Salmond puts SNP 'on election footing' after Budget defeat by Greens

At the end of a day of extraordinary drama in the chamber of the Scottish Parliament, the Green MSP voted down the Budget because of a technical dispute over funding.

The jubilant laughter and celebration of last year's Budget victory was nowhere to be seen. Alex Salmond, the First Minister, and John Swinney, his finance secretary, sat huddled together, stony-faced, as the vote was announced to gasps of surprise.

Even just a couple of minutes before the vote, Mr Swinney believed he had won over the Greens. He had agreed to insulate 100,000 homes in Scotland – as Mr Harvie had demanded. What he could not do was give a guarantee that all the 33 million offered for the project would come from new funds.

After all the negotiations – deals thrashed out at the back of the chamber and compromise solutions pinging back and forth by e-mail between Mr Swinney and Mr Harvie – the Green MSP decided it was just not enough.

He was angry partly because he had not been given the assurances he wanted, but also because of the way he had been treated by Mr Swinney. So he and his Green colleague, Robin Harper, voted No.

Because of the tightly balanced nature of the parliament, that decision was enough to bring down the Budget.

Mr Harvie will meet Mr Swinney this morning in an attempt to repair the damage his decision has caused, and the Green co-leader insisted he would be "constructive" in his talks with the finance secretary.

But Mr Harvie's decision was already starting to cause problems last night and it could even lead to the resignation of the government and an election in Scotland.

Mr Salmond said he would make one more attempt to get his Budget passed – he has until the end of March to do that – but if this next attempt failed, he would resign as First Minister and try to force an election.

Clearly infuriated with the tactics of the Greens, Mr Salmond said: "I am putting the SNP on an election footing tonight. We have a responsibility to try to get the Budget through."

After a day of extraordinary drama at Holyrood, which at one stage involved Mr Salmond negotiating with Mr Harvie at the back of the chamber, Mr Swinney believed he had secured enough votes to get the Budget agreed.

The Tories had agreed to back it, as had the independent MSP Margo MacDonald, and Mr Swinney had offered the Greens 22 million towards their insulation scheme to get them on board too – money he promised would come from higher-than-expected business rate receipts.

Labour and the Liberal Democrats had already let it be known they would oppose the Budget, so everything came down to the Greens, putting the party's two MSPs in the most influential position they have ever had.

They had originally asked for 100 million for home insulation. Mr Harvie then used his Budget speech to tell Mr Swinney he would back the Budget if he got 33 million for that project.

Mr Harvie was also angry that he had been negotiating with the finance secretary since October and still had not had a proper answer to his demand.

Right at the end of the debate, Mr Swinney said 33 million would be provided for the scheme, insulating 100,000 houses, as Mr Harvie wanted. Although Mr Swinney guaranteed that this money would be spent, he could not give an assurance that all of it would come from the Scottish Government.

Mr Harvie was worried that some of the money might come out of budgets already earmarked for fuel poverty when he wanted it all to be new money. And it was at that point that he decided the Greens should oppose the SNP's Budget.

With the two Greens joining Labour and the Liberal Democrats in voting against, the vote was tied 64-64. Under the rules of the parliament, Alex Fergusson, the Presiding Officer, had to vote for the status quo and, in this case, the status quo was last year's Budget. So Mr Fergusson cast his vote against the Budget, causing it to fall.

Mr Harvie was unrepentant afterwards and insisted that he had done the right thing. "I think it's necessary that we all stay a bit calm, try and be a bit grown-up and let's see a better Budget," he said.

Although SNP ministers have time to submit another Budget, the implications of Mr Harvie's last-minute decision will start to be felt very soon.

Local authorities were due to start setting their council tax rates on 12 February, but now they cannot do so because they do not know whether they will get the 70 million in the Budget for this year's council tax freeze.

The First Minister also warned that, because of the worsening economic situation, Scotland needed a Budget, and needed one quickly. The latest gross domestic product figures, published yesterday, showed Scotland is accelerating into the recession quicker than the rest of the UK.

Mr Salmond said: "Every day that passes where the Budget is not in place, our ability to plan effectively, during a time of enormous economic uncertainty, is reduced."

Immediately after the vote, Iain Gray, the Scottish Labour leader, increased the pressure on SNP ministers by warning he would introduce a "no confidence" vote on the performance of the government if the new, revised Budget did not get through parliament. Under Holyrood rules, if a motion of no confidence in the First Minister is supported by 25 MSPs, a vote is taken. If this vote is passed, MSPs have 28 days to appoint a new First Minister. If no First Minister is chosen, an election is called.

Mr Gray said: "This is a government that is badly damaged. They tried to negotiate things they'd known for weeks and months that we had known about and the Greens had known about.

"It culminated in the First Minister of Scotland skulking about the back of the chamber trying to negotiate a last-minute deal with the Greens to get them off the hook and he failed."

Annabel Goldie, the Scots Tory leader, indicated she would support ministers again. She said: "If the bill, as re-presented, reflects the concessions that we have secured, then we shall support it."

The Tories agreed to back the Budget in return for 60 million for a town regeneration fund.

Ms MacDonald, who had won concessions on affordable housing for Edinburgh, also backed the SNP and denied the defeat was an embarrassment for the party.

What happens now? The Lib Dems' demands for a 2p cut in income tax have been rejected by all other parties, so there is no point in Mr Swinney negotiating again with them.

Also, Labour's demands are so far away from being met that it is unlikely Mr Swinney will be able to find a compromise on skills and apprenticeships to suit them. Which leaves the Greens.

Talks could go on until the final minutes of the final debate on a new Budget next month. Only then will parliament, and the country, know whether it has a Budget – or a possible election.

Profile: Ecologically sound fan of sci-fi and single malt

WHEN he won the "politician to watch" award in 2004, little did anybody expect that Patrick Harvie should be watched very closely indeed.

Had the SNP realised this, they may not have taken such a relaxed attitude to their negotiations with the Green list MSP for Glasgow, who this year became his party's leader – or co-convener, as the Greens term it.

The SNP should have also taken note of his shortlisting for "free spirit of the year" in last year's Scottish Political Awards.

His political activities and the issues that drive him – the environment and gay rights – fill much of his life. However, he loves science fiction films and books, and good quality drink, particularly single malt whiskies.

Despite being a party leader, Mr Harvie is one of the most independent thinkers in the Scottish Parliament. His atheist approach has made him an indirect target of sermons from Catholic bishops. His major causes have been on human rights, especially for the gay community. As a new MSP in 2003, he proposed civil partnership legislation and has pushed forward legislation for hate crimes.

He is known to be uncompromising. A quick temper, that some MSPs have complained about, was on full display yesterday in the main chamber when he felt that John Swinney, the finance secretary, had tried to make him look like a fool.

He is largely adored by his own party members and has been one of the main proponents of making the Scottish Greens a party aimed at promoting a liberal lifestyle rather than just a fringe party fighting for environmental issues.

Last night, his predecessor as leader, Robin Harper, the Lothians Green MSP, defended Mr Harvie's "firm stance" and said the SNP had left them little choice but to vote the way they did.

BACKGROUND

THE Greens originally wanted 1 billion to fund a scheme to provide insulation for 1.5 million households.

Under their proposal, 100 million would be spent every year for the next decade providing loft and cavity insulation for the homes in Scotland that needed it.

The scheme was developed by Green councillors in West Yorkshire and the Scottish Greens' figures were based on the reduced costs achieved there.

The Greens claimed that every household in Scotland would save 340 a year in energy costs for a one-off insulation cost to the Scottish Government of about 500 per home. There would be a carbon emission reduction of six per cent in Scotland, just from this measure.

The second part of their demands was to provide home renewable energy devices, such as windmills and solar panels, under a loan scheme where the Scottish Government or local councils would take part- ownership to meet the costs.

This would also be the means of paying for difficult-to- insulate homes – about 20 per cent of the total.

If they had got this, it would have been the biggest achievement by any Green Party in the world and many experts thought it was a good idea. The scheme was wholeheartedly welcomed by the Scottish Building Federation, whose members have been suffering in the recession as work has dried up and thousands of jobs have been lost.

Environmentalists backed the scheme because it would tackle the carbon footprint of households and seriously reduce emissions in Scotland. And economists were impressed by the way the scheme could help tackle the recession.

Professor Brian Ashcroft, from Strathclyde University, said: "While there is always the caveat of how much money is available in the budget, it is hard to see anything wrong with the idea. It is hard to put a price on stopping climate change and there is no doubt that this would provide the sort of work needed to get Scotland out of the recession."

Q & A: What now – and what does it mean for the man and woman in the street?

What happens now the Budget Bill has been voted down by the Scottish Parliament?

A new one can be introduced at any time.

There is no time bar on a new Budget Bill being brought back before the Scottish Parliament and, in fact, the SNP resubmitted its Budget last night.

It is the same package that started yesterday and new negotiations will take place with the Greens today.

The Scottish Parliament's Standing Order – Rule 9.16.8 on Budget Bills states: "If a Budget Bill falls or is rejected at any stage by the Parliament, a Budget Bill in the same or similar terms may be introduced at any time thereafter."

Now that the SNP has resubmitted the Budget, what happens next?

The SNP will try to accelerate the Budget with the help of the corporate body, which organises parliament's business.

But as things stand, the new first reading will be on 4 February, with second stage of committee scrutiny on 10 February and the third-stage vote on 19 February.

But what happens if it still fails? How can the Scottish Government spend any money if it does not have a Budget?

If, at the beginning of a financial year, there is no Budget Act in place, then Part 1, Section 2 of the Public Finance and Accountability Scotland Act 2000's emergency arrangements apply.

This means the government has to rely upon the terms of the previous year's Budget and for each calendar month expenditure is limited to one twelfth of the total Budget for the previous year.

When a new Budget is finally passed, the lost money from previous months will be put back into the Scottish Budget.

What will happen to plans to continue the freeze on council tax, and what are the implications for public-sector pay increases, if a Budget is not passed in time?

The council tax freeze and pay increases will only happen if a new Budget is passed. The SNP has alleged there will be a 30 per cent rise in the council tax if the Budget is not passed in time.

If it fails and the SNP resigns, will there be an election?

Not necessarily. Parliament will have 28 days to find a new First Minister.

Labour has said it will put up its leader, Iain Gray, and if he gets more votes in the chamber than anybody else, then he could become First Minister and lead the government.

• Analysis: From hero to zero in high-risk strategy

• Robert McNeil's Sketch: When the hand of history should be used for a clip round the ear

• The Scotsman's David Maddox was blogging on yesterday's events live from Holyrood for The Steamie, our Scottish politics blog. Read his analysis here