HBOS-Lloyds TSB Merger
The final item of business is a members' business debate on motion S3M-3989, in the name of Margo MacDonald, on the HBOS-Lloyds TSB merger. The debate will be concluded without any question being put.
Motion debated,
That the Parliament considers that there would be merit in a public inquiry to look into the information that persuaded the Prime Minister and the Chancellor of the Exchequer to set aside the usual procedures that apply to company mergers and takeovers when HBOS and Lloyds TSB were given government support to do so, with a subsequent significant impact on the finance sector and employment in Edinburgh and in spite of the likelihood of the proposed merged bank being in breach of competition law and the cost to the taxpayer, before the shareholders and employees of both banks had been made aware of the full facts of the financial situation of both and before any alternatives had been explored.
I realise that, in a members' business debate, one does not seek votes, but I am looking for all men and women of good will to give me their support in my efforts to establish that there should be more investigation into the business of the HBOS-Lloyds TSB merger.
The motion seeks the agreement of members that there should be a public inquiry into the reasons for the decision by the Prime Minister and the Chancellor of the Exchequer to dispense with the normal procedures that usually accompany company mergers when HBOS and Lloyds TSB were supported and encouraged by the Government to engage in such a process. The motion also reminds members of the particular relevance of the decision to support the merger, which a more analytical observer might describe as a takeover. It refers to the inevitable and quantifiable increase in the number of people who are likely to become unemployed in the financial sectors in Edinburgh, the Lothians and the capital's travel-to-work area, and the less easily measurable but nonetheless adverse impact on the city's self-confidence and reputation as a secure and well-managed financial centre, which has implications not only for the people who live in this area but for all of Scotland, in terms of the economic generation that has been ramping up in the city over the past decade.
But it is a done deal, is it not? Why bother to rake over cold embers, even if the commonly held view among people who work in the sector is that the merger was not such a get-out-of-jail move as was assumed last September, when Gordon Brown and his chancellor sprang their news that there would be no investigation into the so-called merger? At the time, I and others said, "Oh, they probably really didn't have any choice." In fact, probably everybody said that. However, by the middle of October, the situation in other banks was not much different from that in HBOS and Lloyds TSB. The merger was therefore seen in a quite different context. We had thought that the proposed merger was a stand-alone crisis that left the Government with no choice other than to wave it through before the banks' depositors left one or other or both of the banks high and dry. By October, it was obvious that the same flawed lending policies had been pursued by other banks, and that a strategic policy, rather than an emergency reaction, was required.
Months before shareholders voted on the merger proposal, other options should have been explored to address what was known to be a systemic weakness, so why did that not happen? Why did Gordon Brown, whose reputation was built on his being a prudent chancellor, fail to take advantage of the time bonus that was bestowed on him by other banks here and abroad being in the same pickle? The suspicion is that this most political of Prime Ministers stuck to his initial decision for political reasons, in spite of having been given time to let the normal practices on mergers come into play, and in defiance of the widespread and growing opinion among banking professionals that the size of the merged bank would break European Union and United Kingdom rules.
We should not forget, when we are trying to work out why Gordon Brown in particular did not take advantage of the time that he had been given, the initial approval of the decisive action that he took. That approval got him out from under the weight of accusations that followed his cop-out from calling an election—accusations that he was an indecisive ditherer. Almost overnight, his reputation changed. There has to be some reason, other than the business case for a merger, to explain why Gordon Brown threw so much weight behind the merger in the period leading up to the shareholders' meetings and votes.
It may be significant that Lord Mandelson, having succeeded John Hutton as Secretary of State for Business, Enterprise and Regulatory Reform on 3 October, made plain from the outset his opinion that recapitalisation of the two banks would be dependent on the merger going ahead. Some members may recall that he seemed to jump in before he had had time to think the thing through.
Although the Prime Minister said that he did not see the reports from the Financial Services Authority—reports that pulled together information that the banks supplied on their financial health—it seems most unlikely, given his known propensity to micromanage other departments' policies when he was chancellor, that he did not glance at the more independent reports produced jointly by the Bank of England, the Treasury and the FSA. He cannot have been unaware of their concerns about anti-competitiveness, or of the concerns expressed by the Office of Fair Trading relating to personal accounts and banking services for small and medium-sized enterprises in Scotland, or of concerns expressed about the impact on the mortgage market.
I accept that the suspicions that I have outlined—and they are only suspicions—as to the reasons for the failure to test the efficacy of the proposed merger against the normal standards cannot be proved without a complete record of the interdepartmental information exchange in the period from 18 September 2008, when the merger was first announced, and the decision of Lord Mandelson to proceed with the merger in spite of the OFT reporting on 24 October that, since the onset of its investigation, market conditions had "changed considerably".
The OFT report advised caution. It emphasised the
"enormous importance of the mortgage business to the UK economy."
It also warned, given the market conditions, that
"the combination of the largest and third largest mortgage provider is significant enough to cause concern."
The report concluded that the proposed merger would result in a "substantial lessening of competition."
Frankly, the redactions applied "in the public interest" to my request for the papers that might explain why the original plan was unaltered, even when the market conditions had changed hugely, have compromised the transparency of this whole episode. The question has to be why. If it is a done deal, why can we not understand it better?
The point at which my suspicions tipped over into certainty that there should be a public inquiry into the merger came with the reported refusal of Lord Mandelson's department to hand over a document considered in camera at the appeal by the anti-merger group. The group was told that the document had been destroyed. Even if that is true, it strengthens the case for an inquiry into the merger decision-making process that led to shareholders voting when they may not have been in possession of the full facts about the soundness of HBOS, the effect on the mortgage market and the competitiveness of the merger. If it is not true, an inquiry is essential to discover what had to be hidden in the public interest.
If the FSA had been doing its job properly and light-touch Gordon Brown had been doing his job properly as Chancellor of the Exchequer, the banking sector would not have been left to self-regulate as it was and we would not have been left in such a deep mess. There would also have been no need for a public inquiry. I quite like raking over cold embers, as that is where we find interesting pieces of evidence in this case and others.
Will the member give way?
I have only four minutes.
Neither Ireland nor Norway is in this mess, and Ireland is projected to come out of the recession more quickly. The idea that Scotland has been better off as part of the UK, enabling the bail-out of banks to go ahead, is nonsense. The UK is not in a good position to bail out the banks—it cannot afford that—and our children for generations to come will be paying through the teeth for the subsidising that has had to happen, so that is a false tale.
We now own 70 per cent of the Royal Bank of Scotland and 65 per cent of Lloyds. The social housing portfolio of the Dunfermline Building Society is wholly owned by the Bank of England. Indeed, the House of Commons is undertaking an inquiry into the takeover of the Dunfermline Building Society, calling witnesses from the Treasury, the Bank of England, the FSA and, thereafter, representatives of the Dunfermline Building Society and the Nationwide Building Society.
Order. The member seems not to be speaking to the motion.
I am. That is linked to our holding an inquiry here.
Good. The member should get to that now.
I am right at it, Presiding Officer.
Looking at the timetable for the Lloyds TSB-HBOS merger is like watching a runaway train hurtling down the tracks. Reference has been made to the fact that Lord Mandelson gave clearance for the merger in October 2008. He did not refer the matter to the Competition Commission, despite the position of the OFT. That was Lord Mandelson—unelected, sacked twice—railroading against the wishes of the HBOS shareholders. Alternatives were rubbished: Sir Peter Burt and Sir George Mathewson, who had been senior members of the bank, were ridiculed, and there were even attempts to undermine their reputations. The process was all rather sullied, rushed and undemocratic, bypassing any alternatives.
I understand that there may be issues with having a public inquiry in Scotland; I hope that the minister will address them. It is my understanding that such an inquiry would proceed under the Inquiries Act 2005 and that there may be limitations when matters cross from devolved to reserved areas either in the scope of any inquiry or in the compellability of evidence, both documentary and from witnesses—some of our parliamentary committees have had difficulty with the compellability of witnesses during parliamentary inquiries. However, there can be joint inquiries between the two legislatures. I have not had the time today to check whether there have been any. If there have been, I would like to know about them; if not, would such a proposal have legs? Could there be some kind of joint inquiry because of the economic implications of the situation for Scotland?
We can hold parliamentary inquiries, but they are limited in the compellability of witnesses and in their scope. Perhaps the Finance Committee and the Economy, Energy and Tourism Committee could hold such an inquiry, but what would be its limitations, which would not apply to a public inquiry? It is an important issue, given the thousands of jobs in Scotland that are dependent on the financial sector. Scotland has been particularly vulnerable. We do not want to have just brass plates for headquarters; neither do we want Scotland's banking reputation to remain tarnished. That would be wholly undeserved.
It may be possible to have a public inquiry, subject to the caveats that I have mentioned, but if the best that we can do is a parliamentary committee inquiry, that exposes the limitations of devolution and the substantial fault lines that continue to run through the uneasy devolution settlement. This is a particularly good example of that. I am uneasy that the merger was concluded hastily for political, not economic, reasons that we may not be able to explore.
I congratulate Margo MacDonald on securing the debate, which is welcome. It provides another opportunity to discuss the issues that are faced by a great number of workers in the financial services sector, particularly those in HBOS and Lloyds.
I remember the September morning on which I first heard the news that HBOS and Lloyds were to be merged. Like many at the time, I was concerned about the reasons behind it and the implications for the workforce.
The Parliament has shown itself in a good light during the process. We have had many debates on the merger and have done some practical things. There has been consensus in the Parliament, particularly on the Financial Services Advisory Board's jobs task force, to try to ensure that there are proper responses to the HBOS-Lloyds merger in particular and the problems that the Royal Bank of Scotland and other banks in Scotland face. One of the first things that I did was meet shop stewards and union representatives from HBOS and Lloyds—the group is now known as the Lloyds Banking Group—to enter into dialogue with them about their concerns and understanding.
I turn to points that members have made. There were concerns about the level of regulation. All politicians should bear some responsibility for that. Not that long ago, the First Minister said that regulation of Scotland's financial services sector was gold plated and that, in an independent Scotland, the Scottish National Party would want to move away from that. When we talk about such issues, we should all bear in mind the language and rhetoric that politicians used.
I am not persuaded at this point that there should be a public inquiry, because all the efforts of politicians, including all MSPs, and everyone else who has concerns about the financial services sector in Scotland should be directed towards helping people in that sector and looking to the future. Perhaps we will learn lessons from the past in doing so.
Today, I met representatives of RBS who are very concerned about their employment.
One of my concerns was that we might find what is happening in America happening here. In America, shareholders who think that they were not given full information before their bank's situation completely changed are organising litigation. I have heard whispers from shareholders of the former Lloyds TSB that they were not in full possession of the facts about HBOS, and I am concerned about that.
I understand that there will always be concerns as we move forward. We undoubtedly had a unique set of circumstances in September, and quick action needed to be taken. Lessons were learned from what happened to Northern Rock almost a year previous to that. However, the reality is that there are daily implications for the individuals who work in the banks. They have to deal with those implications and pick up the pieces. I know from speaking to a constituent of mine who worked in HBOS's corporate banking arm that people in that office are not receiving bonus payments—not payments for exceptional performance throughout the year but payments that were seen as deferred earnings. The current situation has huge implications for those individuals: low-income to middle-income people are suffering from major strategic errors that were made by senior managers, particularly in HBOS.
Companies such as Dunfermline Building Society and RBS have been able to put certain areas into administration, but it is clear that the HBOS banking model was exposed in a way that showed that it was broken. At the time, looking for a merger was undoubtedly the right thing to do. The unions supported a merger—although not necessarily of HBOS and Lloyds—because they recognised that the HBOS banking model was broken.
We need to have more discussions such as this. As I have said, I am not convinced that a public inquiry is needed. All our efforts must be directed towards ensuring that the financial services sector grows in Scotland and that we sustain employment.
Like John Park, I am not entirely persuaded of the need for a public inquiry, but I come from a different angle in that I believe that many of the points that Margo MacDonald raises are worthy of further exploration. I acknowledge that Margo MacDonald has been entirely consistent on the issue for months and has raised concerns since the merger was first mooted but, for a variety of reasons, I am not sure that a public inquiry would be appropriate.
In effect, three options were on the table for HBOS last autumn. The first was the merger—or the takeover if we want to refer to it as that. The second was nationalisation, which most people thought was the worst possible option. The third option, which was considered for some time, was to preserve HBOS as some form of independent entity, whether through another bank providing financing or some other method. Margo MacDonald and others spent a lot of time considering those options. To be fair, it is legitimate to ask whether the fact that the Government was so unambiguously in favour of the merger and so clearly behind it—despite the fact that it did not take a political decision to say that it must happen—put off other potential bidders. However, what has emerged since the HBOS and Lloyds TSB shareholder votes shows us graphically the reality of HBOS's situation.
The question that I posed in the debate on the situation last October was simple—I asked what the likely cost would be to the taxpayer if the merger did not go ahead and an alternative could not be found. Margo MacDonald's point about the disgruntlement among shareholders of Lloyds TSB—which was acknowledged as a strong and well-resourced bank—puts that into context. HBOS's problems were so much greater than we appreciated when the merger was first mooted, and shareholders in what was Lloyds TSB perhaps now feel that they got a raw deal. That suggests that the cost to the taxpayer of nationalising HBOS would have been significantly higher than the cost of supporting the merged Lloyds Banking Group. When we are borrowing £180 billion a year more than we are raising, there is a serious issue that we cannot simply ignore. The capacity simply to nationalise and preserve an independent HBOS was seriously compromised. That is perhaps clearer now, looking back, than it was at the time.
Christine Grahame mentioned regulation, and John Park alluded to it. We must be careful on that issue. The problem with the Financial Services Authority and the regulation of the banks was not to do with light-touch regulation. The year-on-year growth of the FSA and the volume of regulation shows that the problem was not that there was not enough regulation but that the regulation was not effective. We should not confuse volume of regulation with effective regulation, which it is rather easy to do.
We are left with the fundamental question of what happens now. We are where we are, and the combined Lloyds Banking Group has a great deal to do to get back to a state of greater financial health. I acknowledge that how that happens will have a significant impact on the Scottish economy, and I am clear that headquarters are important to the Scottish economy. However, raking over the coals, as Christine Grahame put it, will not necessarily take us further, although I would be fascinated to find out what actually happened during those vital few weeks early in the autumn last year.
I, too, congratulate Margo MacDonald on bringing this important issue to the Parliament. I for one hope that, in either Opposition or Government time, we will be able to discuss the issues that have been raised and the wider context in a substantive debate and to test the Parliament's opinion again.
In September, we first debated the merger in Government time. In October, in Liberal Democrat time, we debated the issue under a motion that sought to gather opinion against the merger. Liberal Democrats have continued to express anxiety and concern not only about individual jobs in the institutions but about the longer-term consequences of the merger and the situation. I recall distinctly Mr Brownlee describing that motion as "reckless and unwise"; he was wrong. His Westminster counterpart, the former Chancellor of the Exchequer Kenneth Clarke, indicated that he deeply regretted the merger; he was correct. I suspect that Mr Brownlee will not admit that he was incorrect to use that language, but hindsight proves absolutely that he was.
The reference to recklessness related to that motion's mention of Edinburgh's status as a financial centre being jeopardised. The point that I made in that debate was that HBOS was likely to be nationalised if the merger did not proceed. The Liberal Democrats ridiculed that at the time but, since then, Vince Cable has said that, if Lloyds TSB had not launched the takeover bid, HBOS would have been nationalised. That is in his latest tome, a copy of which I was given recently. Is it not the case that the decisions are not as simple as the Liberal Democrats suggested last October?
It is certainly correct that we have had concerns about Edinburgh's position as a financial centre. We also have long-term concerns about the impact that the takeover and the creation of a monolithic organisation such as the Lloyds Banking Group will have on competition in the sector in Scotland. Mr Brownlee knows that we argued that part of the solution that the Government put in place for Northern Rock should have been considered for HBOS. My Westminster colleague Vince Cable argued that, as we did in this Parliament.
Absolute rubbish.
If the members who are making sedentary comments look at the Official Report, our references to Northern Rock will be perfectly apparent to them.
The recapitalisation of the banks means that we have primarily taxpayer-funded institutions in Scotland. That is significant for understanding exactly why competition law was set aside in the case of HBOS. The two issues are connected. The Westminster Parliament voted to set aside competition law against the advice of independent advisors and the country's regulatory bodies. It did so on the basis that there was no alternative.
There is a continuing need to examine the banking situation for the retail and investment sectors, but the Scottish Government can have a direct role in the competition law issue. Distinct Scottish markets are recognised for OFT and Competition Commission inquiries. The precedent is perfectly clear: we saw one recently in the inquiry into airport ownership and, before that, we saw it in the milk industry.
The Scottish Government made representations to the OFT in advance of the report on the HBOS-Lloyds TSB merger. Given our long-term concern for not only retail banking in Scotland's high streets but the competition for small business banking, I hope that the Scottish Government will continue to take a close interest in the matter. Indeed, the first anniversary of the decision to set aside competition law, which approaches after the summer recess, would be an appropriate point for the Scottish Government to ask the OFT to re-examine competition within the Scottish banking sector. I am asking not for a debate about global finance or whether the takeover would have happened in an independent Scotland but for an inquiry into competition in the high street and in small business banking. I hope that the Scottish Government will take that on board and ask the OFT to investigate.
I welcome the opportunity to have a debate on this important issue and congratulate Margo MacDonald on her tenacity in ensuring that it is not forgotten. I am pleased to support her call for a public inquiry and thank her for supporting my motion, which called for a special parliamentary committee to be set up to investigate the matter, and the letters of support that she sent to the Finance Committee.
As has been mentioned, the Parliament has debated the issue before. I firmly believe that further investigation of the situation that surrounded the merger of HBOS and Lloyds TSB is desirable and has merit. I wish that any such inquiry would also examine the transfer of the Dunfermline Building Society's operations to the Nationwide Building Society. It is important that we do that.
There are many unanswered questions. For instance, why is there no paper trail? I wrote to the Financial Services Authority, which told me that it was conversations between Gordon Brown and leading bankers that led to the merger of HBOS and Lloyds TSB—although Margo MacDonald told us that there was evidence but it has now been destroyed. That, above all, deserves an inquiry of some sort.
I cannot prove that evidence was destroyed. It was reported to the anti-merger group that part of what I think was a 350-page document had been destroyed.
I thank Margo MacDonald for that clarification. I accept what she says, but I believe that even that merits an investigation.
It is the duty of this Parliament to take the necessary actions to get to the truth and to represent the people of Scotland. Although we are talking about bankers, Gordon Brown and legislation, we have to remember that real people are affected; members of the public have suffered and they want action and answers.
It might be that the Scottish Government does not have sufficient powers to direct a public inquiry into this affair, but that does not mean that we cannot support a Scottish parliamentary inquiry. Of course it will be argued that without the full powers of a public inquiry any resultant parliamentary inquiry, or other such inquiry, would lack the necessary powers to compel witnesses to give evidence, but I believe that there are sufficient grounds not to reject calls for an inquiry. I am optimistic that anyone who was asked to come to the Scottish Parliament to give evidence would be more than willing to do so. I firmly believe that we have to push for an inquiry.
I had a feeling that the Scottish Conservatives would still need to be convinced of the merits of an inquiry, but I really did not think that Labour would need convincing. Perhaps the Conservatives should heed the comment of David Cameron, the Conservative leader, that he would make a constructive working relationship with the Scottish Parliament and the Scottish Government a priority in the event of the Conservatives forming the next UK Government.
Will the member take an intervention?
I am sorry, but I cannot take an intervention.
As David Cameron falls over himself to apologise and Gordon Brown follows, the talk turns to transparency and openness once again. It is in the interests of this Parliament and the Scottish people to be open, honest and transparent, to establish an inquiry into the decisions that led to the merger of HBOS and Lloyds TSB and to investigate why the Dunfermline Building Society was similarly carved up.
Jeremy Purvis mentioned the use, or otherwise, of competition law in this matter, which merits investigation. The events of the past week have shown us that the public have no time for back-room, dodgy deals. I hope that members here today will reflect on how the public feel about this issue and that they will support an inquiry, whether a public inquiry or an inquiry by a committee of the Parliament.
I welcome the opportunity to take part in the debate and I congratulate Margo MacDonald on lodging the motion. The debate gives us an opportunity to reflect on the Lloyds TSB takeover of HBOS and on the general issues surrounding the banking crisis, given the importance of the banks and the financial sector to the Scottish economy not just in relation to the jobs they provide in Edinburgh and throughout Scotland but in relation to the mortgages that householders throughout Scotland's communities hold with the banks.
I know that the motion is about Lloyds TSB but, as I see the sun streaming through the window, I reflect back to this time last year, when, on a sunny Friday, I, along with a number of other MSPs, visited the RBS headquarters on a business exchange visit. We could not have realised at the time that, by the end of the year, RBS would have capitulated, its value would have gone into meltdown and it would have been 70 per cent owned by the Government. What struck me on that visit was the number of assurances we were given about the reliability of the business model at RBS—which were proven in future months not to be sound.
I welcomed the strong intervention of the UK Government in the Lloyds TSB-HBOS merger. There is no doubt that it would have been catastrophic for the Scottish economy if the UK Government had not intervened.
Does the member agree that if the UK Government had put in place more stringent banking legislation, as other countries did, we would not have been in the same position with Lloyds TSB and other banks?
The point is that the UK Government's priority was to intervene to save jobs and provide stability so that the Scottish economy did not go into meltdown. I very much welcomed that intervention. Investment to the tune of £37 billion was made in Scotland. It is worth pointing out that that is more than the total Scottish budget. If Scotland had been independent at that time, I would have feared for its future.
As for the issues that Margo MacDonald's motion addresses, we had and still have relevant concerns about the banking sector. We want to ensure that robust business models are adopted and that our banks improve cash flow so that we support businesses and the economy. We want transparency about senior management and their bonuses. We also want reassurances and help for the workforce at this difficult time. It is clear that job losses will occur, but we want to minimise them and to try to get the workforce into other jobs.
The Parliament should concentrate its efforts on looking to the future, not to the past. I do not diminish the issues that Margo MacDonald raises, but the role for the Parliament's debating chamber and its committees is to consider how we can help the banking system to grow and support the Scottish economy.
I congratulate Margo MacDonald on lodging the motion. I always admire her tenacity and style and I often support the causes that she espouses, but I cannot support the motion this evening. There is a case for a broad-ranging inquiry that investigates the details of everything that happened in the lead-up to the general banking crisis, but there is no case for homing in on one aspect, as Margo MacDonald recommends.
The key issue for Edinburgh members and, I am sure, for all other members is the employment situation. John Park emphasised the key question, which is how we protect and preserve as many jobs as possible now. Given that employment and unemployment are probably the key aspects for everyone, it is worth saying that the main banking union, Unite, has always supported the merger. Critics of the merger must take that into account—and perhaps explain it. It is by no means obvious that resisting the merger would have meant more jobs. Like the trade unions, my basic belief is that unemployment would have been higher without the merger and without the wider action that the UK Government took to support the banking sector.
The member mentions saving jobs. In his reply to me, James Kelly said that the purpose of the Government's intervention was to save jobs, yet he said later that jobs are being lost. If the Westminster Government put in money to save jobs but we are now talking about jobs being lost, how does that correlate?
As is obvious, jobs are being lost in the banking crisis; the issue is whether we would have lost more jobs without the intervention.
Another point that should be picked up, to which Christine Grahame referred, is that shareholders voted for the merger. The Chancellor of the Exchequer made it clear that funding was not contingent on the deal going through.
I do not have time to give way; I have already taken one intervention. I know what Margo MacDonald wants to say. If I have time at the end, I will take another intervention.
We must remember the dire situation that HBOS was in last year. It developed long before the crisis of September; we have heard that internal people warned about the absence of risk controls and we know from figures from the Financial Services Authority that in June last year HBOS's funding gap was greater than that of any other UK bank, at £198 billion. That led to massive reliance on the wholesale funding markets, which seized up after the collapse of Lehman Brothers on 15 September. Within hours, HBOS shares crashed—the markets decided that the bank was going to go. The fact of the matter is that, without the intervention of and guarantee from the UK Government, the bank would have gone under. It is clear that, without that intervention, we would have had far more job losses, not to mention the devastating effect on the rest of the economy.
We have to remember what the situation was like in that critical week in September and applaud what the Government did at the time. Even more than that, we need to acknowledge the wider action that the Government took at the beginning of October to save the banks by way of recapitalisation. Whatever their criticism of the UK Government in other areas, members of other parties should give the Government credit for the decisive action it took at that time to save the banks.
In the small amount of time that remains to me, I will focus on the present and the need to save as many jobs as possible. A City of Edinburgh Council meeting on the local economy on Monday of this week heard that Edinburgh is beginning to see beneficial flows of investment, including in the financial sector. One very interesting piece of information is that the Lloyds Banking Group is beginning to see Edinburgh as a centre of excellence, including for its procurement arm and asset management business. We have to look at what happened in terms of swings and roundabouts.
I congratulate Margo MacDonald on securing a debate on such an important issue. I have appreciated the speeches from members on all sides of the chamber.
As we have heard, we are going through a period of unprecedented change in the global financial services industry, with banking at the eye of the financial storm. Few could have foreseen the dramatic change in circumstances that we have experienced and the alarming speed at which events took place. I remind colleagues that the main aim of the Scottish Government remains to create a more successful country, with opportunities for all in Scotland to flourish, by increasing sustainable growth.
In pursuit of that aim, since the first announcement of the intended acquisition of HBOS by Lloyds TSB, the Scottish Government has done everything within its powers to ensure the best deal for Scotland. Throughout the process, we have been clear that our banking industry is a cornerstone of the economic life of the nation. Any loss of function and decision making from Scotland, along with employment, would have a detrimental impact on Edinburgh—the impacts would be felt far beyond Edinburgh, but particularly there.
The concerns that the takeover raised about the impact on jobs, decision making and competition in Scotland were reflected in the Scottish Parliament resolution of 30 October. We always made it clear that Lloyds TSB acted perfectly honourably in pursuing its commercial interests. However, we believe that the UK Government has not been even-handed in its dealings on the matter.
We believe that it is right that the Scottish Government and the people of Scotland should have before them the full facts that United Kingdom ministers at the highest level considered when decisions were taken to set aside normal competition considerations to enable the merger to go ahead. However, as things stand, if Scottish ministers were to establish a full public inquiry, its terms of reference would extend only to devolved matters. Unfortunately, the issues that Margo MacDonald set out in the motion and many of those that members raised in their speeches relate to matters that are reserved to Westminster by the Scotland Act 1998. They are important matters nonetheless.
We all appreciate the difficulties in respect of the reserved-devolved divide. However, if I picked up correctly what the minister said, it is the Scottish Government's view that the public and shareholders should have the right to understand the full facts. Is he suggesting that the advice that was presented to UK Government ministers should be published? If so, will the Scottish Government do likewise?
Mr Brownlee is not convinced of the need for a public inquiry and yet he wants to know what happened. Likewise, we want to know what happened. We want to get the information into the public domain.
Margo MacDonald spoke about the lack of choice and the haste that were in play; the ignoring of the OFT report; the setting aside of competition law; and the reluctance to bring forward recapitalisation. Underpinning all that is the flawed model that got us into the situation in the first place: the regulatory race to the bottom. People in Scotland had a right to believe that Her Majesty's Treasury, the FSA and the Bank of England were up to the job. However, book after book on the subject—by John Kay, Vince Cable, Philip Augar and George Soros—tells us that there was a climate, created largely by Government, that encouraged financial institutions to borrow short and lend long. Institutions were encouraged to come close to overtrading—something that they would not encourage their customers to do.
Sandra White's speech was pertinent. She argued that a further investigation, to include the sale of the Dunfermline Building Society, was justified and spoke about the impact on people here in Edinburgh—people who were depending for their retirement pensions on rock-solid RBS and HBOS shares that have turned bad on them. In addition, we must consider the compensating book-keeping entry that everyone in the UK has suffered. People have suffered stress about their business, their jobs, their incomes and the value of their portfolios, savings, pensions and property, and now devaluation of the currency—that is a big compensating book-keeping entry.
Although a public inquiry established by Scottish ministers would be unable to consider fully the issues relating to competition or mergers and acquisitions, we think that it is vital that lessons are learned. The current crisis and the ways in which Governments across the world reacted to it and worked to deal with it will be the focus of many debates and inquiries around the globe in the foreseeable future.
Just as important is the long-term impact of the crisis on the size, shape and focus of our financial institutions. That matter will be uppermost in our thinking as we move forward. I must respond to the point that James Kelly made about independence and the funding of the banks. When a bank becomes too big to fail, we must ask, "Too big to fail for whom?" The Scottish banks that we are discussing were too big to fail for UK plc, the USA and Holland.
The primary driver of sustainable economic growth is now at the forefront of our minds.
Does the minister accept that the amount of investment that was required to save the banks—£37 billion—was greater than the Scottish budget and that, had Scotland been independent, we would have struggled to sustain our banking system?
I resent the proposition that Scotland is not a bankable proposition. Scotland is always a bankable proposition. We can build a strong situation, especially if Scotland now stands shoulder to shoulder with its banks and the rest of its strong financial services sector—our investment trusts, fund managers, life and pension businesses, actuarial businesses, legal businesses and accountancy businesses.
Will the minister give way?
I have 30 seconds left and am keen to finish my speech properly.
Sandra White's eloquent call for openness and transparency has been echoed by George Soros. We need to ensure that our banking sector supports fully our national competitiveness. Any inquiry that helps us to understand the impact of recent events and decisions on our banking sector can only be helpful. I am looking to engage with the sector further, beyond FiSAB and our dealings with Scottish Financial Enterprise. I will engage equally with the US banks that are investing in Scotland; they are delighted with the quality of their staff here and plan to invest more. I fully support any move to hold a Scottish parliamentary committee inquiry into this matter.
Meeting closed at 17:48.