S2M-2729 Financial Services Strategy

Scottish Parliament

Wednesday 27 April 2005

[THE DEPUTY PRESIDING OFFICER opened the meeting at 14:30]

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Financial Services Strategy

The Deputy Presiding Officer (Trish Godman): The next item of business is a debate on motion S2M-2729, in the name of Jim Wallace, on the financial services strategy.

14:34

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16:02

Stewart Stevenson (Banff and Buchan) (SNP): I start by making reference to my register of interests, which shows my investment in Bank of Scotland stock—now Halifax and Bank of Scotland stock—my pension from Bank of Scotland, my investments with Scottish Provident and Standard Life, my membership of Amicus, the trade union that was party to the strategy group, my wife's pension and investments with the Royal Bank of Scotland, and my brother's continuing employment in a very senior position with that bank. Apart from that, I have no interest whatever in the debate.

Some people's credit is already overdrawn—I refer to Jamie Stone. However, in the context of this debate, the credit of this Parliament is substantial, because it was an act of this Parliament in January 1695 that established the Bank of Scotland, which opened for business on 17 July of that year. Of course, the Bank of Scotland was set up because William Paterson, a Scot, had established the Bank of England the previous year, causing a certain amount of resentment. Therefore, English interests came to Scotland to establish the Bank of Scotland together with local interests.

The initial board of the Bank of Scotland had 12 members, six English and six Scottish—very fair and very reasonable. Of course, the articles of association passed by this Parliament stated that only directors who lived in Scotland could vote at board meetings—very fair and very equitable. If only we had such rules in business today.

Our Scottish banks continue to have substantial and important international connections. The chair of the group that produced the strategy document, "Success", Susan Rice, is an American who has experience of an entirely different banking regime and brings an enormous amount to Scotland. The Executive always encourages the best team working and she has tremendously effective academic connections, as her husband is the boss of the University of Aberdeen.

Banks get involved in a range of things and I was pleased to hear the Greens refer to credit unions. They represent tremendously important grass-roots banking that we must do more to encourage. The Bank of Scotland creditably baled out a credit union in Sighthill that got into trouble because of the malfeasance of some of the people involved.

Banking is not as boring an industry as some people think. I share with members the fact that the last person to die in a duel in Scotland was the Bank of Scotland manager at Kirkcaldy. He had a dispute with one of his customers, was challenged to a duel and, foolishly, accepted the challenge and lost. The gun that killed that manager may be examined in the Bank of Scotland museum to this day.

I characterise the strategy as a bears-in-the-wood strategy, although there are a few bulls out there too. I shall explain why I so characterise it. There are a number of rules about bears. The first is that when one is making love to a bear, one stops when the bear wants one to and not a second before. The document is about the financial bears of Scotland making love to the Scottish Executive. That is excellent, but although the document articulates clearly what the banks want from the Executive, it articulates rather less clearly what the Executive wants from the banks. I repeat the first rule of bears: one stops making love to bears when they want one to.

Banks are getting engaged with Government more than they used to. As long ago as 1998, Gavin Masterton, the then treasurer of the Bank of Scotland, asked me whether he should join a Labour Government-initiated group to discuss banking. I replied, "Yes of course you should. If you don't agree with them, it's time you went and told them, and if you do, you should support them in all their efforts."

Rule 2 of the bears in the woods is important too: it is the bears' wood, not our wood, and we touch very little on what they do in the wood. The implementation plan for the first year, which was published last month and which, helpfully, is also called "Success", contains 31 objectives. I pose the question: how many of those objectives are ones that we would not have progressed anyway, given pressures from elsewhere? I am not terribly clear whether many of them are financial-services based, but, again, they illustrate perfectly the fact that the bears own the wood. There is a danger in seeming to listen to banks more than we listen to others.

The third rule of the bears in the woods is that bears leave the wood only when they are hungry. That is why the banks are now engaging with Government in Scotland.

Mr Wallace: Stewart Stevenson has presented the strategy as being solely for the banking sector; indeed he seems to think that banks and bears are synonymous—I am not sure whether there is a lot of bull there too. Will he acknowledge that, although banks are an important part of Scotland's financial services industry, the industry embraces many more sectors? Will he clarify whether he thinks that banks and bears are synonymous or whether he thinks that the woods also belong to others?

Stewart Stevenson: That is an interesting intervention. I will say that many of the objectives in the document, such as improving the mobile phone operation between Glasgow and Edinburgh, are excellent and will benefit many people apart from the banks. However, that illustrates the point that I was making: what in the document is specific to banks? Comparatively little.

Let us welcome the fact that the Government and banks are talking and listening to each other. I have a lot of time for banks, not least because of their healthy dividends—I am not ashamed to say that. I would say, though, that there are things missing from what we have before us. For example, there is nothing about the Government encouraging or promoting the establishment of funds that would enable entrepreneurs, at early stages—but after Scottish Enterprise might have helped them—to develop ideas, move ideas into production and support innovation. We do not need to rely on the state to do that, but the state's role is to facilitate, encourage and create a framework within which that might happen. That is something that we should think about.

I cannot leave the subject of bears in woods without a brief mention of bears' lavatorial habits. Bears leave their digestive waste in the woods. We must think about that in the following way. Over the past 30 years—save for five months—Scotland's interest rates have been higher than those in Germany or the euro zone. One of the interesting things is that the banks rather like that situation because, when interest rates are high, the margins between borrowing and lending on the banks' books rise, as do banks' profits. Let us not imagine that the banks' high profits are simply and solely due to their entrepreneurial skills and their focus on getting the best bang for their buck; they are also due to the choices that Governments make. The interests of banks and the interests of the public do not always wholly coincide.

It is important that Governments and banks keep talking, but we must get the banks to listen a little more closely to what Government and the public want from them and not simply listen to what the banks want from us.

16:12