We’re here today to discuss the contribution that the Scottish financial services sector makes not just to the Scottish economy but also to the wider UK economy;
To think about how we make sure that government - whether that be in Holyrood, Westminster or Brussels - is supporting this vital industry;
And to consider how the industry and government, working together, can best ensure that the sector continues to seize the opportunities and respond to the challenges we face.
I want, this morning, to set the scene with the steps that the UK government is taking in London and Brussels;
The steps we are taking to promote a stable and internationally competitive financial services sector through our regulatory reforms;
And our wider economic reforms.
You will not be surprised to learn that I will also argue that Scotland’s place in a strong and stable UK provides the industry with the certainty it needs in a competitive, global environment.
The financial services sector has of course experienced some tough times in recent years.
Governments, industry - we must all share responsibility for this. We must be candid about what went wrong, but more than that, we must work together to find the right way forward.
One thing that remains true, past, present and future, is that this sector is of vital importance to all of us.
Your sector provides direct employment for more than 95,000 people in Scotland.
A quarter of UK life insurance and pensions employment is based in Scotland, and 13% of UK banking sector employment.
Scotland plays host to renowned homegrown companies such as Standard Life, Aberdeen Asset Management, Baillie Gifford, Alliance Trust and Scottish Widows.
And its strengths have persuaded many others from outside Scotland to base themselves here - including companies such as State Street, Citibank, BNY Mellon, Morgan Stanley, Barclays and Virgin Money, to name but a few.
The sector provides the banking and investment services that households and businesses rely on in everyday life;
It provides life and general insurance service to protect us when things go wrong;
And it provides pensions and long-term savings to support us in the future.
These services are important to millions of people and thousands of businesses;
And that is reflected in the significant contribution the sector makes, with the industry accounting for around £8.5 billion, or 7% of Scottish GDP.
I understand the importance of this industry. And I want to make clear to you today that the UK government understands it too.
Of course, the UK government had to take rapid, and historically unprecedented, action to support the financial sector during the crisis. And of course we have all had to learn hard lessons as a result. But the UK government is now looking forward.
We are not shying away from fixing the problems, but we are also implementing policies that will enable the Scottish financial sector to support jobs, provide vital services and contribute to the Scottish economy over the long term.
We aim to strike the right regulatory balance to deliver an acceptable level of risk to government, shareholders and consumers.
We are determined to make the UK the best place in Europe to start, finance and grow a business;
A crucial part of this is to ensure that we have a robust and stable financial system.
Our programme of regulatory reform aims to ensure that Scotland has a reformed, fair and competitive financial services industry.
The new system of regulation that we are putting in place will give the Bank of England - and as announced by the Chancellor earlier this week, its new Governor, Mark Carney - responsibility for overseeing the financial system.
We are creating the Financial Conduct Authority to supervise all firms to ensure that business across financial services and markets is conducted in a way that advances the interests of all involved.
Within the EU and other international forums, we are working closely with our key partners to ensure that the legislative framework fully supports the unity and integrity of the single market, and creates the right environment for stable and sustainable growth in financial services and the wider economy.
This is a hugely important point - the industry should be in no doubt as to the benefits that accrue as a result of the UK’s influence and voice on the international stage.
Being part of the UK allows Scotland’s voice to be heard on such key issues as Solvency II, where we are urging EU institutions to act decisively and agree a credible process for resolving disagreement on the treatment of long-term products, and commit to a realistic timetable for Solvency II implementation.
We are strongly opposing the imposition of Solvency II-inspired capital requirements on the pensions industry. These would negatively affect millions of Europeans, by reducing growth, investment, competitiveness, jobs and pensions income.
We are a vocal opponent of attempts to ‘water down’ international agreements on issues like tough bank capital requirements, in order to avoid regulatory arbitrage and financial instability.
And we have pushed back hard against unworkable proposals for a Financial Transaction Tax.
Of course, we are not only acting in the area of regulation.
Elsewhere, we are taking decisive action to ensure that the Scottish financial and professional services sector can flourish. That action includes:
Working with the banking industry to improve competition.
We are removing barriers to entry and growth for mutuals and credit unions, to help foster diversity in financial services;
And we are working to introduce a more competitive tax regime for funds, including special taxation rules to facilitate tax transparent funds, allowing UK-based asset management companies to thrive.
In the area of professional services, some of you may have attended an event last week at which the Advocate General set out the work the UK government is doing in support of the Scottish legal services sector.
The UK government is ensuring that the Scottish legal sector has promotional opportunities through the unique UK government network around the world. We recognise that the sector is of huge importance, underpinning strong economic growth in all sectors, including financial services.
Of even greater importance to the financial and professional services sector, we are working to help return the wider Scottish economy to growth - we understand that, just as the financial services sector is vital to the health of the wider economy, so the health of the wider economy is fundamental to the prospects of the sector.
So we are reforming the tax system to help promote growth.
We will introduce a reduction in the main rate of corporation tax to 22% in 2014, the lowest in the G7.
We are taking action to support bank lending to businesses, including through initiatives such as the Funding for Lending Scheme.
We have introduced the Seed Enterprise Investment Scheme to encourage investment in new start-ups and in businesses with the highest growth potential.
The UK Guarantees Scheme will help dramatically to accelerate investment in infrastructure.
And we are reducing regulation and making procurement processes simpler to help small businesses gain access to government contracts.
Let me now turn to the final issue I will speak about today - Scotland’s place in the UK, and the benefits our United Kingdom brings to the financial and professional services sector.
I mentioned at the outset the historic strength and enduring place of the financial services sector here in Scotland.
But I know from meeting and talking with many of you that those working in this industry would be the first to acknowledge the benefits that we derive from close ties with the rest of the UK and the City of London in particular.
Under the current arrangements, the Scottish financial services sector benefits hugely from the strong and credible Bank of England as its central bank, lender of last resort, and - as demonstrated with HM Treasury in recent times of crisis - the rapid and coordinated action between strong, credible fiscal and monetary authorities.
Coordinating the Bank’s monetary activism with the greater fiscal firepower that the UK, as a larger and diversified economy, is able to leverage, has been absolutely crucial to our financial system.
The UK government spent £45 billion recapitalising RBS. In addition, the bank received £275 billion of state support in the form of guarantees and funding. In total, this would have been more than 200% of Scotland’s GDP on any measure - including the Scottish government’s preferred one that includes a geographical share of North Sea oil.
The UK government was able to deliver a coordinated response that mitigated the significant harm that could have been caused to the UK economy and our families and businesses if the 2 banks had collapsed.
It’s unclear to me how an independent Scotland, which the First Minister wanted to be more light-touch in its regulation of the sector, could have achieved that.
Let’s also look at the benefits of a highly integrated UK financial services marketplace. Taking 2 examples; the mortgage and life insurance sectors, in the last financial year:
Fewer than a fifth of mortgages provided by Scottish firms were for Scottish properties, with the remainder - four fifths - for properties in the rest of the UK.
Eight out of 10 life insurance products sold to Scottish postcodes were from rest of the UK firms; and
Only 1 in 10 life insurance products sold by Scottish firms were to Scottish postcodes - 9 out of every 10 sold went to the rest of the UK.
One of the main factors underpinning this integration is that we have a single regulatory environment covering the whole of the UK.
Why would anyone wish to put a barrier in the middle of these transactions? Doing so could surely only harm competition and choice, and drive up costs for Scottish consumers.
The plans and consequences of leaving the UK are based on shifting sands and enormous doubt.
Gone are the days where we heard about the differences that independence will bring - now apparently everything will definitely remain the same.
It’s not just the pound sterling that the Scottish government claim they now want to adopt, but also the UK’s financial regulatory framework.
The Scottish government like to tell us that banks and financial services in an independent Scotland would remain under the UK regulatory regime because “that framework is solid and substantial” - John’s own words.
But as you in this audience know, under European rules every member state must have its own regulatory system.
The Scottish government tell us that they will be part of Europe, but they have yet to explain how their proposal to adopt the financial framework of another state would work. (Never mind how they will become part of the EU!)
Now there are those who say that Scots need not worry about these problems because the Referendum Agreement states that Scotland’s 2 governments will work together.
That Paragraph 30 is a magic paragraph that will erase all the difficult questions.
Well, let’s be crystal clear this morning about what this agreement does - and does not - mean.
And let’s begin by hearing the Paragraph 30 text itself.
“The United Kingdom and Scottish governments are committed, through the Memorandum of Understanding between them and others, to working together on matters of mutual interest and to the principles of good communication and mutual respect.
The 2 governments have reached this agreement in that spirit.
They look forward to a referendum that is legal and fair producing a decisive and respected outcome.
The 2 governments are committed to continue to work together constructively in the light of the outcome, whatever it is, in the best interests of the people of Scotland and of the rest of the United Kingdom.”
This means that the 2 governments will conduct the referendum on the same constructive terms as they work today.
It means that if the referendum follows the path set out in the Order and Agreement, its outcome will be decisive.
And it means that, regardless of what the result is, that constructive relationship should continue as we move forward.
That is good practice and common sense.
But what it does not mean is that, in the event of a yes vote, the remaining UK would facilitate Scotland’s every wish - any more than an independent Scotland would unquestioningly facilitate the wishes of the remaining UK.
Inevitably, when there are 2 separate countries, there are 2 sets of interests - sometimes mutual, sometimes at odds.
So it is in the UK’s relationships with its closest allies today.
And so it will always be between separate, sovereign states.
Nor does it mean that the difficult questions that would face a newly independent Scotland would all be within the UK’s gift to resolve.
Membership of the EU, participation in NATO, international regulation of our financial services.
These deeply complex issues would require resolution on the international stage, and Scotland alone would take responsibility for tackling them.
This too is common sense.
So the Edinburgh Agreement - particularly its Paragraph 30 - are a statement of our determination to hold a referendum that is legal, fair and decisive.
They do not - cannot - pre-empt the implications of that vote.
I know that this is what the words mean.
Because I negotiated them.
This all matters because the key to a strong financial services sector is confidence and stability.
And not just to this sector but to the whole economy.
So we need more than optimistic assertions of what might be, without evidence, analysis, or support.
That approach will not help the Scottish financial services in a global industry where confidence and stability are hugely important.
That is why the UK government is setting out what we are doing now to support the financial services in Scotland; and we will continue to do so over the next few months.
It’s also why the Scottish government must set out what the details of its independence proposal would be for this sector
And why each and everyone of you should examine statements from both governments and test them, in just the same way that you would examine and test your own business models.
Where we do not have all the answers - we must be honest and say that. Where the Scottish government cannot give the financial services industry or the Scottish people a guarantee - for example where matters need to be negotiated, and agreed with others - the Scottish government must be clear of the limits of what they can promise.
It is only by doing so, by us all being candid, that we ensure the facts are heard, and that everyone is able to make an informed choice in the referendum.
To get the right outcome for the financial services sector.
And the right outcome for Scotland.