´óÏó´«Ã½

Regarding this matter of the economy, politicians have two roles. To do things which make the economy better - and to shun things which make it worse.

In truth, we learned little today at FMQs as to things which might ameliorate the situation.

Perhaps understandably, the debate centred on competing visions of what might prove a problem.

Labour's Iain Gray pursued the first minister over the SNP's plans for a Local Income Tax.

It was, averred Mr Gray, A Bad Thing. A Very Bad Thing indeed. It would penalise hard-working people.

It would be a tax on jobs. Business loathed the notion. Dump it now.

Alex Salmond dismissed this. LIT was fair and popular. By contrast, he was keen to talk about the consequences for Scotland of the pre-Budget report.

Mutual strength

In particular, the sting in the tail: the prospect of spending cuts in 2010.

It was a test of mutual strength. So who won on the day? Alex Salmond, in my view.

Firstly, he was on rather good form generally, plainly recovered from his illness.

Secondly, Mr Gray suffered from sundry weak points. Chief among these is that Labour has yet to set out its alternative to the council tax, its proposed reforms.

Presumably that is why the party did not submit evidence to the consultation over LIT. It is, however, fundamentally weak to rail against a proposal without being in a position to set out your own views.

Mr Salmond reminded Mr Gray that the Labour leader had decried his own party's efforts on the topic during the last Holyrood election.

Another problem for Mr Gray on the day was that he inadvertenly opened up an opportunity for the first minister.

Lit questions

Mr Salmond talked of £500m Scottish spending cuts due in 2010 as a result of efficiency savings to be pressed in Whitehall.

Barnett consequentials, you understand.

Instead of dismissing this on the day - and inviting the FM to answer the questions about LIT - Mr Gray entered momentarily into a discussion of the point, suggesting that the sum might be lower than £500m.

This merely allowed Mr Salmond to pursue the point more vigorously still. A debate about LIT duly became a debate about the PBR and "spending cuts."

More generally, it still seems likely that LIT will be thwarted by a combination of opposition from rival parties - and disquiet from business and others.

At which point, Mr Salmond will lament pitiably - and will set about blaming Labour for preventing him from effecting reform.

This will be on the not unreasonable grounds that people hate the tax that is in place - and long for the green fields of alternative taxation over the hill.

The impact of the PBR and the recession, however, will still be in place.

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• - What's this?

Few details responding to the chancellor's package of financial measures.

That upset some - with Tavish Scott of the Lib Dems complaining later that the finance secretary had indulged in a whinge with little substance of his own.

Labour's Andy Kerr wanted to know what, where and when with regard to the promised programme of accelerated capital investment.

That is, of course, a classic theme from Mr Kerr, particularly in respect of the Scottish Futures Trust. (He distrusts it and suspects it has little future.)

Up with this Mr Swinney would not put. He had, he said, been "ahead of the game" with regard to speeding up housing investment.

That, he said, lay at the core of the controversy over whether he was or was not invited by the Treasury in September to bring forward investment.

He was, he said - but in a letter which referred specifically to housing money and went on to acknowledge that Scottish ministers had already outlined such a scheme.

Targeted support

Further, it was unreasonable to expect full details of capital investment - and prior to talks with local authority partners.

So was there any consensus? Some. Mr Swinney praised elements of the chancellor's package - while noting that he would have preferred to see more targeted support on tackling fuel poverty and reviving the housing sector.

There was an acerbic note of cross-party agreement, advanced by Derek Brownlee for the Conservatives.

Both they and the SNP, he said, now knew what it was like to pick up the pieces after Labour failure.

Probably wisely, Mr Swinney declined to rise to that. He prefers, one suspects, to pick his own fights - and choose his own comrades; however helpful Mr Brownlee has been in the past, for example over last year's Scottish budget.

But to the substance - what little there was at this stage.

Mr Swinney signalled that he would exploit the offer of advanced capital invesment to the full. That means bringing forward £260m.

Cash in pockets

But it won't just go on public value projects. It's plain that the test will also include bolstering the economy.

So that means schools: broader thinking is that Scotland must upskill to be ready for the upturn - when it comes.

It means transport infrastructure: improving economic prospects. It means fuel efficiency and tackling fuel poverty: redressing the impact of recession and putting money in pockets.

It means housing: the construction industry.

However, as with so much in these notably troubled times, this was a holding statement pending further detail: a provisional plan.

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What a difference a day makes? On GMS yesterday, the Chancellor was confronted with claims that the by the detailed implementation of his tax plans.

He had told MPs that he was simply offsetting the cut in VAT by increasing duty.

The industry thought otherwise, as we reported. They said the new duty outpaced the VAT cut.

By Reporting Scotland and Newsnight Scotland last night, the Chancellor had acknowledged and addressed the issue.

- and ensure that Scotch isn't disadvantaged.

Slainte mhath.

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• - What's this?

More on the Pre-Budget Report.

Understandably, it is turning into a substantial inter-party row - with sundry different elements.

Good thing too. Enforced consensus on the economy was becoming wearing. The scent of humbug, over-powering.

We've had the Westminster version. George Osborne had to be good - and, within limits, he was.

This was classic dog-whistle politics: tell (or rather yell) what your partisan side wants to hear.

The limits are less about the future choice confronting the voters than they are about what the Tories would have done to prevent the economic situation arising in the first place.

Would they, for example, have been more stringent in regulating the banks?

Then there's Vince Cable's alternative LibDem prospectus: building upon his party's predilection for cutting income tax rates.

(Doesn't quite square with Local Income Tax - but that's for another day.)

In Scotland, there's a toothsome battle, as ever, between Labour and the SNP.

Firstly, whisky. The industry is aggrieved that what was presented as a revenue neutral move is, apparently, nothing of the sort as far as they are affected.

See on this site. But their grievance is that the chancellor has cut VAT by x amount.

But he has, simultaneously, increased duty by x+y - as far as whisky is concerned because of the higher duty gearing faced by Scotland's national drink.

Further, the VAT cut is time-limited. It will expire at the end of 2009.

Do you imagine that, in January 2010, the Chancellor will then remove the additional duty which is intended to offset that VAT cut?

Yes, I thought that might be your answer.

More generally, public spending. John Swinney has been relatively emollient in addressing the budget, certainly by contrast with Mr Osborne.

Mr Swinney has backed the VAT cut - and the measures to assist business.

However, he has complained that longer-term efficiency savings in Whitehall could drive down spending in Scotland.

That's because the Barnett formula imposes cuts as well as comparable increases.

Expect more, much more, of that tomorrow when the Finance Secretary spells out his formal reaction in a statement to MSPs.

Also expect more, much more, of Labour's response.

Today, for example, Labour MP Anne McGuire said Mr Swinney was "in denial", ignoring the beneficial impact of the early phase tax cuts for Scotland - and the recapitalisation made available to Scotland's banks.

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Some early Scottish reaction to Alistair Darling's PBR.

Jim Murphy, the Scottish Secretary, reckons it's worth some £2bn to Scotland from the cuts in VAT etc. He calculates that at £275 per average family.

Others, you will not be surprised to learn, are more inclined to sum up the longer term impact of higher borrowing, spending constraints and, perhaps in particular, that proposed increase of 0.5% in National Insurance.

For the SNP, John Swinney, the finance secretary in the Scottish Government, broadly welcomed the fiscal stimulus package, including the VAT move.

He also welcomed the acceleration of capital investment south of the Border, with the proviso that his administration will be able, in talks with the Treasury, to follow suit.

This, he promised, would be investigated.

But he was discomfited by the proposal to reduce spending in Whitehall through further efficiency savings - because of the potential impact on Scotland.

Budget 'con'

You see, Barnett doesn't just work one day. If English spending rises, then comparable Scottish spending also increases.

However, if English spending falls . . . well, you get the concept.

So proposals to cut £5bn from English expenditure through further efficiency savings could, Mr Swinney reckons, trim some £500m from the Scottish block in 2010/11.

The Tories in Scotland went on all-out attack, taking their line from George Osborne that this is a budget "con" which will result in hugely increased borrowing.

For the Liberal Democrats, Alistair Carmichael warned that the package would fail to restore confidence.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

We are, of course, eagerly awaiting the . Perhaps we might find an alternative name for the gig.

Pre-Budget Report doesn't quite do it. Post-crisis rescue seems more appropriate.
Couple of points in advance.

Given that government ministers have repeatedly argued that the crisis is globally sourced, presumably they will not suggest the rescue can be driven by the UK alone.

To be fair, I do not expect the chancellor will follow that path. However, I also believe we require to tone down the expectations - and the rhetoric.

This IS a global crisis. One might argue over the contribution or otherwise of UK policies.

But we should be careful not to ascribe too much importance to one element of the global response.

Yes, it is vital for the UK economy to prepare itself to resist recession as much as possible.

However, there will be factors well beyond any UK fiscal stimulus affecting the longer-term health of that economy.

Secondly, it will be important to place the various anticipated measures this afternoon into the correct category.

Two biggies have been disclosed so far: first, an expected cut in VAT and a warning, revealed by my esteemed colleague Nick Robinson (nice one, Nick), that higher earners would pay more, should Labour win a subsequent UK General Election.

The first, the cut in VAT, is aimed at generating a fiscal stimulus: the hope that folk will sustain expenditure if prices in the shops are reduced.

The second is a political manoeuvre, aimed primarily at the Tories.

Alistair Darling and Gordon Brown are signalling a decisive break from Labour's previous pledge that neither basic nor upper tax rates would be increased.

They are doing so for two reasons. Firstly, that currency has already been debased.

That ship has sailed. The tax rates may not have gone up - but do people believe there has not been an increase in the overall burden of taxation, including National Insurance?

Secondly, it poses a challenge to the Tories - who had urged Labour to spell out how the interim measures would be funded in the longer term.

Mr Darling will now say: by an increase in the imposition on upper earners. Never mind that critics say this would not recoup the cost of his interim measures.

The Chancellor is inviting the public - and the Tories - to judge the package as a whole.

He is inviting the Tories to talk themselves into a position where they oppose th measures - and hence defend maintaining the present tax position of those earning the most in society.

Not, frankly, a comfortable position for any party - and particularly for a Conservative Party which is designed to shed any lingering image of supporting those with wealth and privilege.

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• - What's this?

She finished strongly, did Nicola Sturgeon. She was confident and controlled.

But this was also .

The topic? Clostridium Difficile or c.Diff.

More particularly, on ´óÏó´«Ã½ Scotland which has disclosed the inadequacies of the investigation into the outbreak at the Vale of Leven Hospital.

For Labour, Iain Gray got to work. Why no public inquiry? Why was the health secretary the only remaining obstacle to such scrutiny?

It was an entirely legitimate question: well-mustered and well-presented.

It fell to Ms Sturgeon to respond directly because she was standing in for the indisposed first minister.

Past responsibility

Questioned first by Mr Gray and then by Annabel Goldie, she never wavered.

Only at one point did she resort to suggesting, mildly in passing, that some responsibility might lie with delays occasioned by the previous administration.

Mostly, she took it.

She listed short and long term efforts to resolve the problem: single rooms for patients in future; new hand washing regimes; new responsibility for senior nurses; no more privatisation of cleaning contracts.

But still - and rightly - Mr Gray persisted. Why no full public inquiry - when the immediate inquiry had been shown by the ´óÏó´«Ã½ to be insufficient?

Let's cut to the chase, here. I believe it is highly likely there will be such a public inquiry. I believe, further, it is largely a question of when not if.

The health secretary's judgement is that she should not announce such an inquiry now while police inquiries into the deaths are continuing.

Exceptionally prolonged

Those inquiries, she indicated, might result in a Fatal Accident Inquiry or, possibly, prosecution.

As Iain Gray pointed out, that process does not of itself preclude a public inquiry. Ms Sturgeon stressed she had never relied upon such a point.

The police inquiries will proceed. If truncated, a public inquiry would, in all probability, follow.

My belief is that, if those inquiries are exceptionally prolonged, then Ms Sturgeon will exercise her power to call a public inquiry regardless.

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It is not, in truth, the direct responsibility of Iain Gray.

However, it's less than wonderful news for him, either. .

It's all the result of a stand off between East Lothian Constituency and the party's National Executive Committee over the reselection of Anne Moffat MP.

For me, it also revives the issue of the internal voting system within the Labour Party.

You may recall my offering a few cheeky comments anent that topic at the time of the election of Mr Gray as leader.

To recap, briefly. Anne Moffat, it would appear, is not universally popular in her constituency of East Lothian.

As is customary, she was up for reselection in July last year.

'Anomoly' probe

The choice facing party sections was whether to endorse her automatically - or whether to back an open selection in which the sitting MP would be on the shortlist.

Only two branches out of six backed her for automatic endorsement. As I understand it, three branches wanted an open choice and the largest branch, Prestonpans, was divided 50/50.

Despite that division, she was adopted on the back of votes by affiliates, principally trades unions.

Following objections, an investigation was held by Lesley Quinn, then the party's chief officer in Scotland. She reported "anomalies" in the process.

The matter was referred to the NEC who upheld the selection procedure. Further protests ensued and the NEC has now decided that, pending resolution, the local party is suspended.

I am told from East Lothian that there is "great unhappiness" and a "lingering sense of injustice" that constituency opinion has, arguably, been ignored.

The alternative perspective is that it is standard procedure to suspend where there is a dispute - and that this will be settled in a comradely fashion.

We shall see.

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• - What's this?

Did you hear John McFall on GMS this morning? He who chairs the Treasury Select Committee in the Commons?

The committee that is routinely described as "influential".

Mr McFall is a thoughtful and diligent MP. Disdaining bombast, he offers precise analysis, generally grounded in three elements: an evidence-based approach, a concern for the disadvantaged and basic loyalty to the UK Government.

I listened with interest to his views on how to encourage the banks to sustain productive lending in these difficult times.

In particular, I was struck by his key point. "We need competition", he said, adding for emphasis: "We need more competition".

Tiny point - but how does that square with the drive to merge HBOS with Lloyds TSB: a deal which in other circumstances would be ruled out by fundamental competition law?

Mr McFall was disarmingly open about the limits of political power.

Neither he nor ministers could set a rate for the banks with regard to lending. He was reluctant to rush to legislation, urging the banks to consider the gains in public image of being co-operative.

More generally, he stated: "You can't interfere with the workings of an organisation and I think it would be foolish for any government to lay down rules, hard and fast."

So far, so clear. Is it not, then, a touch illogical, for example, to complain bitterly when Northern Rock exercises due diligence in recouping difficult debts?

The Rock is now nationalised. It has been warned that it must timeously repay the debt due to the public. Why then should we be surprised if, under that constraint, they seek to get back some of their bad debts?

I am, of course, being deliberately provocative. I know exactly why there were complaints. It was because Northern Rock appeared to have become over-eager in repossessing properties.

But think. Politicians cannot have things both ways.

They cannot order Northern Rock to trade competitively in a fashion that refunds the public - then say: but we didn't mean that style of behaviour. No interference means no interference.

And back to HBOS. If the driver of reform in the banking system is competition, then why sanction a move which is explicitly anti-competitive: where competition rules have had to be suspended?

Again, I know the answer which is offered: that HBOS required rescue, not merely recapitalisation; that HBOS was in peril; that the merger is vital for the survival of the bank.

Good answers all - although others dispute that case. The verdict upon these arguments will be delivered by shareholders in the two banks. It would still appear at this stage that merger will go ahead.

However, in the by-going, perhaps we might be spared the pleas for greater competition in the banking sector.

UPDATE, 3:00pm:
Further re HBOS. As my colleague Robert Peston has already noted, the Chancellor has issued a statement pour encourager les autres: those others, that is, who feel that the HBOS take-over is not the final word.

Alistair Darling notes that there is "no automatic right of access" to the recapitalisation scheme.

To be fair, he never said that HBOS would definitely gain full-scale recapitalisation if the merger fell through.

He said, as I understand it, that any recapitalisation would require to be rethought in the light of the new circumstances.

In other words, recapitalisation is not solely predicated upon merger - but the current offer is calculated upon such a deal.

Today we learned more about how the Chancellor might redo his sums.

As you might guess, they would not be to the advantage of HBOS. Any capital to be injected into HBOS would be considerably more expensive.

Plus the likely outcome, according to the Treasury and the bank itself, would be effective nationalisation. Not something the bank wants.

Hence Lloyds TSB shareholders will be asked to endorse the deal tomorrow, with HBOS following a month later.

A little like the scenario which surrounded devolution in 1997 - when the eager Scots were asked to vote first while the referendum in sceptical Wales was deferred.

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• - What's this?

Anyone remember the Constitutional Convention? I certainly do: I covered it for so long they struck a commemorative medal for me. (For the avoidance of doubt, that last bit is hyperbole.)

It was not always the most fascinating of experiences. (Now, that bit demonstrates another figure of speech, namely litotes: that is, pure cheek from me.)

However, in the long - very long - term, the convention produced the devolved parliament we presently love and loathe in comparable measure.

There was a very precise read-through from the scheme drafted and, more specifically, revised by the convention to the Scotland Act, legislated by Her Majesty's Houses of Parliament, there assembled.

Maybe we need to regard the Calman Commission and its attendant debate in the same light. Cautious, steady - yet ultimately productive.

But, boy, is it cautious. Recently, we had the submission from UK Government departments to the commission. And a splendidly Panglossian document it was too. Nothing need change. All, it seemed, was for the best in the best of all possible worlds.

With one exception. If you chaps at Holyrood could see your way to being a bit more understanding over nuclear power, then all would be fine.

Now we are shortly to receive an interim report from the expert panel established by Calman to examine alternatives for funding Scotland. Similarly, I expect it to be quite brilliantly cautious, noting that no alternative to the current set-up meets all the criteria for a funding system: namely, that it should provide equity, accountability, autonomy, stability and efficiency.

For example, you could assign tax revenues to Scotland - say, the product of VAT or income tax. But that might be largely cosmetic, affording no real autonomy.

There would still be the need for equalisation grants from the Treasury to cover other spending needs and the products of other taxation, not least North Sea oil.

And there's the rub. Say there's a new system of assigned revenues.
Say that lessens by volume the block grant from the Treasury as, by definition, it would do. Say that allows politicians south of the border to argue that Scotland is getting less directly from the UK taxpayer, addressing a political concern over cross-border equity.
Say, though, that then prompts a necessary review of need in order to calculate the extent of the top-up that would still be required.

Would that be good news for Scotland - where spending is currently higher per head than in England? Ain't necessarily so - especially if the review is driven by the Treasury.

However, I believe today's report will be a vital contribution to the debate over funding. I believe it will give a hard edge to the fluffy, ill-considered debate which frequently surrounds the Barnett formula. I believe it will set out in substantial detail the alternatives: upside and downside.

Cautious? Yes, but rightly so. This is not an issue to be rushed or forced. Caution is sensible.

However, there is a political dimension too - which leads me to think that the Calman exercise will not, after all, mirror the convention.

The convention was wide-ranging, embracing much of civic Scotland. But, politically, it was driven by Labour and the Liberal Democrats with a common objective of delivering an elected parliament with substantial powers, within the United Kingdom.

I still believe that the competing interests within Calman may ultimately prove divergent. The LibDems want radical reform, including substantial tax powers. Labour is much more cautious and, at the UK Government level, partly preoccupied with the wish to placate English opinion.

The Conservatives are, quite understandably, using Calman as a think tank to prepare for what they might have to confront in government, should they win power at Westminster. This has a long way to go.

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• - What's this?

If not PPP/PFI, then what? And when? What system is Scotland to use for funding capital projects?

SNP ministers adamantly insist there is no slippage in building new schools and the like across the country.

Pretty well everyone else says that there is.

Alex Salmond and John Swinney have several substantive points to make in response.

Firstly, they note that changed rules mean it will no longer be possible to keep PPP/PFI off balance sheet - which lessens its attraction.

Secondly, they note the excesses of the early contracts which leave public authorities facing all the financial risk while private firms gain huge profits.

Thirdly, they say that their new Scottish Futures Trust is working hard on ideas to transform the capital funding system.

Fair enough. But, once more, what? And when?

It seems to me that the options are limited.

One can use straightforward public sector capital spending as is being done with the new Southern General Hospital in Glasgow.

However, the Scottish Government has no borrowing powers of its own (something that is being closely scrutinised within the present debate over the financing of devolved Scotland.)

Having no substantive source of revenue of its own (again, for now), it can issue no bonds.

Ministers say bonds might be collectively issued by local authorities.

But are those likely to be attractive in the currently constrained market? Mr Salmond says they could be financially competitive. Others harbour doubts.

To be clear, the Scottish Government has not completely ruled out the use of PPP/PFI.

Indeed, it has sustained existing contracts.

However, it is now being argued that local authorities and others are unwilling to risk the expense of preparing such plans, given the stated ideological opposition to this method of finance from ministers.

Without endorsing the apocalyptic rhetoric of some of the Scottish Government's political critics, it is still reasonable to ask for an alternative narrative to be presented.

What? And when?

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• - What's this?

So that's all right, then.

The Scottish secretary has that a Team GB at the Olympics wouldn't jeopardise the status of the home nations in taking part, separately, in international football competitions.

Most politicians affect an interest in football. Jim Murphy is the genuine article. He plays football. He follows football. He's a fan.

Mr Murphy has even achieved the ultimate soccer accolade: he survived trial by Stuart and Tam on Off the Ball. In fact, he was rather good.

Not entirely sure he's on the ball with this one, though.

The assurance he has obtained is from Jerome Valcke, the Secretary General of Fifa. Which is fine, as far as it goes.

He is the ranking official. His word is important. However, as the Scottish Football Association has noted, does this entirely bind the members of the association?

Winner takes all

What if, in future, there were to be questions raised about why the member nations of the UK have separate international status?

What if someone hostile to that status were to attempt to use the Olympic example as precedent evidence?

One can, of course, see the politics behind this. Labour Ministers, led by the prime minister, want to bolster a spirit of Britishness.

SNP ministers want to promote a spirit of Scottishness. Hence they differ on Team GB. Maybe they could settle their differences on the football field. Winner takes all.

PS: I'm off to witness the cup semi-final draw at Holyrood this afternoon. Here's hoping it works this time - and United get the right outcome.

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• - What's this?

My father served in the RAF during World War II.

Sundry other family members have served in the armed forces, notably the Black Watch.

So I observed the today - admittedly while driving through the Grassmarket in Edinburgh, listening to the wireless.

It may be my imagination but I think the guys shepherding the traffic through the semi-permanent roadworks in that thoroughfare appeared to be bowing their heads a little in acknowledgement of the hour.

It is a tiny gesture, a scintilla of respect for sacrifice made.

Dignified silence

Further, one may protest against war and militarism yet offer respect to those who fought and died.

At the very least, they and their descendants are entitled to dignified silence, if that is what they request.

I must confess that I have little patience with those who attach notes of protest to their commemoration. It seems to me those are for another day, another hour.

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• - What's this?

We should not, I think, be all that surprised that the UK Government's collective submission to the Calman Commission is cautious and defensive in tone.

It was, after all, the UK Government which drafted and implemented the Scotland Act. We could scarcely expect them to say: "OK, it's mince, let's tear it up and start again."

Further, this is an institutional response rather than a purely political one. It bears the stamp of the constitutional caution which, for good or ill, is intrinsic to the British state.

Further still, this is not the final word. It is a submission to Calman, albeit one from a rather influential source. There is more, much more, to come.

All of which said, there are voices raised against today's document. The SNP - which is not in membership of Calman - excoriates the publication.

The Liberal Democrats - who are members - condemn its over-cautious approach.

Perhaps more significantly, there are one or two well-placed folk on the Labour side who wonder whether the UK (Labour) Government might not have evinced a little more daring, having accepted the notion of the Calman review in the first place.

I draw three broad lessons. Firstly, look at the submission from the Department of Energy and Climate Change.

They raise, again, the issue of potential tension between energy strategy (reserved) and planning law (devolved).

This, they say, may "provide challenges to the implementation of reserved policy objectives".

Translated, that means they want a new generation of nuclear power stations across the UK - and that perfect pest Alex Salmond won't allow them to build one in Scotland.

To be fair, the submission merely notes the existence of a potential problem - and advances "the need for close co-operation".

And remember that the previous First Minister, Jack McConnell, was comparably pesky on the subject. His position, broadly, was to reject new nuclear in Scotland - while offering a substantial (and potentially controversial) increase in renewable generation as Scotland's contribution. Wind farms anyone?

Don't see this objection going anywhere, frankly. The Department of Energy may find it exasperating - but there is no point whatsoever to devolution if planning isn't included.

How, pray, are you going to implement UK nuclear strategy in Scotland if the Scots object through their devolved government? Send in the Army to build a new power station?

Secondly, that caution. I think it is understandable that the UK Government would tread softly. From their perspective, the devolved settlement is just that: a settlement, carefully negotiated and legislated.

They remain to be convinced of the need for substantive, legislative change.
However, read more closely.

The document also cites examples where executive devolution has gone further than the original Scotland Act: for instance, transferring day to day control of railways to Scotland.

In essence, I think the underlying mood of this submission is: there can be more executive devolution - but we don't intend to open up the Scotland Act for fear of stirring unwanted consequences.

Thirdly, the caution on transferring further powers shifts the focus of Calman back to the real issue: money.

The submission from the Treasury is largely historical: setting out in detail the nature of devolved funding including Barnett and the principle of equalisation. That is, explicitly, what was promised by the Treasury when the commission was first mooted.

Essentially, the Treasury is trying to provide a factual basis for further discussion. It is, at this stage, offering no view on how to proceed - although, separately, the document notes the desirability of providing financial responsibility to Holyrood.

So don't be surprised at the caution here. It's what Whitehall does. Consider instead where the debate goes next.

Look out for the publication next week of Anton Muscatelli's first report on the financing of devolution. He was tasked with this by Calman.

Look then for the interim report from Calman by the end of the year. Look, further ahead, for the final Calman report by next summer.

Today is not the final word by any means.

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• - What's this?

They are not advancing a rival bid for HBOS. They are not setting out specific alternative financial proposals. They have not formed a consortium to rival the Lloyds TSB offer.

In fact, Sir George Mathewson and Sir Peter Burt are, mostly, simply posing the questions which others have already set out: including, from the outset, on this blog.
But they are rather intriguing questions, are they not?

Sir Peter was on the telly yesterday, Sir George on the wireless this morning. Both emphasised they wanted primarily to question the logic behind the Lloyds TSB deal: to suggest that it might not be sensible or in the wider public interest.
Question One: is this in the interests of the customers?

The two eminent bankers note that the Office of Fair Trading reckoned the deal would be anti-competitive.

That is because it would create a near oligopoly in the market: a huge conglomerate that would not be tolerated in other circumstances. Logically, that argument is confirmed by the fact that competition law has had to be set aside by the UK Government in order to permit the merger.

Against that, UK Ministers and the banks themselves argue that the circumstances demand distinctive action: that it is the only deal on the table with a prospect of creating stability.

Question Two: is this in the interests of HBOS? Why cannot the recapitalisation on offer be made available to HBOS individually, given that Lloyds also requires support? Has the merger been superseded?

Yes, say the eminences grises. No, say UK Ministers and the banks. There are further problems of liquidity. HBOS would require to be nationalised if the deal fails.

Question Three: is this in the interests of Scotland? No, say the two bankers. Scotland would be better served by an independent HBOS. Yes, say others: Scotland would not be well served by a weakened, fractured bank.

It is important to note that the Scottish issue is down the list for Burt and Mathewson, at least in the way they present their case. That is because they are pitching to shareholders more generally - but also because they believe the interests of customers outwith Scotland are jeopardised.

At this stage, it still seems most likely that merger goes ahead. But this is a significant question mark.

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No more glad, confident morning. (Labour, of course, would deploy the word "arrogant" instead of "confident.")

This is a substantial setback for Alex Salmond.

Politics is not in stasis. It is about momentum, about progress. .

Yes, there was a five point net swing to the Nationalists.

Yes, Labour's majority was substantially reduced.

But the SNP needed to do better here - and they know it. They expected to do better, much better.

So what happened? Geography, timing and opportunity.

Firstly, Glenrothes is not Glasgow East.

It is generally a more cohesive society, perhaps less inclined to the outpouring of anger at the state of the world witnessed in the earlier contest.

In addition, it is in .

He represented part of the present Glenrothes seat for some 20 years.

His own constituency neighbours the contested division.

That meant he was vulnerable to defeat. It also meant, however, that there was a positive Brown factor. Folk in Glenrothes, folk in Fife, feel a quiet pride that one of their own is PM.

That would make little, lasting difference, frankly, if the negative aura surrounding him had persisted.

However, that had been dissipated by his energetic efforts to resolve the global financial crisis.

The world rated him - and Methil decided to give him the benefit of the doubt.

That coincidence of timing - the by-election marrying with Mr Brown's rehabilitation - allowed Labour to be heard. No more, no less.

They weren't spending every waking hour defending their boss against the undefensible.

They were permitted an audience by the voters.

They used that audience, that permission, to harry their opponents relentlessly over their local record.

In particular, Labour attacked the Nationalists day and daily over claims that the SNP-led administration in Fife Council had cut home care services for the most vulnerable.

In vain did the SNP protest that this was driven by externally imposed exigencies, that they were doing nothing different from several other councils (including Labour ones) and that they had increased the budget in key areas of expenditure.

Folk in Glenrothes weren't interested in what was happening elsewhere.

They weren't examining the root cause. They were upset with their council. And their council was led by Peter Grant. The SNP candidate in this by-election.

Of course, the issue of local authority home care isn't, directly, one for the MP, one for this by-election.

In that sense, it was extraneous.

Further, the SNP accused Labour of "dishonestly" stoking fears.

Politically, however, it was legitimate. Labour saw an SNP weakness and went for it without mercy.

The SNP were unable to counter-attack.

In particular, they were unable to find a hard enough narrative about the economy.

For example, folk saw that they had, broadly, supported the prime minister's initiative on the banks.

Alex Salmond's understandably subtle fence-sitting on HBOS didn't cut it in the context of a by-election.

Mr Salmond attracts no blame for that. His stance was driven by the need to consider longer-term Scottish interests. But it didn't make for a tough attack line on the doorsteps.

Which leaves us where? On the ´óÏó´«Ã½ programme overnight, Jim Sillars reckoned the result would be good for the SNP if it acted as a wake-up call.

Certainly, such a call is now on offer. If the SNP responds with humility, rather than persisting in accusing Labour of dirty tactics, then Mr Sillars might ultimately have a point.

Does the by-election tell us anything about independence? Frankly, no.

The topic was scarcely raised, either by the SNP - or, intriguingly, by Labour in contradistinction to their stance in Glasgow East.

It does tell us, however, that the sense of unimpeded progress for the SNP is at an end.

They lost Glenrothes on local factors.

How, though, to explain the fact that they also lost two council by-elections to Labour last night, one in Glasgow, one in Edinburgh? Their momentum has stalled.

Does it tell us much about a UK General Election? Not really, no. Labour will not be able to behave like an opposition in such a contest, as they did here.

They will primarily be fighting the Conservative Party who were squeezed in Glenrothes (although not as tightly as the LibDems.)

It indicates, however, that the fault line in Scottish politics - Labour v the SNP - is as sharp as ever and that Labour is capable of regrouping.

If repeated, that could impact on certain Westminster seats, to Labour's advantage.

However, if the economy continues downwards, that impact might not be repeated.

Same story with regard to a Holyrood General Election. We should be careful not to read too much into a contest driven by distinct circumstances.

In short, though, Gordon Brown is entitled to don an authentic smile this morning. He has won. He has won well.

Congratulations to Lindsay Roy, the newly-elected Labour MP for Glenrothes. He is new to electoral politics: indeed, he was offered at various points to the voters as if he were an outsider, an antidote to politics.

The Sarah Palin of Cardenden.

Isn't there a beautiful irony there?

During his travails, at the Labour conference in Manchester, Gordon Brown said it was "no time for a novice" to take charge in Britain.

His political prospects have now been rescued by a quintessential novice.

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UPDATE AT 0059:

Very narrowly focused contest. Tories squeezed. Libs squeezed out of sight.

Both Tories and Libs lose their deposits as do all the other candidates.

Labour vote up 3.2. SNP vote up 13.1.

UPDATE AT 0056 GMT:

Details suggest that Labour has actually increased its share of the vote.

SNP share up too - by much more. But overall picture, taking those two factors together, is a swing which I reckon is only 5%.

Good in other circumstances - but not good in a seat which the SNP had said they would win. Plus Labour has also taken two council seats tonight.

A good night for Labour. A poor one for the SNP.

UPDATE AT 0047: GMT

Labour wins. Major boost for Gordon Brown. Lindsay Roy's first point in accepting vmictory? The claim of council cuts by the SNP.

UPDATE AT 0043 GMT:

Glenrothes not the only by-election tonight. Two council wards contersted: Glasgow Baillieston and Edinburgh Forth. Word is Labour has won both.

UPDATE AT 0022 GMT:

From the count, Labour now speaking of "confidence" that they have won - and that they might take council ward by-elec tions too.

SNP now talking of "halving" the Labour majority.

UPDATE AT 0003 GMT:

Quote from a senior member of the Labour team: "I'm smiling a lot more than I have done for weeks."

If Labour has won, it is a seriously good result for them. If the SNP lose, it is a significant setback for them.

The determining factor? Perhaps the Labour attack on the local council under the SNP.

UPDATE AT 2339 GMT:

Yet more gossip. Early boxes perhaps indicate Labour victory. Jim Murphy now forecasting Labour victory. Libs fourth? Toiries third.

UPDATE AT 2314 GMT:

The Scottish Secretary Jim Murphy says Labour has been fighting an "uphill battle" in the constituency.

He says that his party retains a "fighting chance" of winning the seat.

Remarkable, given that this is a seat with a ten thousand UK general election majority.

Reasonable, given that the SNP hold the comparable Holyrood seat and are the lead party in the council.

The Tories and the LibDems have disclosed that neither expects victory tonight. Another ´óÏó´«Ã½ Scotland exclusive!

UPDATE AT 2255 GMT:

Returning officer at the count says he hopes for a result before or by 0100 GMT.

There are 49 polling stations and 95 ballot boxes to count. Word from the count still that it is tight.

, result due around 0100. First news, as ever, on ´óÏó´«Ã½ Scotland. Yes, folks, it's a by-election night.

I'll be blogging throughout the night. But, where I was a wounded observer, I'll also be in studio to offer punditry and random cheek.

So if you see me on the telly battering away furiously at a computer terminal - then that's another blog in the making.

Early tips from Glenrothes? Tight but looks like the SNP may have taken the seat.

Split showing

That's partly because the LibDems may be struggling to hold up their vote as well as they'd like. (A good LibDem showing splits the anti-Labour vote.)

But I stress. That's early - VERY early - gossip. Informed - but not authoritative.

Don't hold it against me if it's wrong. Just thought you deserved to know what folk on the ground are mostly saying.

Stay with it. This is going to be intriguing.

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Were you up for Washington? State, that is, not DC.

The moment, at 0400 UK time, when the blue line advanced beyond the 270 college votes required to ensure that Barack Obama is US President Elect.

After months of media hype and political hokum, it came down to lines of quiet Americans, queuing to vote.

Expended cash, endless effort, debate, argument, claim and counter-claim, an absurdly complex electoral system - and it's all settled by determined citizens, often standing in the rain for the chance to make their choice.

This morning in Edinburgh, I chaired a breakfast discussion under the auspices of the Scottish North American Business Council.

It was attended by a range of guests: politicians, folk from finance, sundry others.

There was palpable excitement at the election of the first president from an African-American background.

There was enthused analysis over the clarity of the outcome, over the reasons for victory and defeat.

Also, though, there was a sense of expectations which may be difficult to meet.

Just look at the raw economic figures in the US: manufacturing at a quarter century low, car sales slumping.

Questions raised this morning. Will President Obama - and the new Congress - maintain, in full, the banking bail-out?

Will there be an economic reinvigoration package: of what sort?

What happens to energy policy: will sustainability fall victim to the urgent need for economic growth?

What happens to foreign policy? The Middle East, the conflicts in Iraq and Afghanistan.

More generally, is this a seismic shift in US voting patterns - or change driven by one well-funded, highly-motivated individual, facing an opponent tainted by the unpopularity of his predecessor?

If it is a fundamental change, can President Obama retain the confidence of the young, the students, the African-Americans who have offered him their energetic support?

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The world is watching. It's the electoral contest that will shape the future of the planet.

Yes, from Cardenden to Methil, they'll make their choice. Glenrothes will speak. Be my guest.

Try telling Fifers that there's something rather more significant, electorally, happening across the water. They won't believe you. They know, in their souls, that nothing important happens in Dundee.

Ach, I don't mean it, really. I love Fife. I studied at a university there. OK, so maybe St Andrews isn't quintessentially Fife. Former miners bit thin on the ground around the Ladebraes and the Scores.

For those unlucky enough to have been born outwith the Kingdom, the contest in Glenrothes is somewhat overshadowed by the choice confronting millions of Americans.

Energetic endeavours

Is that deliberate? Was it part of Labour's strategic thinking to time this by-election alongside one of the most intriguing US Presidential contests in history?

Almost certainly, yes. Will it work? Depends what you mean. It won't affect the outcome. Fifers will vote according to their own choice.

Of course, that wasn't the thinking which was that a potential defeat might be minimised in media impact by coterminosity with a much larger political event.

However, there's another timing issue in Glenrothes. Will the voters reward Gordon Brown for his energetic endeavours to rescue the economy? (Labour's theory.)

Or has the impact of that declined already, leaving voters more concerned about their own circumstances? (Copyright, SNP.)

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