Credit Crunch (Impact on Scottish Economy)
Item 3 is on the impact of the credit crunch on the Scottish economy. We covered a few issues on this topic during the previous item.
Members have the options paper in front of them. It contains possible approaches to following up the evidence session at our previous meeting. Events have overtaken us since the paper was written and there are major issues to do with the funding package that was announced this morning, what has happened to the Royal Bank of Scotland during the past couple of days, and what is continuing to happen with the HBOS-Lloyds TSB potential merger. However, there would be some merit in exploring with the House of Commons Treasury Select Committee what can be done under option 3(a), taking account of the changes in circumstances since the options paper was put together. Obviously, the Treasury Committee has yet to meet to consider the matter, but we will see during recess what its response is and we can then explore further whether some form of short joint inquiry would be possible, especially given the constraints of standing orders. That is my recommended way forward, but I am open to comments from others.
The paper's scope has been overtaken. There are a lot of issues that we might want to take a look at, but perhaps we should take a step back and ask ourselves whether a joint approach is the right way to make progress. I question the convener's party's view that that would be a good thing to do.
For a start, I do not know how the concordats work. I would like to know whether this committee can question Westminster officials and whether they would be prepared to come here to answer questions. There are many underlying issues that could cause the committee to appear to be going off at half-cock over the credit crunch and the circumstances that we face. I would like the committee to consider what our relationship is with John McFall's committee and the Treasury, and to find out whether there are steps that we can take to achieve some clarity about that relationship before we approach the Treasury Committee. My impression is that it might well say that it is not interested in joint meetings. What would we do then?
That is clearly a matter for the Treasury Committee. At the moment, it is just a question of exploring the possibilities, given that a number of the issues to do with the credit crunch are reserved and the Scottish Parliament cannot address them on its own. That is why a joint inquiry is suggested; it would be beneficial to use the skills of both Parliaments.
I want to deal with a devolved aspect of the credit crunch. I realise that the options paper deals with all aspects of it, and I might stand back from the discussion about joint working because other committee members have more experience than I do.
In his statement to Parliament the week before last, the First Minister indicated that he had secured a meeting with the chairman of Lloyds TSB to present Scotland's case. I hope that the committee can unanimously agree to write to the First Minister to ask whether the date for such a meeting has been set and, given that the First Minister was keen to preserve a united front on the issue, whether he would be willing to give the committee advance sight of his presentation. I am mindful that it was indicated that the meeting would take place within three weeks, although I suspect that it might be slightly delayed as a result of recent events. It would be in the Parliament's interests for us to write to the First Minister to ask whether the date for his meeting with Victor Blank has been set and whether he would be willing to share the case for Scotland with the committee in advance. If the committee is not due to meet, perhaps the convener could make the appropriate comments on the presentation.
Thank you for that suggestion. Do any other members want to comment?
That suggestion is perfectly acceptable.
The paper in front of us contains five possible options. The idea of simply taking a watching brief sounds as if the committee would be taking too much of a step back; we should be doing something slightly more than holding a watching brief.
Three potential inquiries have been proposed, but I have some difficulties with them. I would not rule out the possibility of joint working, although the details need to be looked at, as Rob Gibson said. The principle of a joint inquiry is perfectly reasonable and could give us some useful stuff. However, in relation to the issues that we face today, I would be nervous about the specifics of such an inquiry. The pace of change in events in the marketplace as opposed to the pace at which this or any committee can act causes me concern. The letter from the convener to the chairman of the House of Commons Treasury Committee is dated 26 September, but we will not know whether that committee is up for it until a week today; it will have taken us three weeks to figure out whether the idea is a goer in principle. We should look at what has happened during the past three weeks, and consider what might happen during the next three weeks. That is my first concern about a joint inquiry.
My second concern is that if an inquiry is worth doing, it is worth doing well. It should be a comprehensive piece of work that can be presented to Governments and which draws out useful lessons, as our tourism inquiry did. That inquiry was found to be useful by the Government and all parts of the sector. I am not sure about the idea of doing a short inquiry into something so complicated. The issues that are outlined include Government changes, regulators, derivatives, central banks, global issues, credit rating agencies, and the bonus culture. There is a great breadth and depth of issues there and we have limited time and powers to deal with them. If we cannot do such an inquiry extremely well, we would do better not to sign up to it at this stage. We are still in the middle of the storm.
The paper outlines HBOS issues. When two shareholder votes are due to happen, I am nervous about holding an inquiry into whether the HBOS arrangement is right and how it came about. Whether the proposal is right or wrong is surely for the shareholders of HBOS and Lloyds TSB to decide. We could confuse matters and cause difficulties by going into that at this stage.
Option 2—mainstreaming—is the most sensible option. We could consider the situation at every meeting and make it part of our budget scrutiny in the next couple of months. I do not rule out an inquiry, but I am not sure how useful signing up to that would be at the moment.
I share some of Gavin Brown's concerns. We should not go off at half-cock and undertake an inquiry that we will not do thoroughly. That is important. Gavin Brown suggested mainstreaming, which we began to do this morning—we mainstreamed the credit crunch in our work.
The suggestion of informal contact with the House of Commons Treasury Committee is helpful in several respects. We cannot prejudge that committee's priorities, but I suspect that it is likely to be interested in many issues to which the paper refers, as they are important to the UK economy and financial sector regulation. In informal contact with that committee, we could offer to share the conclusions of our mainstreaming work on the credit crunch and its impact on financial services in Scotland and ask it to share with us its conclusions or its developing conclusions, if it examines such issues.
As Gavin Brown implied, once that process has started, we could take up Wendy Alexander's suggestion that we focus on and seek to be fully informed about what the Scottish Government has said that it will do, which we can feed into the Treasury Committee's considerations. Returning to consider what has happened once the storm has passed its peak might be helpful.
Option 2—mainstreaming—appeals to me, too. It would allow us to keep up to date with what is going on each week. We heard a lot of good material for nearly two hours this morning, which was extremely useful. What emerged was that nobody knows where the situation is going. We must be well aware of that. The committee will not meet for the next two weeks, but thereafter we will meet every week.
We cannot divorce the Westminster aspect from our considerations—it is important. The European Union's economic and financial affairs council is considering allowing VAT on house repairs to be reduced from 17.5 per cent to 5 per cent. We cannot implement that reduction, but we could say that we support Europe's proposal to allow the UK Government to make that reduction and that we think that it would boost many small businesses in the building trades. People are being paid off instead of building new houses, but many people might want to improve their houses. If the VAT rate on doing that were only 5 per cent, that could be a big boost.
If somebody from the UK Treasury could give us a view on the likes of that, that might help us—Rob Gibson talked about that. What do we need to do to get such people to come along to have the sort of chat that we had this morning about the impact on Scotland of broader issues, given that the levers of power are held in Westminster and that measures such as reducing VAT on house repairs are not in our gift? There are lots of other ideas, such as bringing forward construction projects, which we touched on this morning. Mainstreaming the work would allow us to be flexible week to week.
Two subjects are worth considering. One is the European assessment of the relative performance of London and Scotland in the HBOS imbroglio. I think that the Scots came out reasonably clean from that; that cannot be said of operations on the London stock exchange. The other, which has already been mentioned, is the question of funding for infrastructural and industrial projects. The BOS bit of HBOS used to do that well, but there is a great deal of scepticism about whether Lloyds TSB would be so minded.
Having listened to members' views, I propose that, first, we take up Wendy Alexander's suggestion that we write to the First Minister to request more details of his proposed meeting with Lloyds TSB; secondly, that we agree to mainstream the matter in the meantime, perhaps returning to it at a future date; and thirdly, that we continue to explore with the Treasury Committee areas in which the two committees can co-operate to address the matter. Is that an acceptable way forward?
Members indicated agreement.