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has been requested to give up at least part of his £650,000 annual pension entitlement.

The former boss of RBS is, we are told, "thinking about it".

At Holyrood, politicians suggested he might accelerate his thought process somewhat.

The party leaders were united in condemning the deal. (Annabel Goldie pursued a tack of her own with regard to VAT which need not detain us here.)

Tavish Scott of the LibDems was splendidly vituperative. He said that Sir Fred's package was 140 times the size of the state pension.

Iain Gray was agin it, as was the first minister.

However, at that point, unity evaporated. For Labour, Mr Gray attempted to pin the blame for the deal on Sir George Mathewson, formerly of RBS, now chairing the FM's team of economic advisers.

'Misfired attack'

Actually, he said that he was not out to undermine Sir George's reputation - then proceeded to attempt just that.

For this observer, the attack rather misfired. Not least because Mr Salmond ably deflected it by highlighting the role played by the UK (Labour) Government in respect of RBS, including the departure of Sir Fred.

Mr Salmond relied upon a comment from the present RBS boss Stephen Hester to the effect that the UK Government played a role in the arrangements covering Sir Fred's exit.

. He says ministers had thought, in October when they intervened in the bank, that the deal for Sir Fred was legally binding.

They learned last week that elements of it might have been discretionary upon the bank.

Should they not, sceptical MPs are now asking, have inquired a little more closely at the time?

Notable exasperation

We are told that both RBS and UK Financial Investments, which manages the UK Government's shareholding, are trying to claw back some of the cash from the departed chief executive.

At RBS, meanwhile, one detects a notable exasperation with the media focus upon Sir Fred. Mr Hester, understandably, wants to focus on the bank's future.

We in Scotland - and taxpayers throughout the UK - must hope that he is successful in his efforts to revive RBS.

However, sometimes the ventilation of public anger is entirely justified. This is one such case.

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Quite a bit more today anent Holyrood's financial powers.

Firstly, John Swinney has for change.

And the conclusion? That independence is the berries.

That it far outpaces the sundry proposed reforms of devolution in terms of enhancing the economy.

I would imagine that you are less than shocked at that disclosure, given that Mr Swinney's driving ambition is to secure independence for Scotland.

However, to be fair, the document does not simply jump to the conclusion. It steers there elegantly via a pretty comprehensive analysis of the alternatives.

We have here, in outline, the submission Scottish Ministers are now pledged to send to the Calman Commission.

Supremely relaxed

Which brings us to today's second development. Labour in Scotland has published its response to the self-same commission.

They're relaxed about borrowing powers for Holyrood. Indeed, Andy Kerr, their finance spokesman, appears supremely relaxed on that topic. (Some MPs muscles may be a little more rigid.)

They believe, in short, that Calman should now look seriously at borrowing: including how the money would be repaid.

On powers, they're largely content with the 1999 settlement. (Author: the Labour Party.)

But they believe Calman might care to look at an enhanced role for Holyrood in the operation of the Health and Safety Executive plus Gaelic broadcasting.

Contrary to some internal prompting, they do not want any powers returned to Westminster - including re energy.

Instead, they want enhanced co-operation between Edinburgh and London. Indeed, that is a core theme.

To return to the Swinney document. Remember this is a government, not party, publication.

Indepedence argument

Self-evidently, it is driven by ministerial aims: aka, independence.

But it also contains fascinating analysis of the alternative options. Perhaps, in addition to ministerial control, one can detect evidence of civil service input here, with an eye to that wider debate.

One can see issues here being drawn to the attention of London, quite distinct from the over-reaching indepedence argument.

So we have a warning re the possible impact of a needs review of Barnett: this could lead, we are told, to "potential real cuts in funding" for Scotland. Translation: Scotland is ready to fight in any Treasury-led review.

On assigned revenues - the concept of collecting taxation in Scotland without the power to vary it - the document is notably cool.

The document doesn't discern any evidence that this would create an economic growth incentive. To the contrary, it's described as "Barnett with greater uncertainty and volatility".

So that would be a no, then.

'Significant step'

By contrast, there is a notable warmth shown to the concept of "devolution max" - whereby Scotland would raise and control most taxation, while sending a subvention to London for shared services like defence.

Barnett in reverse, if you like.

This, says the document, would be a "significant step forward". It concludes: "Short of independence, this option would create the maximum policy discretion for the Scottish Government to increase sustainable economic growth."

In interviews, Mr Swinney has, of course, stressed the value of independence - while noting the emergence of a tentative consensus on issues such as borrowing powers.

Just possibly, he is gearing up to bank what he can.

Let's not kid ourselves. Nationalists and Unionists remain fundamentally at odds. They do not agree. However, there is now an intriguing territory upon which to stage a debate, aside from those fundamental battle lines.

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It is hard, in all truth, to contemplate circumstances more egregious, more calculated to appall.

Hundreds, thousands of people came forward for blood transfusion or haemophilia treatment. They thought the system was helping them. They thought it would make their lives better.

Hundreds, thousands ended up infected with Hepatitis C and HIV.

Collectively, we owe them a duty of care. It is entirely right, therefore, to apply close scrutiny to the plans to investigate this tragedy.

Two developments today. Firstly, we have had conducted by the Labour peer Lord Archer of Sandwell.

He notes it was "difficult to imagine" a worse disaster for the NHS. He condemns the system which permitted the importation of contaminated blood in the 1970s and 1980s without sufficient monitoring.

Secondly, we have heard concerns voiced in Scotland that the . Perhaps inevitably, the talk in advance is of "whitewash".

Inquiry limits

I heard Nicola Sturgeon on GMS this morning on this topic - and found her to be frank about the limits of the inquiry while attempting to offer reassurance, in my view with some success.

The inquiry in Scotland will be statutory, announced by the Scottish Government. It will be headed by Lord Penrose.

The concerns are two fold. Will the inquiry be able to get at all the facts? Will the inquiry be able to compel all relevant witnesses to attend?

On the second point, the answer, bluntly, is no. t least in as much as one envisages that there will be key witnesses in Whitehall.

Lord Archer notes the UK Government declined to offer public evidence to his inquiry - while co-operating to the extent of providing data and details.

He lacked the power of compulsion because his inquiry was non-statutory. Not, in short, set up by government.

The Penrose inquiry in Scotland has governmental backing - but it will similarly be unable to compel witnesses beyond Scottish shores. That is a plain fact of law.

Specific problem

However, it is believed within the Scottish Government that this may not present an insuperable problem.

There has been talk this morning that a specific problem arises in that the events in question took place before devolution in 1999.

However, that may not be as big a difficulty as some envisage. Even before the advent of a Scottish Parliament, health services were administratively devolved to Scotland.

There was a Scottish Home and Health Department with Scottish Ministers. Papers and documents from the SHHD fall within the remit of the present Scottish Government.

There could still be an issue, however. Day-to-day charge of the blood transfusion service lay in Scotland. But Whitehall had responsibility for the regulation and licensing of blood products.

Ms Sturgeon is adamant she has assurances of co-operation from the Department of Health in London.

It will be up to Lord Penrose to activate those assurances - or voice complaints if he faces frustration.

All power to him.

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.

Iain Gray tore up a copy of the SNP manifesto, presumably having removed a few pages first in order to ease the task.

Tavish Scott followed Mr Gray in suggesting that the next casualty from the said manifesto should be the promise to hold a referendum on independence.

But, amid all the sound and fury, perhaps the most intriguing question, long term, came from Annabel Goldie of the Tories.

What, she asked, happens to council tax now?

Good question. What indeed? With , will there be efforts to reform the council tax?

The Tories say they'd cut the rate for all - and add an extra cut for pensioners. Labour? They'll get back to us once they've decided precisely what to do, painfully aware that their plans at the last election didn't stack up.

Political pain

It's likely, however, that any reform they suggest will involve rebanding in order to make those in bigger houses pay a higher proportion of the charge.

Will the Scottish Government itself sanction reform of the council tax, now that it has dropped its own proposals? Perhaps on an interim basis pending efforts to return to LIT post-election?

Seems unlikely. Seems much more probable that they'll concentrate on their project to freeze council tax charges in order to lessen the pain for those obliged to pay.

Here's another question. Why didn't ministers lessen the political pain for themselves by advancing a Bill to introduce LIT, watch it fail - and then blame their Labour and Tory rivals?

Because they had come to the conclusion, for a range of reasons, that LIT wasn't going to run in current circumstances.

It is, arguably, to their credit that they didn't pursue the Machiavellian option outlined above, that they confronted the question and took the hit.

Remember that the problems afflicting LIT were cumulative. Firstly, ministers were already committed to spending millions in order to peg LIT at 3p in the pound.

Anti-recession agenda

Which, in itself, tells you that they acknowledged potential problems if LIT was allowed to float freely.

Secondly, those millions become less readily available when set against a relatively tight financial settlement - and one that is set to become tighter once Scotland suffers the Barnett consequential of efficiency savings being imposed upon Whitehall.

Thirdly, . If withheld under LIT, as UK ministers have insisted would happen, that would add hugely to the cost of the new tax.

Scottish Ministers could not guarantee that the benefit would continue.

Fourthly, the question of collection. Would the Scottish Government

Fifthly, . Ministers insist they were ready to face down that opposition, if necessary.

But how much easier to pursue an anti-recession agenda if you withdraw a tax plan loathed by business.

Politically, Labour will now pursue the claim that the SNP cannot be trusted in office. In return, the SNP will pursue the argument that they have been thwarted by London misrule.

In outline, there, the next election.

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UPDATE:And so local income tax is no more. Or at least not for this present Scottish Parliament.

John Swinney has announced that he will not proceed with plans for LIT until after the next election.

According to Mr Swinney, this is because he cannot command a parliamentary majority on the issue - and because there are cuts coming down the line from Westminster which threaten to destabilise council finances.

Not the environment, he argues, in which to attempt a complete overhaul in the system of funding local authorities.

The announcement - at the start of the debate on local government finance - produced a sharp reaction from opposition parties.

Labour's Andy Kerr said it was the "biggest retreat" in the history of this parliament. He added that it was now plain that the SNP had been elected on a false prospectus.

Expect much more of this from Labour - in the shape of accusations that key SNP policies are being steadily dropped. Expect to hear revived talk of student debt and support for first time house buyers.

The SNP answer? Welcome to minority government.

Equally, though, this move will enable Mr Swinney to build a strengthened relationship with the business sector - upon whom he will rely heavily in efforts to combat recession.

Business organisations don't always agree with each other on everything. Indeed, they are occasionally disputatious. But they cordially loathed LIT - and said so, repeatedly.

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Now we get down to details - and to a substantive political argument. Will the help to stimulate the economy?

If it doesn't, who will take the blame?

Two items today. Firstly, we have further evidence, if it were needed, that the economy is in severe trouble.

Just .

Secondly, MSPs will today .

John Swinney, the finance secretary, will stress that this is a relatively good deal, that he has taken steps to enhance the cash available to councils, that he has included money to enable a further year of council tax freeze.

Opposition critics will point to examples of constraint around the country: from Highland to Dumfries and Galloway.

I would be grateful for your input. What's happening in your area? Are there damaging cuts - or are councils protesting too much? Could they find productive savings to release money?

How about capital spending? Are the projects under way?

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UPDATE: Bit more re the reshuffle. As with Linda Fabiani, the new Culture Minister Mike Russell works from within the office of the first minister, alongside Bruce Crawford.

But Mr Russell, a former SNP chief executive, will have a key new responsibility: for the constitution.

As such, he'll prepare the submission to the Calman Commission on borrowing powers for Holyrood. And he'll lay the path to the proposed referendum on independence next year.

When he was party chief exec, Mr Russell was the number one lieutenant to Alex Salmond in his first incarnation as SNP leader.

Together, they devised and pursued party strategy.

Now he's back in that role - but, this time, inside government. As one observer commented, Mike Russell makes his best contributions when he's placed right at the core of decision making.

- - - - - - - - - -

An - although not one that laps upon the shores of the cabinet.

Three ministers outwith cabinet have been sacked: Culture Minister Linda Fabiani, Schools Minister Maureen Watt and Communities and Sports Minister Stewart Maxwell.

Each was thought to have faced difficulties, either generally or with particular issues: Creative Scotland in the case of Ms Fabiani and SportScotland in the case of Mr Maxwell.

So far, no particular intrigue. But look at their replacements: Mike Russell at culture; Roseanna Cunningham replacing him at environment; Keith Brown at schools and Alex Neil at communities.

Alex Salmond says this represents "fresh talent". Few would dispute the word talent - and they are "fresh" in that three of them have no ministerial experience.

But, with the exception of Mr Brown who has performed with diligence at Holyrood, these are scarcely untested politicians. To the contrary, they are big names with a hinterland of their own in the SNP.

Indeed, both Mike Russell and Roseanna Cunningham contested the leadership against Mr Salmond.

Further, Alex Neil was in the past a critic of the strategy of the SNP under Mr Salmond and John Swinney. I stress, "in the past".

He has been notably, indeed virulently, loyal in more recent years, firmly backing the government from the back benches.

It would appear that any residual disquiet over his colleagues in the mind of the FM has vanished or at least subsided to the extent of bringing them inside the team and/or promoting them.

Partly, he is rewarding palpable talent. Partly, he may be following the doctrine of LBJ regarding the positioning of your potential critics vis a vis your canvas accommodation.

Removing the tongue from my cheek, I should add that each of the three is intelligent, thoughtful, vocally skilled and open to ideas: not universal characteristics in politics.

Indeed, as a junior minister, Mike Russell has frequently been tipped for cabinet rank in future.

They all deserve their promotion. My congratulations to them. Condolences to the departing three.

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You seemed to rise to the previous post re: Scottish borrowing. So herewith a bit more.

In response to one query, the Northern Ireland Executive does indeed have a borrowing power of up to £2bn. It was introduced in May 2002 as part of a reinvestment and reform initiative.

The exec can borrow from the National Loans Fund (Proprietor, HM Treasury.)

Borrowing must be to finance capital investment - not current spending. Aka the Golden Rule (Proprietor, G. Brown.)

To the end of 2007-8, the NI Exec had borrowed £723m.

So is that the model for Scotland? Well, I keep hearing decided scepticism from the UK Government (Prop., see above).

They argue that the NI deal is tantamount to the aggregation of borrowing powers by Scottish local authorities, stressing that many functions carried out locally here are delivered throughout NI by central boards.

New liberty

They argue further that borrowing does not of itself create new, unfettered resources. It is borrowing. Borrowing that has to be paid back.

If Scotland were to be granted borrowing powers, it is argued, that would simply replace the capital element of the present allocation, as determined by Barnett.

It is argued that Scotland could not be granted substantial new liberty in borrowing powers without affecting: a) public spending totals; and b) the amount of capital investment available elsewhere in the UK.

It is argued further that, if additional capital borrowing is granted, that would also require a revenue hike to cover interest payments. Consequently, borrowing would have to be strictly limited by HM Treasury.

Against that, it is argued that HMT is insufficiently flexible - as witness the current impasse over the Forth Crossing.

I'd welcome further contributions, perhaps particularly those which address the issue of how borrowing would be repaid. And to whom. Treasury borrowing only? Or open market?

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This consensus thing seems to be catching. . Now the issue of borrowing powers for the Scottish Government.

At the moment, the Treasury has the power to borrow money. Local councils have the power to borrow money. But the Scottish Government has no such power.

The case for granting such a change? It would enhance the financial autonomy of the devolved administration and allow them, within limits, to fund capital projects.

The case against? The Scottish Government already gets borrowed money to fund capital projects, albeit processed through the Treasury.

Further, unless sharply constrained, borrowing powers at the devolved level could countermand UK efforts to limit the national debt.

Although, admittedly, that is rather a tricky case to advance at the moment when debt is soaring without devolved assistance.

But back to that consensus. Holyrood has been debating the issue on a motion from the Liberal Democrats.

Autonomy and accountability

The SNP, self-evidently, is in favour of enhancing Holyrood powers - but has now agreed, as a government, to submit evidence to the urging such a development.

A Tory amendment to the Lib Dem motion is also warm towards the concept of borrowing powers - while suggesting that it "could" rather than "would" improve Holyrood autonomy and accountability.

Which leaves Labour. Their amendment is notably neutral, simply welcoming the examination of the issue by all parties and also endorsing the Scottish Government's decision to engage with Calman.

However, Sir Kenneth Calman held talks with Labour MSPs last night - and I believe Labour's submission to his commission is imminent.

My feeling is that Labour in Scotland is decidedly relaxed about the granting of borrowing powers to Holyrood.

Will that sense of relaxation extend to the Treasury?

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Update: And so the budget duly carried - by 123 votes to 2. The two being the Greens.

Intriguingly, there was little jubilation in the chamber on the government benches.

Perhaps it was a sense of dislocation caused by the unexpected experience of Labour and the SNP voting together.

Perhaps it was weariness. Anyway, it's through.

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Update: The Greens say they'll vote "No" - unless they receive assurances that the proposed insulation scheme will be free and area-based: that is, not triggered by individual applications.

Right now, they say ministers have dropped this approach. Plus they've now been offered less.

You'll remember the deal on offer last week, eventually, was £22m from the government plus £11m leveraged in from "social partners".

Now it's £15m plus £15m. But the key point, according to the Greens, is that it is a means-tested scheme.

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And then there was one. One party still , that is.

And that party would be? The Greens - whose opposition tipped the balance last week.

This morning Labour's Iain Gray added his voice to the litany of support for the £33bn spending package.

Mr Gray freely concedes - how could he otherwise - that he has compromised still further in discussions with the first minister.

A few members of the wicked media suggested to Mr Gray that he had settled for a package eerily similar to what was on offer last week.

To the contrary, said Mr Gray, the deal done today guarantees new apprenticeships for 7,800 people - plus guarantees for apprentices who lose their jobs, money for retraining in struggling areas, a summit on jobs and money for town centre regeneration.

These various ideas have been in the ether for some time but, according to Mr Gray, this is the first time they have all come together.

Cash anxiety

That is true. But it would still appear the offer of 7,800 apprenticeships for a single year was previously made - although not included in the budget bill because there was no deal with Labour.

Still, no matter. Considerable compromise there has been.

There is no guarantee for subsequent years - partly because of anxiety over cash, partly because of concern that Scottish industry may not be able to expand its apprentice system so rapidly.

So what's really changed? , Labour has taken the temperature - and detected voter disquiet with political machinations at a time of economic crisis.

To grasp the importance of this deal, you have to appreciate the degree of mutual suspicion and hostility between Labour and the SNP.

It's tangible. You can taste it.

Right to the last minute, there were murmurings in Labour ranks, murmurings from senior figures, that the SNP seek to exclude Labour from the emerging consensus.

Formal offer

One even said they reckoned Alex Salmond had two competing spirits on his shoulders: one urging a deal, one counselling mischief.

Ministers are adamant, insistent that they were always eager to reach as wide an accommodation as possible. And so it proved.

Which brings us to the Greens. They have now been made a formal offer with regard to their proposed home insulation package. But it seems that it is less than was on offer last week.

Not surprisingly, given that Mr Swinney has now had to find extra cash to deal with Labour.

Will the Greens vote "no"? I'll get back to you. But the budget carries. And, right now, the Scottish Government will live with that.

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More re the Budget. .

Additional aspects of the agreement include a financial jobs task force, a new role for the Council of Economic Advisers and a guaranteed revenue stream to support school building projects which will emerge through the Scottish Futures Trust.

As to Labour, my guess is they will go for it. Their group considered the possible deal - again as outlined earlier.

Why do I think they'll go for it? Because momentum matters in politics - and co-operation is now definitely the direction of travel.

I expect Labour frontbenchers to stress that they have obtained all they were seeking on apprenticeships: in the current budget year.

Formal offer

They don't have cast iron promises for future years - not least because ministers say those years will be tight. Labour simply has to live with that.

Expect Labour also to stress other elements: the guarantee that apprentices whose firms go bust will be helped; money for town centre redevelopment (I know, I know, the Tories claim that as theirs); and money for helping areas which suffer economic reverse.

The Greens, too, are awaiting a formal offer. I think they'll go for it too.

Unanimous support, anyone? If that happens, I would somehow anticipate that the subterranean muttering about John Swinney - which I disdained previously - may subside somewhat.

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More re the Budget. . Details this afternoon but herewith a bit of info.

The Lib Dems will vote FOR the budget, switching from their opposition last Wednesday. Together with Tory support, that in itself will be enough to get the budget through tomorrow.

The deal? Nothing on immediate spending plans. Lib Dems felt it would be inappropriate to produce a shopping list at this stage - given that they had not entered negotiations at an earlier point because they were pursuing tax cuts.

Instead, SNP ministers will agree to table a letter to the urging that borrowing powers be conceded to Holyrood.

Further, it has been agreed that there will be a widespread review of spending by the Scottish Government. It is hoped that all parties - and external experts - will participate in this.

Neither, I think, will prove particularly onerous for the SNP given that they, self-evidently, back greater financial clout for Holyrood and would have to review expenditure anyway.

However, we should perhaps not be too tough on the LibDems. I believe they held a finger up to the wind - and detected public disquiet with political machinations at a time of economic crisis.

Releasing cash

The spending review is intriguing. It will be a single review - but with multiple objectives.

For ministers, it is a chance to prepare for an expected reduction of £500m in Scottish spending as a consequence of UK efficiency savings due to kick in from 2010-11.

For the Libdems, it is a chance to pursue savings which might then release cash for the tax cuts to which they remain committed.

Talks are still under way with the Greens. Which leaves Labour. Alex Salmond met Iain Gray this morning.

No deal yet. Labour wants more than 15,000 extra apprentices over two years - in itself a scaled down version of its original three year demand.

I understand ministers will offer 7,000 plus over a single year - with a pledge to look seriously at the second year.

That second year, however, would presumably come within the scope of the spending review agreed with the Lib Dems.

And timing? Think it might all now go through tomorrow.

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A somewhat acute dilemma for UK Government Ministers, including the Scottish Secretary, with regard to the .

The dilemma? Whether to insist that the employment of Italian and Portuguese workers for a project at the plant is entirely in line with EU - and hence UK law?

Or whether to voice sympathy for those objecting to the deal, perhaps mindful of Gordon Brown's previous pledge to enhance "British jobs for British workers".

Ministers, including Jim Murphy, have stressed that wildcat supportive action in Scotland should play no part in the dispute.

Mr Murphy has intervened in an effort to calm the atmosphere north of the Border.

But of course that doesn't address the central question: is there in any way a genuine grievance here, regardless of the tactics?

Weekend chatter featured some ministerial and ex-ministerial sympathy for the British workers.

Too hasty

However, today, most seem to be taking their line from Lord Mandelson.

Which is that, provided UK employment law, including the minimum wage, has been observed, then there can be no dispute: that the hiring of EU citizens by the refinery's subcontractors is legal.

For myself, I think one or two have observers may have been rather too hasty in criticising the strikers by accusing them of intuitive xenophobia.

Yes, it is true that there are political forces who may welcome the opportunity to exploit such a dispute. However, that does not mean that, ipso facto, there is no grievance at source.

The Scottish workers I have heard protesting about the Lincolshire deal have argued that they are not opposed to the employment of foreign workers per se.

Rather, they complain that this particular deal has withheld the prospect of British workers getting the chance of employment.

The basics. The refinery is owned by Total. They contracted to a Calinfornian firm to extend diesel refining capacity at the plant.

That work was then sub-contracted to an Italian firm with a proviso that they would use their established Italian and Portuguese workforce.

Total has strenuously denied that it has any policy or practice of discriminating against British workers.

The workers' case is that there would appear to be exclusion in this particular issue. This may be settled by arbitration.

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