said that the proposals in the bill were akin to "Nazi-style experiments", and he said that it was behaviour

"last seen under the Nazis".

Does the First Minister think that that is the right sort of language to use?

Alex Fergusson (None, Galloway and Upper Nithsdale)

I do not believe that the First Minister has responsibility for what Cardinal O'Brien has said. I give the First Minister the opportunity not to respond to that if he so chooses.

Alex Salmond (Scottish National Party, Gordon)

I have made my own comments on the Human Fertilisation and Embryology Bill. It is a matter of personal conscience. I am sure that members would at no stage deny Scotland's cardinal or any other person the right of free speech.

Alex Fergusson (None, Galloway and Upper Nithsdale)

I should caution you, Mr Scott, that your further questions should be on a subject for which the First Minister has direct responsibility.

Tavish Scott (Liberal Democrat, Shetland Islands)

I quite agree that free speech is a pillar of our society, but I do not think that a First Minister of any persuasion should equivocate on such language. The debate is extremely important, but the last thing that it needs is extreme language.

The First Minister's Government is investing—as previous Governments were right to do—in building Scotland's life sciences industry. It is one of Scotland's priority industries, and it gets millions of pounds of support from his Government. Equivocation is not an option when language about Nazis could put Scottish jobs at risk. What steps is he taking to put right the damage that might be done?

Alex Salmond (Scottish National Party, Gordon)

When it comes to choosing how to treat an extremely serious issue, I do not think that Tavish Scott has given a good example at today's question time. The life sciences industry is extremely important for Scotland. We have indicated our support for it across a range of activities. That is what I am responsible for as First Minister of Scotland, and we will continue to discharge that responsibility.

Alex Fergusson (None, Galloway and Upper Nithsdale)

I will take a constituency question from Dr Elaine Murray.

Elaine Murray (Labour, Dumfries)

The First Minister might be aware that last Friday Shasun Pharma Solutions Ltd announced its intention to close its plant at Newbie, in Annan, with the potential loss of 86 highly skilled jobs. What will he do to assist the efforts of Scottish Development International and Scottish Enterprise to find a buyer for the site and retain valuable jobs and a facility for life sciences research and development in Annan?

Alex Salmond (Scottish National Party, Gordon)

The full facilities of SDI and the arrangements for helping people with skills and retraining will be deployed in Annan, as they are being deployed in my constituency at the moment—I suspect that they will be required in a range of constituencies throughout Scotland in the current economic circumstances. Annan will get the same priority from SDI and other agencies. If the constituency member wants to discuss the matter with the Cabinet Secretary for Finance and Sustainable Growth or the Minister for Enterprise, Energy and Tourism, we will be pleased to set up a meeting.

Alex Fergusson (None, Galloway and Upper Nithsdale)

We have another constituency question, from Angela Constance.

Angela Constance (Scottish National Party, Livingston)

Is the First Minister aware that Cable & Wireless has made a share acquisition of Thus, a leading telecommunications company that provides more than 200 highly skilled jobs in my constituency? There will be redundancies of Thus employees only, which greatly disadvantages the Livingston constituency. What representations will the First Minister make to protect jobs in my constituency in the current economic climate?

Alex Salmond (Scottish National Party, Gordon)

I have already made representations on the matter during the past few months, as the issue emerged. Jim Mather, the Minister for Enterprise, Energy and Tourism, has been making representations as well. It is clearly a matter of serious concern to the workforce. There have been indications from Cable & Wireless that some suggestions about job losses are wide of the mark. We have sought, and will continue, to make representations. In all circumstances, ministers in this Government will act in the interest of the workforce and the Scottish economy.

Ian McKee (Scottish National Party, Lothians)

To ask the First Minister what effect the global financial downturn will have on major capital investment projects in Scotland. (S3F-1121)

Alex Salmond (Scottish National Party, Gordon)

We will continue to make substantial investment in public capital programmes across Scotland. In March we announced our £35 billion infrastructure investment programme for the next 10 years, including £14,000 million over the current spending period to March 2011. Last week, the Inverclyde Council schools project, with an investment value of £80 million, was signed. That project and the many projects currently under construction show that investment is moving forward in Scotland. In addition, in August I announced the acceleration of £100 million spending on the affordable housing investment programme, which will act as a valuable stimulus to the economy in these difficult times.

Ian McKee (Scottish National Party, Lothians)

Does the First Minister agree that the return to Scotland of £120 million of fossil fuel levy money, with no financial strings attached and no compensatory clawback elsewhere, would allow the Government to use that extra finance to initiate a capital investment programme of renewable energy projects? [ Interruption. ] Such projects would not only help hard-pressed Scottish businesses and preserve Scottish jobs but reduce our dependence on energy generated from fossil fuels.

Alex Salmond (Scottish National Party, Gordon)

Such was my enthusiasm to answer Ian McKee, I almost started too early.

The member puts his finger on a hugely important issue. The Office of Gas and Electricity Markets money, which is sitting in a bank account in London and was raised by contributions in Scotland to the fossil fuel levy, is funding to which we can have access. It is unfortunate that the Treasury's current position is that the money would be deducted from the departmental expenditure limit, which means that Scotland would get no advantage from that revenue.

However, I am delighted to say that, for the first time in recorded political history, I have the support of the former Labour minister Brian Wilson, who of course was an energy minister and understands the topic, in pursuing what could be vital and valuable investment for Scotland. I hope that the Parliament can put aside party interest, as Brian Wilson has managed to do, and unite in seeking access to that £120 million for renewables investment. We need look no further than just across the Forth to Tullis Russell in Markinch for a great example of how we can harness the natural resources of Scotland to increase the competitiveness of Scottish industry. There, Government investment of £8 million is helping to build a biomass generator, securing the future of a great, 200-year-old Scottish company and securing 550 jobs in the paper mill workforce and new jobs in the new generator. Would that the chamber united to get that £120 million so that we could see such projects throughout the country.

Margaret Smith (Liberal Democrat, Edinburgh West)

Let us seamlessly travel back across the Forth. The First Minister will be aware of my constituency interest in the new Forth crossing, which is likely to cost in the region of £3 billion to £4 billion, and how it might be financed. The Government has obviously ruled out a private finance initiative and tolls, and there has been a lack of real progress on the Scottish Futures Trust.

I appreciate that the First Minister has been looking far and wide for the necessary funding, including looking at middle eastern sovereign funds.

Alex Fergusson (None, Galloway and Upper Nithsdale)

Come to a question, please.

Margaret Smith (Liberal Democrat, Edinburgh West)

Given the global financial downturn and the fluctuations in oil prices, will the First Minister give assurances about how, when and where the necessary funding will be secured to deliver the new bridge?

Alex Salmond (Scottish National Party, Gordon)

As we promised, we will set out the funding mechanisms for the new Forth crossing in a statement from the appropriate minister before the end of the year. At least under this Administration, in sharp contrast to the eight wasted years of the previous Administration, a decision has been made to proceed with the Forth crossing—something that the previous Administration was singularly unable to do.

David Whitton (Labour, Strathkelvin and Bearsden)

Given that the First Minister and his back bencher could not get their question and answer together, will he end what the Confederation of British Industry Scotland describes as the "current hiatus" by finally telling us today what the Scottish Futures Trust will do and how it will do it to provide some relief to Scotland's hard-pressed construction industry?

Alex Salmond (Scottish National Party, Gordon)

The Scottish Futures Trust adds value and gives more competitive terms to the public sector in Scotland in pursuing the billions of pounds of investment programme. David Whitton was clearly not paying too much attention when I answered Annabel Goldie. The only difficulty and delay in Scotland's capital programme, apart from the financial crisis that is besetting us all, is the inability so far to get clarification from the Treasury on key questions about capital cover.

Given that both the chancellor and Prime Minister have—rightly—responded to the need for a Keynesian expansion in capital investment, perhaps the member can prevail on his friend the chancellor, and I will prevail on my friend the Prime Minister, to spell out the capital cover so that we can get on with the job of building things across Scotland to help combat economic recession.

Alex Salmond (Scottish National Party, Gordon)

The estimated costs of pilot elections to health boards are in our forward plan to be funded centrally from the health directorates' budget in 2010-11.

Rhoda Grant (Labour, Highlands and Islands)

NHS Highland has had to cut £36 million from its budget to stay out of the red. Some of that is a direct result of the SNP Government's policies. On top of that, the health board has to find £600,000 for car parking charges and to fund elections, as the Government is not stepping in to do that. What can the First Minister say to first-class clinicians who are being asked to make cuts in areas that

"were previously thought to be 'scary' or 'untouchable'"?

In what areas does he recommend that they make cuts?