HBOS
The next item of business is further debate on the implications for Scotland of the Lloyds TSB takeover of HBOS. We are now extremely tight for time, but I call on Iain Gray to open the debate. Mr Gray, you have nine minutes.
I am pleased that the Parliamentary Bureau agreed to amend our business to schedule this important debate on a topic that is of concern to people throughout Scotland, from savers to home owners to bank staff. Such is the importance of HBOS to Scotland that few Scots will not be directly affected by the proposed takeover. I suggest that no one will be unaffected by it in some way as a result of the potential impact on the Scottish economy of changes to the bank.
That is why last week Labour suggested a broad meeting of all political parties and representatives of wider Scotland to strengthen our common advocacy for Scottish jobs and Scottish decision making, and to leverage consensus into the most powerful case we can make to Lloyds TSB. That meeting happened on Monday. Using the Scottish Council for Development and Industry to facilitate and host such an event was a good idea, and I was pleased to participate in those discussions.
For one thing, the gathering revealed that HBOS has an even greater reach into Scottish life, commerce and society than I think we in the Parliament had realised. Looking beyond the primary concerns of people with jobs, mortgages, savings or investments with HBOS, takeover of the company will impact on our construction industry, our voluntary sector and our cultural and sports sectors. For example, HBOS holds a significant portfolio—around £4.5 billion—in the housing association sector and on Monday, BAA talked about concerns for air routes that are dependent on the Edinburgh business market, of which HBOS is a big part.
A quarter of a million people enjoyed the Bank of Scotland fireworks concert at the end of the Edinburgh festival, and 140,000 youngsters benefit from the Bank of Scotland's support for grass-roots football, while many of the company's staff engage in a volunteering scheme that benefits many projects throughout Scotland. The Bank of Scotland's contribution to Scotland's history is profound, but the company's contribution to the Scotland of today runs deep and wide. If HBOS is to be taken over by Lloyds TSB, we must—in addition to protecting jobs and sustaining HBOS as a key part of the Scottish economy—ensure that the communities across Scotland that benefit from such initiatives continue to do so.
Clearly, the issue of protecting jobs in HBOS and Lloyds TSB is paramount—not only in today's debate but in the coming weeks as the situation develops. Obviously, the threat lies at the retail, back-office, and corporate elements of the combined operation, so we must ensure that jobs there are protected as best we can. Customers must be protected too: we must ensure that access to banking services is not threatened but enhanced, and that customers do not suffer from a lack of competition in the retail banking sector.
The interests of customers and staff are connected. Many Scottish businesses, large and small—the First Minister has referred to some of them in recent days—use HBOS corporate banking services. I was pleased to hear Susan Rice, the chief executive of Lloyds TSB Scotland, make the point that those customers will still be there—indeed, they are a big part of the asset that Lloyds TSB seeks—and so the jobs will still be needed. Susan Rice is also a symbol of another source of hope: Lloyds TSB does not just have Scottish roots, it also has a strong Scottish presence, powerful Scottish brands and a Scottish board.
However, it would be naive to imagine that, in such a takeover, there will not be a search for synergies and perceived duplication, which will lead to job losses. In the past, Lloyds TSB as a business has offshored jobs in order to cut costs. Unlike HBOS, it does not have an agreement with trade unions on there being no compulsory redundancies. However, Lloyds TSB has made positive statements in the announcement of the deal, with a focus on retaining jobs in Scotland, a headquarters on the Mound, and continued printing of Scottish banknotes.
In my meeting yesterday morning with Archie Kane—who is the Lloyds TSB Group executive director of insurance and investments, and chief executive of Scottish Widows—I was encouraged by our positive discussions. However, we need positive statements to be turned into guarantees as details of the deal are worked out. A myriad of professional services support the bank, and they are also at risk in the merger. Again, the stakes are high.
However, underpinning all that are the facts that the sector has done well in Scotland for good reason, and that we continue to offer the same attractive opportunities, highly skilled workforce, good connections to further and higher education, good transport links and excellent quality of life. The message that Scotland is open for business and is a good place to do business has to go out loud and clear.
I agree completely that that message must be sent furth of Scotland, but I wonder how the leader of the Opposition thinks it will play in London, where the corporate functions that are being practised day and daily make up much more of a critical mass.
In recent years, one of the great strengths of the financial services sector in Scotland is that a critical mass has been built up. The growth of the sector has shown that that is the case. However, Margo MacDonald is quite right to suggest that the great danger—were we to lose some of the functions that may be at risk—is that that critical mass could begin to disappear. That would be very serious, especially for the cities of Edinburgh and Glasgow.
In sending out the message that Scotland is open for business, and in arguing for jobs, I am happy to stand alongside the First Minister. However, when it comes to his analysis of how we got to this point, he really is on his own—in fact, he is out on a limb. Last week, he argued that HBOS's position was due solely to the short selling by "spivs and speculators". He resiles from that position now and talks only of naked short selling. However, that was not his position last week. He was wrong.
I agreed with the First Minister last week that regulation of short selling should be considered. Within hours the Financial Services Authority had, as he has pointed out, suspended the practice in financial institutions. However, I also said that there were clearly problems with HBOS's business model, its exposure to the mortgage market and its reliance on the wholesale money markets. I also said that the global liquidity crisis was a major factor in its weakness. HBOS is a global player in global markets—it has never been just a Scottish institution. Pre-union, 36 of its 172 founding shareholders were based in London. It was its exposure to wholesale money markets that left it vulnerable to the global liquidity crisis. With every day, and from every commentator, it has become clearer that although short selling might have exacerbated the position, there was a problem with the fundamentals of the bank, for which those who run it must take responsibility.
Far from standing idly by and failing to give the institution the backing that it needed, the Prime Minister and the Chancellor of the Exchequer moved decisively to remove competition barriers to the Lloyds TSB deal. The alternative last Wednesday might well have been a run on HBOS and the loss of the whole bank with all the jobs, all the savings and all the mortgages.
The First Minister says that he would have extended a £100 billion credit line, which would have saved HBOS. Leaving aside the question of where he thinks he could have got those funds from, he misses the point that a credit line was available to HBOS, but it did not access it. I watched the First Minister expound his imaginary scenario on television on Sunday. He was seated by a picturesque stone bridge and a babbling burn. It reminded me of nothing so much as Brigadoon—a strange alternative reality where miracles are possible.
The member must wind up.
We must do everything we can to protect the jobs. Monday's meeting was a good start and yesterday's meetings were encouraging. Scotland expects us to stay on the case and work together for the best outcome that we can achieve.
I declare an interest as a shareholder in the Royal Bank of Scotland and a customer of HBOS.
I welcome the opportunity for Parliament to debate the implications of the proposed takeover of HBOS by Lloyds TSB and I thank the First Minister for facilitating the joint meeting with the Scottish Council for Development and Industry, which was informative and helpful.
The first indication that financial turbulence was hitting the United Kingdom was the crisis that surrounded Northern Rock back in 2007. That company was subsequently nationalised in February 2008. Northern Rock has a small presence in Scotland, so the underlying tremors perhaps seemed slightly remote to us then, but they were felt more directly when, in April 2008, the Royal Bank of Scotland announced that it needed to raise £12 billion from shareholders, which it at least managed to do with only marginal reliance on underwriters.
The tremors became fault lines in May, when HBOS sought to raise £4 billion from its shareholders. The rights issue was largely spurned by the shareholders and massive support was needed from underwriters. At that time, the vulnerability of HBOS became clear. Last week, that vulnerability delivered its own Scottish financial shock wave. HBOS, wounded and bleeding, needed help. The problem delivered to Scotland's doorstep the full impact of market turbulence—an impact that affects thousands of employees, hundreds of thousands of small shareholders, millions of customers, and billions of pounds.
It is essential that the faltering of one Scottish financial institution should not be characterised as a crisis of the whole Scottish financial sector. That sector has a critical mass and a tremendous reputation for skill and acumen that will endure. It would be unpardonable folly if extravagant rhetoric or unguarded comment were to undermine that reputation. We should all remember that there is a sensitive period ahead for HBOS and Lloyds TSB, pending the takeover's becoming unconditional, because another bid might emerge during that period: it is not a done deal. None of us knows what lies ahead, but I am clear that it is infinitely preferable that the challenge that confronts HBOS be resolved by the banking industry rather than by its being laid at the door of the Treasury and at the feet of the taxpayer.
We are where we are, and our duty now is to look for the opportunities, not just for the employees, small shareholders and HBOS customers but for the broader Scottish economy. The new banking entity will be a huge institution and, at the joint meeting with the Scottish Council for Development and Industry and at the meeting that I had yesterday with Lloyds TSB, I made it clear that I expect its presence to fortify and enhance Scotland's financial sector.
In fairness, I should, like other members, point out that with its existing activity in Scotland Lloyds TSB genuinely understands both the Scottish financial sector and the Scottish economy. It is helpful that Mr Archie Kane, who has been charged with fronting the takeover at the Scottish end, has already played a leading role in the merger between Lloyds and the TSB and in Lloyds's tie-up with Scottish Widows.
What will be singularly important to customers, particularly business customers, is that substantial decision making on financial advice and support continues to come from Scotland. The tendrils of HBOS activity reach into a huge number of areas of Scottish life and the support and advice that it currently extends are vast. Mr Gray has already referred to some of those areas. At the SCDI meeting, Duncan Osler of Macroberts said that HBOS could be seen as a number of different business units. It is vital that that input is not lost.
HBOS also plays a very important role in Scotland's physical infrastructure, not just as a lender and investor but as a facilitator. Its roles in tourism and in the sphere of corporate social responsibility have also been mentioned. It is essential that the new entity recognises both the social importance and economic significance of that contribution and that it determines to continue it.
Lloyds TSB also has an obligation to assuage the real concern that reduced competition in the banking sector will prejudice the service to business, particularly small businesses. For such businesses, a local branch network is essential, and smaller businesses that want to grow need to have access to affordable capital. I am clear that politicians and this Parliament can make cogent representations on all these issues to Lloyds TSB, which has indicated its willingness to continue to meet party leaders. That line of communication is very welcome.
I turn to broader issues that are not the responsibility of this Parliament but are relevant to Westminster and the Financial Services Authority. My party thinks it right to suspend competition rules, having regard to the broader public interest, and will support measures to stabilise the banking system. We also welcome any short-term action that will bring stability to the markets. However, it is emerging that the extent of short selling of HBOS shares was greatly exaggerated. We all have to understand that short selling is a symptom, but not the underlying cause, of the problem. The fact is that an economy with excessive property inflation, excessive debt, over-borrowing and a dysfunctional regulatory system has to face corrosive challenges. My party positively supports changes to the capital rules for banks to ensure responsible lending; we would, for example, protect depositors by protecting the first £50,000 of a person's savings. Those broader issues will be dealt with in another place and will certainly be discussed as an election approaches. For the moment, this Parliament can advance many positive arguments to Lloyds TSB in its proposed takeover.
As someone whose party is committed to a strong and confident Scotland within a strong and confident United Kingdom, I am absolutely clear that recent events could have been neither stopped nor meaningfully influenced by an independent Scotland. In an independent Scotland, we would have been pitched like a coracle in the tossing seas of financial tumult. I find comfort in being part of the United Kingdom: it might have the wrong captain on the bridge, but that vessel is nevertheless much better placed to withstand the buffeting of this economic storm.
Today, economic, city and financial grandees are all promoting their interests. Some want a complete rethink of the deal, others feel that the deal is not in shareholders' interests, and some are even coming round to my view that a substantial issue is that there will be less competition on the high street. In that respect, I carefully noted the First Minister's observation that the issue is of abiding concern.
Lloyds TSB's gigantic takeover is of great interest not only in the City of London, the city of Edinburgh and Parliament, but in every village, town and high street in Scotland. This Parliament and our Government need to be seen to be standing up for the individuals and small businesses that will potentially face loss and threat as a result.
Lloyds TSB's takeover affects armchairs in the board rooms—who decides what, and in which city, does matter. Scotland stands united in wanting to secure all that can be secured on the Mound, around Edinburgh and throughout Scotland, but we must not lose sight of the impacts on the factory floor, at the shop counter and at the farm gate. Every small business will say that one of the top three relationships that it has is with its bank. Therefore, as I explained to Archie Kane yesterday, a real priority of our work must be to protect functions, services and competition on the ground throughout Scotland. It will not be only in Lerwick, where a Bank of Scotland branch is 100yd from a TSB branch, that one bank will go. For reasons of local economic impact, the crisis and the challenge of the future of the Bank of Scotland involve reserved powers and devolved consequences.
People therefore expect the Scottish Parliament and the Westminster Parliament to work together. Today, I have written to the chairman of the Treasury Select Committee, John McFall, and to the convener of the Economy, Energy and Tourism Committee, Iain Smith, to ask them to convene a joint inquiry into the failures that led to the crisis and the impact that it will have on business and the prosperity of companies and individuals throughout Scotland. We must learn why, and we must work on the future.
I cannot agree with Iain Gray that the Prime Minister and the chancellor are without blame, because for 10 years Gordon Brown was warned about City of London loopholes that give every incentive to get-rich-quick schemes. For 10 years, he told us that he had conquered boom and bust and that there was no more bust. For 10 years, he ran an economy that was based on ever-increasing house prices that would never fall, that would feed a credit explosion, that would leave £1 trillion of consumer debts, and in which the only problem was to decide how high the inheritance tax threshold should go to protect the bonanza. The economic music then stopped, and look where we are.
It is important that both Governments have clear objectives and it would be helpful to staff, businesses and account holders if those objectives would coincide. The First Minister was quick to condemn those whom he blamed for the crisis, but according to financial commentators, short sellers appear to be less at fault than the weakness of the HBOS business model.
The First Minister also claimed that as a Prime Minister or President of an independent Scotland, he would have ordered his central bank to lend £100 billion to sort out the problem. Until now—to answer a different criticism, in fairness—the Scottish National Party has said that it would not have a central bank, let alone that such a bank would be under the personal control of the head of the Government or that it would have £100 billion ready to lend out.
Tavish Scott knows what the SNP's policy is. That might have led him to question the report in a particular newspaper. There was clearly a misunderstanding of the reference to the liquidity fund.
On the influence of short sellers, perhaps I was following the advice of Vince Cable, who said:
"It is shocking to see a major British bank brought to its knees by an attack by hedge fund speculators engaged in ‘short selling'."
Was I, or was I not, meant to take the advice of that Liberal Democrat spokesman?
The First Minister should certainly follow the advice of Vince Cable, and follow much more of it more regularly. He would do very well if he did so. It is important to note that financial commentators—as opposed to me, Vince Cable or anyone else—have made observations on HBOS's business model. The First Minister might want to reflect on that. We are observing what is happening in the current circumstances.
A united and consistent approach that involves everyone in politics and business is not helped by palpable nonsense about central banks and an independent Scotland. We need to keep the banking system moving forward, but I do not agree that we need to keep the lifestyles of every top banker going. They get their great rewards because of the great risks that they tell us about, but they have hit their heads on the risk that has been taken. We need to keep Edinburgh as a financial centre and make best use of the world-class talent, skills and experience that we have here, and we need to retain the grass-roots talent that works with Scottish business in every corner of the country.
Last night, Simon Thompson of the Chartered Institute of Bankers in Scotland said that what had happened
"comes down to poor decisions made in banks".
He put the responsibility on bankers for
"allowing a culture to develop in the banking industry far removed from the high ethical and professional standards required."
Those are not my words; they are his words. Peter Burt was even more succinct on television at the weekend.
People throughout Scotland, and further afield, need to be convinced about our banking and financial industry. The industry, which is of such significance to Scotland, should not underestimate the jolt that recent days have given to people's confidence—I do not mean people with £1 million share options, but people whose life savings are held on account. The industry has a job to do to convince us that probity, professionalism and the highest standards of analysis and decision making are at the heart of what it does. I have no doubt that the people in the industry will do that, but do it they must.
In the past three days, I have talked to several senior bankers in Scotland who, almost to a person, have told me the same thing: that we should not be in the present situation in the first place. I do not want to dwell on this, because we need to look forward rather than backward, but they highlight the fact that, had sufficient liquidity been available at the beginning of last week through the Bank of England's special liquidity scheme—not just to HBOS, but to other banks—we would not be in the position that we are in today.
Will the member give way?
I do not have time, I am afraid.
It was important for the Bank of England to fulfil its full role as a central bank but, with all due respect, it was too slow off the mark. However, we are where we are, so we must look forward and decide how to deal with the situation in which we find ourselves.
I agree with Annabel Goldie that the next two or three months will be absolutely critical for HBOS, because the merger is not yet a fact. That means that HBOS will, at least for the time being, continue to trade as a separate entity, and that its shares will continue to be traded on the stock market as those of a separate entity. It is therefore important that everything possible be done to ensure that nobody, either in Government or in the banking sector, does anything that could in any way further undermine the situation.
The deal on the merger with Lloyds TSB is the only deal on the table, but it is critical that we all back the efforts of the Parliament, the Scottish Government and the First Minister to ensure that Scotland gets the best possible deal if the merger becomes consummated when the shareholders vote in two or three months. Let us be clear that a lot of water has to flow under the bridge before the shareholders get to vote, and that they must approve the merger deal by 75 per cent of them voting for it. It is already clear that, although some institutional investors initially welcomed the proposed merger, they have concerns. Furthermore, the suspension of the competition rules has to go through the House of Commons, and there is always the possibility of a legal challenge from other sources to the suspension of those rules.
We must ensure that we get the best deal for Scotland if the merger is consummated, but there is a possibility—only an outside one—that someone else will come in with a rival bid for HBOS or with alternative proposals, along the lines of, or as a variation on, those that were outlined this morning by Sir Donald MacKay in an article in The Scotsman. When a bid is made by one company, particularly at a low price, it is always possible for another company, spotting what it perceives to be a bargain, to make an alternative offer. That has happened before.
Irrespective of who ends up owning HBOS, there is no doubt that five issues need to be addressed as we move on. There is an issue about the spivs and the speculators. If members do not believe me, I advise them to listen to what Gordon Brown said to the BBC on Sunday when he highlighted the issue of the irresponsible dealing in pension stocks that went on last week and for weeks beforehand.
We have to deal with the failure of regulation, not just of short selling but of, for example, the 10,000 hedge funds operating in the City of London that are barely regulated. The FSA needs to be overhauled and to have its powers enhanced.
The Bank of England failed to act quickly—that, too, needs to be addressed. There is also an issue around funding through wholesale finance at a time when there is a credit crunch and practically no interbank lending. That requires study and resolution for the future. Finally, there is an issue about the merger process and decision making to see whether they can be done much better and more efficiently in the future.
We have to address all those issues, but the overriding concern is not to make petty party points. We must instead ensure that Scotland gets the best deal for our people, pensioners, depositors and shareholders.
I want to focus on three points this afternoon: the importance of HBOS and Lloyds TSB to the wider Scottish economy and, crucially, to Edinburgh's economy; what MSPs can do not just to support the retention of jobs but to bolster the banking and financial sectors in Edinburgh for the future; and protection for staff and customers now and over the coming weeks.
I cannot be alone in feeling that it was completely surreal how swiftly events unfolded last week as we were in the chamber. We cannot underestimate the massive uncertainty that was created for people who work for HBOS and Lloyds TSB and their customers. I was involved in a radio debate last week in which a financial commentator was critical of MSPs' emotional statements. That was not a fair characterisation of the chamber's response, which I thought was measured.
People in the banking industry are anxious and they need coherent, sensible responses from us. They also need to know that we are on their side and that we are lobbying to demand fairness around the future of their jobs. Thousands of staff are at their desks, dealing with uncertainty and worries about their personal situations, but working hard to deliver business as usual for their companies and the many customers who come in and out. That is why, whatever happens in the medium to long term, it was important that immediate action was taken last week to protect the bank.
Tough questions need to be asked. We need more transparency and accountability in our banking and finance systems. Alistair Darling was absolutely right to focus on the need for a business and enterprise culture that rewards people for taking the right long-term decisions, not just short-term ones. We need to have a debate about bonuses, not on the basis of envy but on the basis of fairness to customers, investors and the thousands of HBOS shareholders who are ordinary staff who hold shares as part of their pay deal.
It is an anxious time for those staff. I well remember the presentation that many of us attended only a few months ago at a business breakfast in the Parliament when Susan Rice of Lloyds TSB shared with us the Lloyds TSB strategy. She observed at the time—she was slightly self-deprecating about this—that people in the City regarded Lloyds TSB as being a bit too cautious and conservative. Her view was that in a time of coming financial crisis and global turbulence in the markets, it was absolutely right to be cautious with her investors' money. How right that sensible banking approach has proven to be.
We need to focus on what the Scottish Parliament and our ministers can do now, and our debate must focus on the role of HBOS and Lloyds TSB in not just the Edinburgh economy but the wider Scottish economy.
In recent years, we have seen major reorganisations, shake-ups and company changes involving Standard Life and Scottish and Newcastle, and the Scottish Widows-Lloyds TSB deal. It is critical that we support the financial and banking sectors in Edinburgh, which are hugely important to our local economy and to the economies of Fife, central Scotland and Glasgow. That is why, throughout the first three sessions of Parliament, we have lobbied consistently to support development in Edinburgh. It is now critical that we ensure that Edinburgh remains attractive to the banking and financial sectors. It is not just about rivalling Frankfurt or the City of London; it is about complementing that approach by promoting our city's attractiveness as a banking and financial services area.
Headquarters status is important for prestige and for the seniority of the jobs that we can retain in the city. However, a raft of other jobs need to be retained in the legal, advertising and wider services sectors, including the hotel and catering industry. We need to lobby for as many of the HQ functions as possible to be retained in our city.
There are areas in which we can deliver practically. I would like to hear more from the SNP ministers in their summing up about skills and training, which are essential for people who are in the industry and critical for attracting more jobs. It is important that we have a highly skilled labour force. We have fantastic universities in the city and throughout Scotland. We need to ensure that there is access to new jobs for the future across the whole of central Scotland.
Transport connectivity is crucial, too. That is why the business community was so supportive of transport upgrades over the past few years, such as investment in trams and in public transport to Fife and Glasgow. That investment must continue—in fact, it must be accelerated.
This is also about quality of life. That is why investment in new schools and infrastructure is absolutely crucial. I ask the Scottish Government to assist the City of Edinburgh Council, because we need investment in new schools. There is no prospect of revamping or rebuilding Boroughmuir high school, James Gillespie's high school and Portobello high school. They all need major investment and the council simply does not have enough money. Investment in new housing is also needed to enable people to remain in the city, rather than having to leave.
Over the past decade, we have seen massive investment in the city in skills, transport, schools and housing. We have built a reputation, which, like the quality of life in the city, must be defended. SNP ministers have to work with our council to give us sustained, long-term public investment and to ensure that we match investment in the private sector. That is what we will be looking for from this Government. We will work with it to deliver, but it needs to make more investment in practical public services now.
Whatever else Scotland expects us to do as a result of this crisis, the one thing that it will expect is that we stay united in our response. I am sorry that some discordant voices are beginning to be heard, because that will weaken any real attempt that we, as a Parliament, are making to move forward.
The origins of the crisis go back quite a long way. It is a year since we started to see the queues outside Northern Rock, so it is not as if the crisis, in the bigger sense, has come upon us suddenly.
Many of us have had to become conversant with terminology such as bear raids, short selling, collateral debt obligations and securitisation—all the things that are now exposed to the light of day. Dubious practices and so-called products are dressed up with fancy titles to make us think that they are real, when in fact they are not. The lid is well and truly blown off the smoke and mirrors of the money market.
The crisis is taking place against a background of rising fuel prices, energy costs, food costs and personal domestic inflation, which is very high in comparison with the official figures. All those things mean that people are feeling vulnerable, and the shock that Scotland experienced over the past week adds to that feeling of vulnerability. We must remember that when we have these debates.
There might be suspicion about when the HBOS-Lloyds TSB merger talks really began. I have no inside information and I do not suppose that any other person in the chamber does, either—other than the speculation that we read about in the press. I am not sure that, in the absence of fact, there is much to be gained from talking about the merger in those terms.
The chairmen of both banks are on record as having said that they had talked about a merger of their banks for years.
I appreciate that and I have read the same newspaper reports, but official merger talks are not the same as having a chat over a cup of coffee. However, that relates to how the market works, and I am not an expert in that.
I heard last week, on Tuesday night or Wednesday morning at the latest, that a bear raid on HBOS was taking place, so the decision to suspend short selling after that was known was—[Interruption.] I see members shaking their heads, but that is what I heard. Perhaps BBC Scotland was completely wrong in reporting that, but if reporting was taking place, it is clear that that was apprehended to be happening. The suspension of short selling was right, so I am a little surprised that it did not happen sooner last week. I go further: given that we are a year down the line from the rescue of Northern Rock, I am surprised that more such movement has not taken place in the past year.
Will the member give way?
No—I need to get on, thank you.
I believe that the high street overlap between Lloyds TSB and HBOS will be greater than first imagined. In my constituency, that overlap occurs not just in Perth, but in Crieff, which is a town of only 6,000. Job losses in small towns will be pretty important.
My constituency also has back-office jobs at Broxden business park. A perfectly simple request at the end of last week for the current number of employees there met a brick wall of silence, so I am grateful that the Government will put into the public domain more detailed information. That silence does not do much to make me confident that the protection of jobs in Scotland will be taken seriously. I hope that the Government will keep on top of that.
I hear that credit was pulled from businesses last week. I know that one business in Dunfermline is fighting for its life and I wonder how many others throughout Scotland are affected. Will the Government keep tabs on that important matter?
Murmurings of discontent about the merger are obvious—they go beyond questions about when the talks began. Critical questions are being asked—as recently as this morning, Sir Donald MacKay made interesting comments about what needs to be done in The Scotsman. I hope that the Government will not just stay on top of the existing proposal, but ensure that any other reasonable options are explored, even at this stage. We must all try to keep that in front of us.
I echo a little of what Annabel Goldie said about being careful not to cast a shadow over the whole Scottish financial sector. I am lucky that Norwich Union has designated Perth, out of the whole UK, a key centre of excellence—another is in Bishopbriggs, so two of the seven centres are in Scotland. Norwich Union is expanding and is growing its commitment to Scotland. Its fundamental confidence in the Scottish financial sector is huge, although it faces a challenge on skills and on infrastructure. We should not do the whole sector down simply because we have concerns about the current situation. I hope that the Government will consider a nationwide impact study of what is going on.
Having come from the left, I remember being told constantly that there is no such thing as a free lunch. I must say that it is obvious that there ain't no such thing as a free market, either. Perhaps it is time that everybody woke up to that.
Roseanna Cunningham talked about the need for unity in the Parliament. I believe that we have total unanimity about the four objectives that the First Minister outlined in his statement. The question is how we realise those objectives best. A Parliament's job is to make sense of events, to shape policy and to set the right course for the future.
Let us apply those tests to the past week. How has Parliament made sense of events? In truth, we have been subjected to a series of myths that our First Minister has fuelled.
Myth number 1, that HBOS was laid low by "spivs and speculators", is simply wrong. Short selling was a symptom, not a cause, of the problem, and the First Minister knows it.
Myth number 2, that Scotland was the main loser, is also wrong: I cite Northern Rock, Bear Stearns, Lehman Brothers, Merrill Lynch and, as of yesterday, the fact that there is no longer a single pure investment bank in the United States of America. The crisis was a global crisis in which exposed banks were the main losers.
Myth number 3, that offering up £100 billion of Scottish taxpayers' cash would have been more desirable than the proposed merger, is also wrong. That would have cost each hard-pressed man and woman and child—about whom Roseanna Cunningham has just spoken—£20,000. I could go on, but I do not have time.
Why did the First Minister feed the nation those myths?
The case for hard-pressed taxpayers' cash might have been better made in respect of Northern Rock. The £100 billion to which Wendy Alexander referred is a liquidity availability—it is the £100 billion that the Bank of England made available on Friday. Would that it had been made available a week earlier—we might not be in the situation that we are now in.
I will address in a moment the crucial issue of how liquidity might be provided in Scotland in future.
I asked why the First Minister fed the nation those myths. He did so because he wanted to milk the age-old sense of victimhood: we wis robbed. However, he knows that Scotland has moved beyond that; he knows that perpetuating such myths does not help in making sense of a global crisis.
What Scotland seeks is sound analysis. That brings me to the second responsibility of the Parliament, which is to shape policy. We all know where the SNP stands on short selling, or at least we think that we do. However, we listened in vain today for any clue as to where the SNP stands on the big issues that face policy makers across the globe.
What is the SNP's strategy for dealing with the toxic paper in Britain? Does it, like Hank Paulson, favour rewarding moral hazard? What is its strategy for tackling the bonus culture? We do not know. How do we best ensure transparency in the shadow banking market or oversee structured investment products in future? How would it reform the credit agencies? I could go on. Suffice to say that it will be the political statesmen who will offer the solutions; the political spivs will simply run for cover.
Let me turn to the third and final responsibility of the Parliament: setting the right course for the future. The First Minister says—and I believe him—that he will "strain every sinew" to secure Scottish jobs. However, as he knows more than anyone, that is not about the number of meetings that are hosted; it is about the operating climate that is created.
I accept that it may be too much to ask the First Minister to take on board what the Opposition parties are saying. However, the test of his seriousness is whether he is willing to listen to his Council of Economic Advisers—expert advisers whom he did not mention in his statement. Next week, the council meets well before the First Minister makes the business case for Scotland to Lloyds TSB. I challenge him to let Scotland hear what his economic experts have to say on the matter. Do those top economic experts believe that a local income tax will help to attract headquarters functions to Scotland? Do they believe that using tried-and-tested methods, such as the public-private partnership, will increase deal flow in Scotland's public infrastructure investment?
What should the First Minister say to Lloyds TSB on the future shape of financial services regulation in Scotland? Will he commit Scotland to staying under the FSA umbrella for the next five years or to leaving its shelter? What is the First Minister's answer to those questions?
I listened to the First Minister's non-answer to Tavish Scott, so perhaps he will enlighten us as the debate concludes. Will he tell Lloyds TSB that his Government favours a Scottish central bank as the lender of last resort to Scottish-based institutions, or does he favour sticking with the Bank of England or moving to the European Central Bank?
The member must conclude.
Uncomfortable as some of those questions may be, they are the questions that future investors will ask. If we are to strain every sinew in the interests of saving jobs, it would be useful to know the answers.
I echo my colleague Derek Brownlee's welcome for the four objectives outlined in the First Minister's statement. We concur with them, and the idea of having all the party leaders and spokespeople at the SCDI event on Tuesday was excellent, too. If we can foster that political consensus, it will be to the benefit of the bank, the sector and the rest of Scotland.
To maintain that consensus, what the First Minister says in this chamber must be reflected in what is said outside. I will return later to some of the points that were made at the weekend about viewing the situation through the prism of independence.
I want first to pick up on Alex Neil's point. He basically suggested that some liquidity from the Bank of England last week would have saved HBOS in its entirety. Exactly how much liquidity should have been put in on Wednesday to ensure that that happened? He did not take my intervention because he did not have time, but I am happy to give up some of my six minutes to hear exactly how much liquidity Mr Neil thought was needed.
I thank the member for giving me another opportunity. The point is simply that, if the Bank of England had pumped in the liquidity on Monday instead of Friday, HBOS would still have been with us, without the threat of merger.
I thank the member for his holding answer. My simple question was: how much? I did not ask on what day the liquidity should have gone in. The crisis unfolded on Wednesday. If, in his view, the liquidity would have made a difference, it would have had to come before Wednesday. I notice that the member was silent—unusual in his case—on the actual amount that needed to be put in.
Will the member give way?
On this one occasion, I will take another intervention.
With all due respect to the member, the figure would have been entirely different depending on which day the liquidity was pumped in. If it had been pumped in on the Monday, the bank might not have needed as much as on the Thursday.
I will not take any more interventions from Alex Neil, although we are still no closer to an answer on how much liquidity needed to be put in. It is important to note that, although it is convenient to blame the spivs and the short sellers, the facts have not borne out that they are to blame. I will return to that shortly.
I will concentrate on the overriding principles that we want to put forward. As I said, we appreciate the Government's objectives, and of course we want as many HBOS and Lloyds TSB jobs as possible to remain in Scotland. We want a headquarters option in Scotland that is as strong as possible, we want as big an influence as possible, and we want the brands to remain strong, growing over time.
It is important to explore further the short-selling blame game. Evidence from Data Explorer, the market leader, shows that, at most, 3 per cent of HBOS's shares were available for short selling last week. That is 3 per cent as an absolute maximum, which means that the shares sold during the week, including on Wednesday, were not part of short selling: people who genuinely held shares in HBOS got rid of them.
That ties in with what happened in the rights issue—a £4 billion rights issue in which there was only an 8 or 9 per cent take-up by HBOS shareholders. It is not for us to say whether the business plan was good or bad—I certainly do not have that technological knowledge—but the shareholders clearly made their judgment about the rights issue, and another judgment was made on Wednesday. It is convenient, and it might suit certain people's purposes, to blame the short sellers, but if we blame the wrong people, we do not learn the right lessons for the future. That is why it is important to have a more careful analysis of what happened on Wednesday.
That is also why, as Annabel Goldie outlined, we have grave reservations about the First Minister making comments about how he would have saved the bank had the situation arisen in an independent Scotland. It is all well and good for him to say today in the Parliament that that is not what he said or meant, but that is the first time that I have heard any utterance from him trying to backtrack on what he said; it is certainly the first time that he has said that it was not what he meant. I am sure all will agree that the First Minister is a perfectly clear communicator and that it seems highly unlikely that it was not what he meant.
Annabel Goldie put forward some of the wider Conservative propositions. In a disorderly market, the temporary ban on short selling—as long as it is temporary—might calm things down. We want more effective regulation, as opposed to more regulation. We also want to increase protection for savers, guaranteeing deposits of up to £50,000. As David Cameron has suggested, we may have to re-examine the Basel II agreement, which has a global impact on reforms within the banking industry. We also need to examine how the credit rating agencies operate: they sold off derivatives and credit default swaps with AAA or AA ratings, which meant that many organisations purchased them believing that they were a good bet.
HBOS can have a great long-term future in Scotland, as can financial services as a whole, but the First Minister will be judged on what he does, not on what he says he would have done.
I agree with the commentators and, indeed, members who describe the current financial collapse as the most predictable crisis in history. For years, many commentators—including, I am glad to say, the Liberal Democrat economic spokesman at Westminster—have warned about unsustainable levels of bank credit and personal debt. It is incredible that financiers on both sides of the Atlantic deluded themselves into believing that the housing market boom would never end. That delusional belief was aided and abetted in America by the Bush Administration and the former chairman of the Federal Reserve, Alan Greenspan. As a result, the scale of the implosion in America has triggered a global financial crisis.
However, it would be wrong to pretend that the UK has not contributed to the crisis. As Tavish Scott pointed out, our Labour Government propounded the equally delusional claim to have abolished the boom-and-bust cycle to which all capitalist economies are prone. The Labour Government did not cause the crisis but, as our economic spokesman has pointed out, it
"forgot that financial success breeds excess; unearned rewards feed greed; and overconfidence leads to folly."
New Labour incubated a culture of financial gambling with other people's money that has contributed to the collapse of trust in financial institutions and bred a dangerous dependence on debt.
Does Ross Finnie agree that the situation that he has just described points to the need for immediate and much better regulation?
I shall come to that.
Liberal Democrats warned that individuals and families were acquiring unsustainable levels of debt. Most of that debt was secured against the illusory wealth of rising, vastly inflated property prices, and people were encouraged to believe that the rises would go on for ever. Now, the nation has to cope with the consequences of an exploding market bubble. Many houses cannot be sold, bank lending is insufficiently supported and the house building industry is collapsing. Everyone in that industry and, just as important, everyone associated with it is fearful for their job. Individuals and families face negative equity, and those who cannot service their mortgages face the threat of repossession. The Prime Minister's claim to have delivered prosperity and economic stability loses credibility as each day passes.
In that febrile financial market, delusion turned into contagion when we read the reports—now corrected or denied by him—that the First Minister would have made £100 billion available to the Bank of Scotland.
However, we must move on. Looking forward, Liberal Democrats believe that it is right for Government to permit its central banking organisations to intervene to support the nation's core financial institutions. However, in doing so, Government should not prop up failed bankers. If confidence is to be restored in our banking system, all those who took excessive risks, set aside prudent capital ratios and were content to trade in financial instruments that they apparently did not understand must be removed from positions of responsibility. Bluntly, that means that, closer to home, Mr Hornby and all those who brought HBOS to its current state should have no part to play in the future of HBOS, whatever that might be.
House price inflation must never be allowed to rip ahead as it has in recent years. That is why Liberal Democrats called some time ago for the monetary policy committee to be made responsible not only for headline inflation but for house price inflation.
I say to Margo MacDonald that it is self-evident that banking regulations have failed. Unfortunately, however, it is not clear precisely which elements in the extensive framework that the FSA set up failed and how they failed. Therefore, my colleague Tavish Scott's call for a joint inquiry by the UK and Scottish Parliaments into the matter is apposite.
The choice for the future of the Bank of Scotland seems to me to be stark: either its inherent strengths in retail and business banking are recognised and developed as a separate banking entity, or it simply becomes a sub-branch of Lloyds TSB. Something that just has a brass plate on the Mound, holds an annual general meeting there—gosh, that is important—and issues banknotes does not even merit the title "sub-branch". The latter course is too awful to contemplate. Therefore, like most members in the chamber, Liberal Democrats support the four objectives that the First Minister set out.
Liberal Democrats are broadly in the same camp as Sir Donald MacKay, who, writing in The Scotsman this morning, implored Lloyds TSB not simply to absorb the Bank of Scotland into its corporate structure but to recognise that, subject to due process, it will acquire an institution with enormous potential to be re-established as a major player. We want all those concerned to be clear that doing that would add value for the employees and the shareholders of an enlarged group—that is the course of action that we recommend.
The role and purpose of the Scottish Government is to represent and advance the Scottish national interest, not least in times of adversity and uncertainty. As a constituency member, I have a duty to represent my community in the context of the challenges that are presented by the recent demise of HBOS and its subsequent possible merger with Lloyds TSB.
Political endeavours to date have rightly focused on the high-level and strategic discussions about retaining jobs in Scotland and ensuring that we get the best deal for Scotland. They have promoted the necessity for key head office decision-making functions to remain in Scotland. However, our focus will have to turn at some point to communities across Scotland such as mine because—make no mistake—banks, like post offices, provide a community service as well as a commercial one. They are part of our social fabric and they add to both the social and the economic viability of our smaller towns and villages. We must not lose sight of that.
For that reason, I welcome the First Minister's comment that we must consider the needs of the whole of Scotland and not just those of the capital city, however important Edinburgh is. In the wake of the takeover of HBOS by Lloyds TSB, I believe that West Lothian is particularly vulnerable to branch closures because of the distribution of branches of HBOS and Lloyds TSB—for every Lloyds TSB branch, there is an HBOS just down the road.
Local concerns escalate when we consider what might happen to Intelligent Finance—a division of Bank of Scotland plc and part of HBOS—whose customer services operations are located in Livingston and Rosyth. Between them, those sites accommodate 1,200 workers. In scrapping Intelligent Finance accounts and credit cards, HBOS has already affected 400 jobs. The closure of HBOS's mortgage processing centres will affect jobs in Livingston as well as in Chester and Cardiff.
Recent events come hot on the tail of announcements of other job losses in my constituency over the past 12 months—by HSBC, Glenmorangie and Bausch and Lomb. Although unemployment in West Lothian stands at only 2.3 per cent, which is lower than the Scottish average and the same as the UK average, we in West Lothian are hypersensitive to the possibility of job losses because of vivid memories of the early 1980s, when one in four of the male working-age population was unemployed. My father was one of those men. Every West Lothian family has been touched by unemployment at some point in the recent past. Although West Lothian is to be commended for turning round its local economy, we can ill afford to lose more jobs. Therefore, I ask the cabinet secretary to consider in his summing-up speech how best we can take forward the specific needs of communities and, in particular, whether local authorities might have a role, given their economic development functions.
Sadly, job losses may indeed be inevitable. In The Scotsman last week, Peter Jones predicted that Scotland would lose 3,000 to 4,000 jobs within a year, based on the 15 per cent loss of jobs that occurred following the merger of the Royal Bank of Scotland and NatWest. Arguably, that could be a conservative estimate, given that the e-mail that was sent to staff by the HBOS chief executive, Andy Hornby, insisted only that "the majority" of HBOS employees would keep their jobs. Obviously, that leaves concerns about what will happen to the minority—potentially, 49 per cent.
Like most people in the real world outside the Parliament, I do not claim to be proficient in the intricacies of the stock market or the financial services sector, nor have I ever met a spiv or speculator. However, like most people, I must ask how this was allowed to happen. We live in a country that is highly regulated. Some would argue that we have a tendency to overregulate. We gold-plate basic regulations. My local council cannot put in flood prevention schemes without having to advertise work in Europe, while my constituents lie awake worrying every time that it rains. It is ludicrous and ironic. To quote Professor Ronald MacDonald:
"We need much better regulation of the financial sector as it has been very lax and we are reaping what we've sown in the sense that it is a poorly regulated financial sector."
Of course, Alistair Darling has been talking about tightening the regulation of the financial industry since the Northern Rock collapse, but nothing has happened. In October 2007, Alistair Darling said that the Labour Government would lead an international effort to learn lessons from the run on Northern Rock and develop a new regime that would restore stability to the financial markets. A year later, he was still making the same promises in his speech to the Labour Party conference. Too little, too late.
There is deep anger and a deep sense of loss over what has happened to HBOS. As we turn our eyes to the future, I hope that we can unite and do what we can at a practical level to save jobs.
I do not need to remind members today of the importance of the financial services sector to the Scottish economy in general and to Edinburgh in particular. In the first seven years of this century, our financial services sector grew by 60 per cent. Seven of the top 20 Scottish companies are in the sector and up to one in 10 Scottish jobs depends on it. Here in Edinburgh, which is the second-largest financial services centre in the UK, thousands of people are employed in the sector, including 6,500 HBOS employees.
I know that we are all united today in our determination both to protect HBOS's customers and to preserve as many jobs as possible here in Scotland. I hope that the new company that is about to be formed by the merger will engage immediately in comprehensive talks with the recognised trade unions and, as soon as possible, give a guarantee that there will be no compulsory redundancies. We are concerned not just about jobs in general but about having headquarters functions in Edinburgh, with as much decision making as possible done in Scotland, up to and including new corporate headquarters. I wish the First Minister well in the presentation that he is to make about that.
Of course, we are looking forward not just to any old decisions but to correct decisions, based on a correct analysis of what is going on. Correct decision making and analysis are important for bankers, and there have certainly been deficiencies in that regard, as the president of the Chartered Institute of Bankers in Scotland argued last night. I submit that it is also important that we politicians have a correct analysis of what has been going on.
The Government and its supporters have tended to say that we should not discuss contentious matters in the chamber today, but they were the first to make contentious assertions about "spivs and speculators" and they blamed the UK Government for not acting in, as they see it, a decisive fashion. They have also claimed how much better it would all have been in an independent Scotland. It is important that the issues are addressed today.
We have to challenge a simplistic analysis that is based only on blaming "spivs and speculators". Of course we should criticise them, and short selling should have been suspended, but only 3 per cent of HBOS shares were shorted last week, compared with 5 per cent of Barclays shares. Short selling was not the fundamental cause of the problem, as many eminent economists have emphasised in the past few days. For example, Michael Moss, a research professor at the University of Glasgow who has written several books on Scottish financial institutions, said:
"To blame speculators, as Alex Salmond did, is lunacy."
I do not know whether Malcolm Chisholm had the opportunity to hear the Prime Minister's speech yesterday, but he made a ferocious attack on speculators. Was that also lunacy?
I also criticised spivs and speculators about 30 seconds ago. It is one thing to criticise them but another to say that short selling was the fundamental issue.
I would be the first to praise HBOS for the support that it has given to many enterprises, to voluntary organisations such as the PROP-Stress Centre in Pilton in my constituency, and to thousands of customers. However, HBOS got into difficulty because of fundamental business mistakes, as one of the First Minister's advisers, Professor John Kay, emphasised the other night. It was overreliant on the wholesale market and there was an unsustainable gap between its deposits and loans, many of which were risky. Investors have been taking fright for months, which was why the £4 billion rights issue was such a failure. It was shareholders far more than spivs who repudiated the bank.
We should be a bit careful about believing that wholesale markets are not legitimate. Does the member accept that, in terms of quantity, the reliance on the wholesale market of HBOS and Lloyds TSB as separate organisations will be exactly the same as that of any new merged company if it accepts the Government's strictures not to withdraw from the mortgage market?
Of course, all banks have to rely on wholesale markets, but it is about the extent of the exposure, particularly in the past year since the start of the credit crunch.
If the First Minister was wrong about "spivs and speculators", he was equally wrong about the role of the UK Government. There was no request for a line of credit last week, and the UK Government got it right to act and give guarantees on the merger. We can argue for the relocation of the headquarters because the new company will be a UK institution. We should also argue that the Bank of Scotland should remain as a legally constituted bank with a separate licence and board within the new larger organisation, in the same way as Lloyds TSB, which currently has a separate legal entity in Scotland and a separate board
More generally and fundamentally, we need to recast the financial system using different principles, with much tighter regulation. As Will Hutton said last night, a small country such as Scotland cannot do that, but the UK can. The UK can also lead the case for new global standards on supervision that match the global flows of capital.
Last week was the nearest that we have come to 1929 since 1929, and we must respond with the urgency and radicalism that are required, unlike in the 1930s. That will no doubt include lowering interest rates and redefining the objectives of monetary policy, but what is crucial in the context of today's debate is that it must involve much greater financial transparency and much more effective financial regulation.
If Harold Wilson was right when he defined a week as a long time in politics, I wonder how he would have characterised the past 10 days in the money markets—as a millennium, perhaps.
People who know how many beans make five have said that the events of the past few days created a set of circumstances that occur only every 100 years or so. Mrs Thatcher said, "You can't buck the markets." Might I therefore suggest to HBOS shareholders, the employees of HBOS and Lloyds TSB, and people of good will who have the best interests of the Edinburgh, Glasgow and Scottish economies at heart that it would be prudent to get their retaliation in first to the proposed takeover of HBOS by Lloyds TSB?
The chief executive of the Chartered Institute of Bankers in Scotland, Simon Thompson, whom other members have mentioned, practised what I am preaching when he said last night that banks were discredited rather than in credit. He urged not just regulation but education to help to rebuild confidence in the banking system.
Bankers must be honourable because their decisions directly affect the lives of every one of us. In Scotland, bankers enjoy a reputation for probity but, as the past few days have rollercoastered onwards, that priceless asset has been damaged by what many people consider to have been the unseemly haste with which the terms of takeover were agreed by HBOS and Lloyds TSB.
Only a week ago, on the basis of the bald evidence that the collapse in the share price of HBOS had been stopped by news of the proposed takeover, in common with most MSPs, I thought that Gordon Brown and Alistair Darling had had no choice other than to fast-track the takeover and skip over some of the usual processes surrounding mergers and takeovers, such as giving the stock exchange early warning so that share dealing might be suspended in order to protect the value of shares against speculators and the seedy elements that attach themselves like limpets to the money markets.
Most of us did not know all that much about the processes that were in play during the takeover, but we ken noo. It is just possible that the Prime Minister and the chancellor really had no choice, but after the chairmen of the two banks admitted that for years they had desired to merge them but had been unable to do so because of competition law, a suspicion no bigger than a man's hand came into sight, as people marvelled at how the ill wind of sub-prime mortgage lending coming in from the other side of the Atlantic had done such good for the chairmen's hitherto forbidden dreams of merger. Should we ignore Sir George Mathewson when he says that some people were trying to do down the banks?
After hearing highly credible figures in financial services praise the business management of HBOS, other people began to ask whether another response might have been adopted to the run on share prices. Even now, shareholders in both banks, who still have to endorse the deal, will no doubt have seen Carla Antunes da Silva's comments casting doubts on how good the agreement is for HBOS and Lloyds TSB shareholders alike. Although that particular market analyst, who works for JPMorgan, says that now is precisely the wrong time to create the size of bank that is proposed, its size has been stressed by proponents of the merger as one of the strongest points in its favour. The possible loss to customers as a result of the loss of competition in the sector has been skimmed over.
In Scotland, we were assured of the sensitivity to, and knowledge of, the Scottish situation. The whole Scottish economy has blossomed as a result of the critical mass of financial services that has been established in Edinburgh and Glasgow. Given that Edinburgh is arguably the driver of the Scottish economy, Lloyds TSB has stressed how the proposed merger will pan out. Annual general meetings will be held here, as Ross Finnie said. As I suggested yesterday, maybe Lloyds TSB people will come up for the festival and give everyone some free tickets so that we can make a real show of things.
What a transfer! The Mound will still be home to the new bank's Scottish HQ, but no one has yet told me what level of corporate function will be practised from there. I hope that when the minister sums up, he will say whether the Government has established a baseline for the services that it wants to be operated from that location. Such high-quality jobs inside the sector, and the highly skilled and well-paid jobs that link into financial services—to say nothing of the hairdressers, the taxi drivers and the leisure and entertainment industry staff—will also be gone from Edinburgh if we do not get this right.
We are told by the Prime Minister, the chancellor and the men who made the deal that these are problems of the global economy. The Prime Minister—of course, it could have been his wife—said yesterday that there had to be a global solution. I do not disagree, but, if HBOS is to be taken over, would it not be a better solution for the Scottish economy if, rather than rebuilding from within, with the Bank of Scotland reverting to a more traditional role, as outlined by Donald MacKay today, we went really big? A big global bank could take us over and we could be the European headquarters of such an outfit. That sounds a good job for anyone working on the Mound. That way, the integrity of the corporate functions would stay here.
However, as people in top jobs relocate and other Edinburgh people see their businesses grow smaller or their jobs outside the financial centre disappear, the market value of houses will fall, and many of the people whom I represent could find themselves in the same position as American home owners who took on mortgages that left them with no financial security and who have been hit by unemployment and are now homeless. I do not want to talk down the possibility of a good deal being made, but neither do I want to flatter people who think that they will give only what they have got on offer at present.
This is a serious debate because it is a serious problem. There is probably not a member of this Parliament who does not have an HBOS employee or account holder among their constituents and, for constituency members, branches of both HBOS and Lloyds TSB. I am told that there might be as many as 150 locations where both banks have premises in the same street. That is certainly true of Kirkintilloch in my constituency. A lot is at stake.
It is important, however, that we put the blame for the situation in which our oldest bank finds itself where it belongs. It was not short selling that brought down HBOS; it was the policies of its board under the leadership of chief executive Andy Hornby. I echo Ross Finnie's comment that it is Andy Hornby and other senior executives who must carry the can, not their hard-pressed workforce. There is a story that HBOS's own subsidiary, Insight Asset Management, was involved in lending out stock to short sellers. As one analyst put it, "They behaved like turkeys voting for Xmas."
According to Stephen Boyd of the Scottish Trades Union Congress:
"HBOS Executives are hardly blameless. It wasn't the spivs who left the Bank over exposed to commercial property and sub-prime debt or too reliant on the wholesale markets."
Indeed, I am told by financial sources that those in Scottish financial circles have known for some time that HBOS was in serious trouble. If they knew, the market knew. That was reflected in the response to HBOS's share issue. The bank was not doing any business and some of its major customers were asking pointed questions about the security of their deposits. Last Tuesday night, those trying to use phone banking to make cash transfers to other banks were being told that no transactions could be made until the following day.
It is not good enough for the First Minister—a man who boasts about his economic credentials—to claim that HBOS was laid low by the actions of spivs and speculators, especially when it turns out that the spivs he is attacking are hedge fund operators and that included in their number is Sir George Mathewson, who chairs the First Minister's Council of Economic Advisers. I would not dream of calling Sir George "Sir Spiv". I note his description of short selling as "perfectly valid", and I wonder whether he agrees with the sentiments of some enraged hedge fund operators, angry that the Government here and others elsewhere have temporarily banned short selling. One city fat cat commented today that regulators should have better things to do. I agree—they should have better things to do, and they should have been doing them before now.
I have tried to get a point of unity. I am delighted that action has been taken against short selling by a further 13 countries in addition to those that have already taken it. I am particularly delighted because when I spoke to the Prime Minister last Thursday morning and suggested that that might be a productive course of action, he gave me no indication whatever that that was in the mind of the United Kingdom Government. Twelve hours later, the FSA took action against short selling. The FSA said that it had done so on its own initiative; it was its own decision, taken after considering the abuses that were taking place in the market. Whether the decision was taken with political support—
First Minister, is this an intervention?
—or whether it was taken just by the FSA, I am delighted that it happened. I am only disappointed that it did not happen much earlier.
I do not think that I need to respond to that short speech.
The First Minister quoted the Financial Services Authority as saying that HBOS was a highly capitalised bank with excellent ratios. I wonder how it managed to come to that conclusion when, as I have said, there was plenty of rumour in Scotland that all was not well. Perhaps some investigation into the workings of the FSA is in order.
At the Economy, Energy and Tourism Committee meeting this morning, we debated the effects of the credit crunch on Scotland. In particular, we considered the effect on the housing and construction market. It is clear that the housing and construction sectors are facing real difficulties. In Edinburgh alone, sales are 60 per cent down on last month and 6,500 properties are on the market. The picture is not much better in Glasgow. Sarah Boyack spoke earlier about investment for Edinburgh. The committee heard that the delay in the SNP Government putting any detail on its Scottish Futures Trust for infrastructure investment was causing serious problems.
The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson) indicated disagreement.
Mr Stevenson may mock, but that information came from people in the building sector. Perhaps he should listen instead of shaking his head.
So what is to be done? I welcome the fact that the First Minister's first objective is to protect jobs in Scotland. If he is going to make a case to the Lloyds TSB board for jobs—"the Scottish offer", as he describes it—I urge that he does not ask but insist that the board impose a freeze on its current plans to send jobs offshore and, in particular, to contact centres in India. HBOS does not do that, and a similar commitment from Lloyds TSB would send a strong signal to Scottish bank workers who are worried about their future. While he is at it, will the First Minister also insist that Lloyds TSB commit to no compulsory redundancies?
In a debate on tourism last week, I asked the SNP to consider setting up a tourism investment bank similar to that in Austria. The STUC has produced an excellent briefing paper for this debate—which I trust that the First Minister will take time to read if he has not already done so—and I draw his attention to two particular points. First, the STUC calls for the establishment of a Scottish investment bank to provide long-term capital to growing Scottish companies; and secondly, it appeals to the Council of Economic Advisers to start to interact with stakeholders in the economy, including trade unions.
Perhaps, in the interests of Scotland, the First Minister should give serious consideration to Wendy Alexander's suggestion that he withdraw his plans to introduce a local income tax to Scotland. As she said, if we want to preserve jobs, encourage inward investment and set up corporate headquarters, the last thing we need is to be tagged the highest-taxed part of the UK.
We now move to wind-up speeches.
In the past week, the Scottish and world economies have seen a number of ironies. The first lies at the door of the Prime Minister. In 1989, he wrote "Where There's Greed: Margaret Thatcher and the Betrayal of Britain's Future". It was an analysis of unfettered greed, of abusive markets, and of the need for a moral form of balance in the free market economy. As chancellor, he oversaw an economy and made it—with regard to support of Alan Greenspan's economic policies in the United States of America—develop a situation, as my colleague Ross Finnie said, in which the United Kingdom now has more than £1 trillion of personal debt. In the USA, the policies led ultimately to the position at Lehman Brothers, where the annual bonus bill last year was £20 billion—about four times the salary bill. The culture of bonuses meant that the business model was so skewed towards risk taking, without there being a sound strategy, that things ended up with an astonishing potential exposure of $340 billion.
The First Minister has rightly said that we have not been immune to the world economy. However, in a speech in May to the financial sector in Scotland, his analysis was this:
"Looking at the global perspective, we hope—but cannot yet be sure—that the worst is over. I have seen estimates that around two thirds of banks' losses have already been declared."
That was simply wrong.
Within the past week, he has given his analysis of why HBOS was "laid low"—to use his language—by short sellers. There has been universal concern about short selling, not only in the past week, but before the summer. Indeed, the chairman of the First Minister's Council of Economic Advisers, Sir George Mathewson, operating Toscafund Asset Management, was himself attacked by short selling in June.
The FSA made a statement about HBOS last Wednesday morning, which the First Minister quoted accurately. It reminded me of when Norman Lamont stood on the Treasury steps on black Wednesday and reassured the market that everything was all right. The similarity between the two occasions is that the markets did not believe what they were told. They did not believe the FSA, nor did they believe Norman Lamont.
The First Minister also stated that last week saw a big change in HBOS's position. However, the bank's share price dropped more between last year and three months ago than it did during last week. A year ago, HBOS's share price was £8.41. Three months ago, it was £2.74, and last week it was £1.47. The biggest fall happened between a year ago and three months ago, and not during the past week.
I did not say that the impact happened in the past week. The point about the Financial Services Authority is this: when the financial regulator makes a statement that validates the funding model, capitalisation and profitability of a bank, if the regulator is to retain credibility, the markets have to believe it and the financial authorities have to back it up. I would be grateful if I could at least get some agreement on that point.
I said that the First Minister quoted the FSA's statement, and he did. However, the statement did not talk about the shareholding or the exposure of HBOS. Let us not forget that HBOS had an exposure of £195 million—the difference between deposits and loans—compared with Lloyds TSB's exposure of £67 million. The FSA was careful with its language, as it always is. There was never any doubt that HBOS was a profitable bank, but there was considerable doubt about whether its business model was sound and whether the market had faith in it. We have heard not one criticism of the management of HBOS from our First Minister. I would have expected at least some comment from the Scottish Government about the business model of a company that the First Minister described this week as a Scottish icon.
It is a conceit to argue that the Scottish Government, through a Scottish central bank, would have provided an individual commercial organisation with £100 billion of liquidity that would not be available to any other financial institution that operates in Scotland. That is a conceit on many grounds, not least because, under SNP policy—until last week—there were no plans for a Scottish central bank. Interestingly, even its previous policy statement has been criticised by Jim White, an economics professor from the United States, who said that an independent but pegged Scottish currency would deliver the worst of both worlds. He said:
"The risk of devaluation against sterling would hang over long-term contracts and investments in Scottish pounds, adding a premium to interest rates."
Is it the Government's position that there would be a separate Scottish bank on independence, or would the position in Scotland be consistent with the decisions of the Bank of England's monetary policy committee? There is confusion about that at a time when the sector in Scotland needs certainty and reassurance.
The Office of Fair Trading announced this week that it will shortly begin its analysis of the competitive framework within which the deal will be decided. The OFT has not received an indication from the UK Government of the waiver of the rules in the national interest. There has been no statement today or in the past week from the Scottish Government about whether it has been in contact with the OFT. There has been no indication of the correspondence between the Scottish Government and the UK Government on the context of its waiving of the rules in the national interest. Those two aspects are critical if we are properly to defend the Scottish interest.
A simple Scottish offer that sets a threshold so low that it is unlikely not to be met is not something that we expect from the Scottish Government in standing up for Scottish consumers and Scottish businesses.
This debate is unlike any other in which I have taken part in the past three years. We often have acrimonious debates on matters that are trivial in comparison with the future of HBOS. It would be wise for us to reflect on the fact that the decisions taken in boardrooms and markets have a much wider impact on our constituents than many of the decisions over which we exchange robust remarks week after week in the chamber.
Of course, that raises the question of what we can legitimately expect from any Government and, particularly, given the devolved competences, the Scottish Government. We should remember what the Government cannot do and that the balance of power does not lie with the Government in every respect. We need to focus on the practical measures that can be taken now and over the longer term to support the financial services sector, which, as many members have said, is of huge importance to the Scottish economy, not just in Edinburgh, but throughout the country.
What can we expect of the Scottish Government? First, its most immediate task is the advocacy role, which the First Minister encapsulated in the phrase "the Scottish offer". Secondly, we must not prejudice our economy's long-term stability and Scotland's attractiveness as a place to do business and to invest in. As others have made clear, that means making the right decisions on infrastructure and skills and—more important—ensuring that we preserve our reputation as a place for the financial sector to do business in.
Much has been made of the more routine side of politics over the past week and of the various claims and counter-claims about who said what to whom and when it was said. It is worth reaffirming that in the financial markets there is no such thing as independence at a Scottish level, at a UK level or even at a European level. If even the United States cannot withstand some of the forces at work in the global markets, we must be dealing with factors that are much greater than those that can simply be legislated for or hoped away.
However, such a situation also opens up opportunities that, in the past, Scottish companies have not been slow to seize and we must ensure that, in dealing with the fallout of the HBOS situation, we do not prejudice the ability of those companies—and of companies seeking to move to Scotland—to take up such opportunities.
As for the regulation of financial services, which has already been mentioned, the matter is, of course, reserved to Westminster and is coming more and more under the influence of both the European Union and the United States. I wonder, though, whether we should blankly charge down the line of greater regulation or whether it would be better to pause for a moment and reflect on the impact of greater transparency. We cannot regulate away risk; all that we can do is seek to give people the information that allows them to make their own assessment of whether risk is acceptable.
In that respect, I was struck by the valid points made in an article by John Kay, of the Council of Economic Advisers, that appeared last week in the Financial Times. In that article, Professor Kay says:
"I yearn for a world in which regulators would moderate the inherent instability of the financial system. But my yearning is tempered by modest expectations of what regulation can achieve."
Realism
"acknowledges that public expectations are much higher and politicians will claim to respond to these … But the politicians will fail. The next financial crisis will be different in origin and the rules that will be introduced to close the doors of today's empty stables will prove irrelevant.
It is easy to assert that the solution to any market failure is better regulation. If regulators were all-knowing and all-powerful; if they were wiser than the chief executives but willing to do the job for a fraction of the remuneration … if they understood what was happening in the dealing rooms … better … then banking regulation could protect us against financial instability. But such a world does not exist. Market economies outperform planned economies not because business people are smarter than civil servants—sometimes they are, sometimes not. But no one has enough information or foresight to understand the changing environment, so the market's messy processes of experiment and correction yield better results than a regulator's analysis."
That statement might be uncomfortable for those who have been or fear that they might be affected by the fallout of the HBOS situation, but it is a fair assessment of where we are.
We must never forget that the future of the Scottish financial sector is more than just the future of HBOS, Lloyds TSB or any of the other individual players, and it is critical that in focusing on what can be done over the next few months or years we do not prejudice that situation.
Many members have commented on HBOS's business strategy. That strategy is a matter for shareholders and perhaps regulators. If I were qualified to talk about the appropriateness of the strategy that HBOS pursued, I would not be standing here today. We would be well advised to remember where the limits of political power lie and to focus on the practical steps that we can take to ensure that the fallout from the tumultuous events that we are discussing is minimised and opportunities are maximised.
First, I want to reflect on the importance of Scotland's financial sector, as many members have done. Malcolm Chisholm, Sarah Boyack and other members have said that the sector accounts for one in 10 jobs in Scotland and that 100,000 people are employed in it—the same number are employed in its support services. The sector generates a huge part of our gross domestic product and is, of course, critical to Edinburgh's economy and increasingly critical to Glasgow's economy. Members have reflected on the fact that it is critical in other parts of the country, too, where other activities take place in call centres and other parts of organisations. The sector is therefore critical.
The impact of the takeover of HBOS goes far beyond the impact on jobs and its customers; it goes right into our economy. The First Minister, my colleague Iain Gray, Annabel Goldie and other members have spoken about the tentacles that reach out as a result of the role of HBOS. The bank's work in the social housing market, the voluntary community, arts and sports and even in supporting flights from Edinburgh airport is a critical part of its impact.
It is interesting that several members have talked about boom and bust. I do not share their views, particularly those that were expressed by Ross Finnie and Jeremy Purvis. The underlying strength of our economy remains. The UK is a member of the G7 and the G8, and our economy remains one of the leading economies in the world. We have a current situation, but Labour values and visions and the delivery of a strong and stable economy over the years have not led us to where we have been in the past, when there was an unemployment figure of 3 million and interest rates of 15 per cent. We are clear that we are in a difficult and challenging global economic situation, but talk of boom and bust is wrong and people who engage in it talk down our economy.
I support proposals that were made in the First Minister's statement on protecting jobs, enhancing core decision-making functions in Scotland, mitigating and managing adverse impacts on our economy and society and maintaining Scotland's leading financial services position, but the UK Government has taken action and has continued to do so. For example, HBOS could have had access to the special liquidity scheme, which has been around since April. It could have had help far in excess of that which has been offered by the European Central Bank and the Federal Reserve system in America. The facility in the UK is for 12 months, and it can be extended over three years. The European scheme is a six-month scheme, and involves only €50 billion compared with the £100 billion that can be made available through the UK Government. The Fed scheme offers only three months' liquidity. Therefore, it is simply wrong to say that the UK Government has done nothing.
I smell a rat in the debate. We heard probably the blandest speech that we have ever heard from the First Minister, which suggests to me that he knows that his analysis is fundamentally wrong. It was soundbite Salmond at his worst; the mouth overruled the brain. He had a good line about spivs and speculators and thought that that might grab a headline, but, of course, the analysis by everybody else in Scotland is different. The First Minister talks about consensus. I want to reach consensus on such issues, but it is irresponsible of him to call for consensus while he undermines the correct analysis and does not recognise that there is more to the matter than spivs and speculators. Every other member recognises that.
Will the member give way?
Will the First Minister clarify a point about short selling? He introduced the term "naked short selling" on Sunday for the first time, and he used it yesterday around the media, but he talked only about short selling for the whole of last week.
Yes, but I did not suggest that short sellers should be put to the fire; I would have been content simply with taking away their money.
Andy Kerr mentioned consensus. We had a meeting on Monday, which did a huge amount to rally Scottish opinion. Andy Kerr offered nothing but support at that meeting, but outside it he broke the consensus.
Is this an intervention, First Minister?
Why did Andy Kerr break the consensus?
I explained my point. If the First Minister wants consensus, we should acknowledge the reality of the position in which we find ourselves. The First Minister has adopted a fantasy position.
The members of the First Minister's Council of Economic Advisers are coming out, man and woman, to disagree with him on the matter. The First Minister has the chance to summate in the debate, although perhaps Mr Swinney will do that—I am not sure. The First Minister should acknowledge that he got it wrong. He should admit that to the Parliament and then we can move on in a consensual manner. If we can have consensus only on the First Minister's terms, that is unacceptable to the rest of the Parliament.
The First Minister tried to say to me across the chamber that I have somehow accused Sir George Mathewson of being a spiv. I have not. I am clear that, in the First Minister's description of what happened to HBOS, he described Sir George Mathewson as a spiv. In response to the First Minister, Sir George Mathewson said:
"If one's ignorant, one could take that tone."
I suggest that he was talking about the First Minister.
As Derek Brownlee, Wendy Alexander and others have pointed out, the First Minister has said that, in an independent Scotland, he would have advanced £100 billion, which is three times the Scottish budget. We are not sure whether there would be a central Scottish bank, so would we rely on the Bank of England to do that? An arrangement was available to HBOS, but it did not choose to take it up. Of course, the European Central Bank offers a scheme, but it is nothing in comparison with the scheme that the UK made available. Funds were available, but there was no request for a line of credit. The chancellor has made that clear. He went on to say:
"frankly, things were way beyond that … They needed a permanent commercial resolution and that is what we achieved".
However, that flies in the face of what the First Minister's SNP website says. It states:
"I'd have acted to save HBOS".
He would have jumped into the phone box, although, sadly, he might have come out naked, rather than dressed in a Superman outfit, because, as he knows, he would have no tools available to him. The strength of the work on HBOS and Lloyds TSB is the fact that we are in the union and part of the UK. We do not have a foreign bank taking over HBOS in Scotland, but a partnership of two UK banks, which would not be an option in the situation that the First Minister set out.
Will the member take an intervention?
Sorry, but I do not have time.
The First Minister has said that corporation tax is the key. He says that businesses will come to Scotland and corporation tax will be the solution to all our problems. However, he ignores the fact that the effects of his local income tax would far outweigh the benefits of any corporation tax cut that he cared to offer. Also, he does not tell us what services throughout Scotland would be cut as a result of his corporation tax cut. Wendy Alexander asked what regulations would have prevented the situation from arising in an independent Scotland. What Scottish regulations would have made a difference? How would independence have stopped the international speculators? Would it have hindered the Lloyds TSB merger plans? The First Minister has a responsibility to answer those questions.
If the First Minister wants to ensure that we proceed with consensus, he must recognise that the consensus is not that the UK Government stood idly by. With all due respect, that is no way to build consensus. To do so, we must recognise the role of the UK Government, in partnership with the Scottish Government, in ensuring that we do the right thing. That means protecting Scottish jobs and ensuring that headquarters functions are retained and that we make progress in an orderly and efficient manner for Scotland. I say to the First Minister that we do not need emotional nationalism; we need financial rationality. We do not need soundbite Salmond; we must ensure that we serve Scotland and do not use the situation as the First Minister has done. As I have said before, he is the true short seller of Scotland.
Mr Kerr mapped out the need for consensus. However, I was somewhat confused by the tone and content of his speech. I was not sure whether it was a model. If Mr Kerr will forgive me on this one occasion, perhaps I will deliver a speech that he might listen to, as the crafting of consensus. I have tried previously to secure consensus with Mr Kerr, but he spurned me during the budget debate, with awful consequences. However, I shall try a bit harder today.
Derek Brownlee made the fair point that we must be clear about what is expected from the Scottish Government. I agree with that. It is also important that we are clear about what the public expect from the Scottish Government into the bargain. I hope that we can secure co-operation on that across the political spectrum. We had ample evidence of co-operation at the excellent event on Monday that was co-hosted by the First Minister and the Scottish Council for Development and Industry. We need agreement that some central features must be tackled in the next few weeks to ensure that we protect the Scottish interest. Frankly, that is what members of the public will expect the Scottish Government and the Scottish Parliament to deliver on their behalf.
The cabinet secretary might have seen, on 18 September, a press release from the Office of Fair Trading that said that the OFT
"expects to begin consideration of the competition effects of the proposed merger shortly, and will do this through established procedures, taking full account of information from the merging parties and others."
In the six days since that press release was published, has the Scottish Government made any contact with the OFT?
The Scottish Government will take forward a number of initiatives arising out of the discussions that we had with the Financial Services Advisory Board at the meeting that the First Minister and I attended yesterday. Among those initiatives will be discussions with the UK Government and others about some of the regulatory issues that arise out of our experience. If it is appropriate for the Government to make a submission to the OFT inquiry, we will, of course, do that. That submission will be based on and informed by the discussions that we will have with financial services companies in that respect.
If Mr Purvis will forgive me, I will continue to respond to points that were made in the debate.
I want to concentrate on some of the expectations that people quite rightly have of what the Government and Parliament should deliver. We are here to protect employment in Scotland. I assure Margo MacDonald that we are here to protect, promote and enhance decision making of substance in Scotland about the business choices that are made by the group that emerges from the Lloyds TSB-HBOS transaction. As part of that, we will make a vigorous case to Lloyds TSB about the strength and effectiveness of the Scottish financial services sector.
As an Edinburgh member, I am obviously concerned about my constituents' jobs.
In his statement, the First Minister said that the management had made it clear that it would move quickly on the details of the merger. However, my understanding from HBOS is that the details of the restructuring, which will have an impact on the numbers and types of jobs that will be affected, will not be available before the vote on the merger. What does the Government mean when it talks about moving quickly?
As Margaret Smith is aware, I am not the person who is writing the prospectus for the transaction. Along with the First Minister, I will be writing the Government's explanation of the strengths of the financial services sector and why there is a compelling case for significant decision making about the activities of the group to be anchored in Scotland. That case is based on several hundred years of financial strength that has been built up by a number of a key institutions, of which the Bank of Scotland has been one and the Royal Bank of Scotland has been another, along with Standard Life and various other companies that I could mention. Further, David Whitton mentioned the situation with Norwich Union in Bishopbriggs, and Roseanna Cunningham mentioned the expansion of Norwich Union's work in the city of Perth. There are many strengths in the Scottish financial services sector.
Mr Finnie and Mr Scott might be correct that there should be a Treasury inquiry, run jointly with the Scottish Parliament's Economy, Energy and Tourism Committee, into the conduct of the HBOS management. However, for heaven's sake, let us not undermine the message about the strength and the quality of the financial services sector by behaving in an unwise fashion.
Sarah Boyack asked what the Government is doing with regard to financial services skills. Out of the global financial services week that the Government hosted jointly with Scottish Financial Enterprise and the Financial Services Advisory Board in May, there emerged an initiative, to be led by David Thorburn, the chief officer of Clydesdale Bank in Scotland and the chairman of the Confederation of British Industry Scotland, to create a better match between the skills demand of financial services companies in Scotland and the provision that is made by our universities and further education colleges. In the past seven days, the Cabinet Secretary for Education and Lifelong Learning has had discussions with the Scottish Further and Higher Education Funding Council and Skills Development Scotland to ensure that that alignment is absolute, so that our financial services companies are assured that, as part of the compelling proposition that Scotland represents in terms of financial services, we have those attributes available at all times.
I wish to address some of the other points that were made in the debate about the circumstances that led to this particular transaction. A number of significant issues need to be addressed. If there was not a problem with short selling, why on earth did the Financial Services Authority act as it did last Thursday evening? On Thursday evening, the chief officer of the FSA said:
"the current extreme circumstances have given rise to disorderly markets".
Members have talked about the special liquidity scheme that the Bank of England and the United Kingdom Government facilitated. The governor of the Bank of England went to the Treasury Select Committee on 11 September and said that the scheme would end on 21 October. Who was sleepwalking when the scheme was not extended at that time? Members must understand that, at a critical time when institutions were under pressure, swifter action could have resulted in a different outcome.
It is essential that this Parliament demonstrates what we were sent here to do, which is to act as a forum that promotes in every respect the best interests of the people of Scotland. I am absolutely confident that we have a strong and robust financial services sector, in which I had the privilege to work.
The purpose of this Government is to increase sustainable economic growth. To do that, we will support the financial services sector in its efforts. In doing that, we will represent the strength of consensus that emerged from the discussions that we had on Monday, ranging across all sectors of Scottish society, and put to Lloyds TSB the compelling case for Scotland to be the centre of decision making for this new venture. We will put that proposition with enthusiasm to Lloyds TSB.