Alex Salmond warns of Holyrood powers 'stalemate'

FIRST Minister Alex Salmond has warned the UK government against creating a "stalemate" over new increased powers for Holyrood.

Following his party's historic victory in the Scottish Parliament elections, Mr Salmond yesterday began a series of top-level meetings with UK ministers, starting with Conservative Chancellor George Osborne.

The meetings were over-shadowed by the Scottish Parliament's potential veto on the Scotland Bill if the SNP's demands on new powers are not met. Quoting former US president Ronald Reagan's famous conversations with Mikhail Gorbachev, Mr Salmond put it to ministers that on many of the demands for extra powers it was easier to "just say yes".

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Asked afterwards whether he would be willing to use his parliamentary majority to block the Scotland Bill if he did not get his way on new powers for Holyrood, Mr Salmond said: "I would want us to be in a position of stalemate." But he added he was "optimistic that reasonable people could come to reasonable decisions for the good of Scotland".

Despite his warning over a potential stalemate - with Holyrood holding a potential veto on the Scotland Bill - Mr Salmond said he was pleased with the meeting with Mr Osborne in the Treasury, the first time the two have met as ministers.

Ahead of the meeting, the Treasury had made it clear it is willing to increase and bring forward borrowing powers for Holyrood, but there was also movement on a row over the 250 million fossil fuel levy, which is being held for Scotland by Ofgem but cannot be touched by the Scottish Government.

Mr Osborne has also offered to compromise on his 10 billion tax grab of North Sea oil and gas revenues to help fund the fuel stabiliser to prevent investment being lost along with up to 10,000 jobs and, what Mr Salmond claimed could be, 120bn of revenue from a billion lost barrels.

However, while Mr Osborne said he would consider other issues he was unwilling to move on giving Holyrood control over corporation tax and the Crown Estates.

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On corporation tax, Mr Osborne said that the Scottish Government would have to wait until the review into devolving it to the Northern Ireland Assembly was completed. The First Minister accepted corporation tax would "take longer than other matters" to resolve.

Mr Salmond noted that the Chancellor had found ways of "not saying no" to everything and suggested that this was in recognition of his party's mandate in the election.

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On the meeting, he said: "I take things in terms of body language. His (Mr Osborne's] body language was very positive on borrowing, good on the fossil fuel levy and quite good on North Sea investment, it then went down in stages to 'not at all positive' on corporation tax."

The Treasury has said previously that if the money from the fossil fuel levy, which has to be spent on renewable projects, is taken up then the same amount will be removed from the Scottish block grant.

A compromise in which the Scottish Government was handed an extra 200 million for renewables as a sweetener has been rejected by the SNP. After his meeting, Mr Salmond said: "The Chancellor agreed it is ludicrous and he was very positive about doing something about it."

Mr Osborne is also said to be looking at field allowances to provide exemptions from his new 12 per cent increase in tax. But with around 70 incremental investment projects worth a billion barrels of oil thought to be at risk, Mr Salmond wants a more specific system of taxing individual fields.

The Chancellor has accepted an offer to look at a report from a Scottish Government economist to find a solution.

A Treasury spokesman declined to comment on Mr Salmond's remarks, but said the possibility of field allowances for marginal gas fields had been addressed in the March Budget.

But a Scotland Office spokesman confirmed that there had been progress on both the fossil fuel levy and borrowing powers.

In particular, it believes that an agreement on borrowing powers is close to being concluded.

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The spokesman said: "The government is in listening mood. The First Minister has been asked to come back with detailed proposals on the issues that have been raised.

"Nothing was ruled out today, but nothing was ruled in either. The discussions were positive."The First Minister was also due last night to hold discussions with Energy Secretary Chris Huhne, in which he was to tackle punitive transmission costs of electricity produced in Scotland as well as pushing forward Scotland's renewable energy agenda.

Mr Huhne is understood to be willing to look at the problem of transmission charges and is in support of the direction of travel on encouraging the Scottish renewable energy industry.

Mr Salmond was to hold talks today with Liberal Democrat Deputy Prime Minister Nick Clegg and Scottish Secretary Michael Moore about the Scotland Bill, in which he expected to press them to hand over powers on broadcasting.