Salmond to table coalition compromise

The SNP is expected to offer the Lib Dems a 'govern-first, decide-later' coalition deal which, if agreed, would propel Alex Salmond into power as Scotland's next First Minister.

In talks scheduled to begin tomorrow afternoon, Nationalist sources say they will propose putting a referendum bill on independence "on the back-burner" for up to two years, if the Lib Dems agree to sign up to a partnership deal.

Only at the end of that period would the coalition partners have to decide on the question of the referendum. Up until that point, they claim, both sides could focus on issues over which they have agreement, such as scrapping the council tax.

The deal is seen as a way of getting round the Lib Dems' implacable opposition to a referendum on independence, which they reiterated yesterday following a lengthy meeting of MSPs in Edinburgh.

But sources close to Nicol Stephen, the Lib Dem leader, last night issued a cool response, offering further evidence that the SNP may have to go it alone as a minority administration.

The SNP's coalition building began yesterday, just hours after their one-vote victory, announced at 6pm on Friday. Salmond met

Green party leader Robin Harper for "positive" talks in Edinburgh.

Former leader John Swinney has now been put in charge of talks with the Lib Dems. The SNP still insists it will not bend over its commitment to hold a referendum within the four-year term of the government. However, SNP sources are drawing a comparison between the deadlock over this with the same disagreement which occurred between the Lib Dems and Labour in 1999 over tuition fees.

One way round the problem is to agree a deal in which a White Paper on independence is published this autumn, but a vote on a bill is delayed until around 2009.

One soon-to-be MSP said: "It may be that we can put it on the back-burner for a year or two. It may be that we can work with them for a year or two and see how it goes.

"The overwhelming feeling among the SNP group is one of moderation and cooperation. But there is no bending that we must have the referendum within the four years."

Another added: "The numbers in the Parliament might make it a sensible option. First and foremost, this is about extending the hand of friendship around the Parliament."

Both the Nationalists and Lib Dems want the council tax replaced with a local income tax. They also oppose the siting of any new nuclear power stations north of the Border.

In a statement yesterday, speaking in front of his new cohort of 47 SNP MSPs, Alex Salmond said: "The people have spoken and the view of the country is quite clear. All politicians have to remember the conversation we've just had with the electorate."

Salmond added that he had already had informal talks with other parties. "We've had conversations informally, but there's been no formal negotiations as yet," he said. "During the election we expressed a preference for a coalition and that's certainly my preference."

Meanwhile, Lib Dem MSPs spent the day locked in talks as they plan their next move. It comes after a disappointing night for the junior coalition partner, which lost one seat.

In a statement, Lib Dem leader Nicol Stephen said he believed the SNP had the authority to try to establish a government. "The group agreed that the largest party has the right to seek to form an administration either through a coalition or as a minority," he said.

However, he added: "The result of the election shows there is no demand or mandate for independence. Therefore, the group agreed unanimously that we will not support a referendum on independence."

One source close to Stephen said that the idea of delaying a referendum bill was a recipe for "bad government". Another hindrance to an SNP-Lib Dem government is thought to be the fact that the SNP dealt two painful constituency defeats on its likely coalition partners. In Gordon, Salmond beat sitting MSP Nora Radcliffe, while in Argyll and Bute, Jim Mather beat former finance minister George Lyon.

One SNP insider said: "They will be feeling a bit bruised at the moment. We have to take that into account."

There is also speculation that the party's UK leader, Sir Menzies Campbell, may be opposed to his Scottish party joining up with the SNP - especially with the Lib Dems at Westminster in the running to enter a coalition with Labour after the 2009 elections.

If the deadlock cannot be breached, the SNP could decide either to press ahead on its own. The Lib Dems would also then have to reach a decision about whether or not to talk to Labour.

Both the Conservatives and the one independent candidate in the Parliament - Margo MacDonald - have now both ruled themselves out of any talks.

A senior Conservative Party source said: "There is no way our supporters would allow us to put the Labour Party into power when clearly the result of this election is that the Labour party has lost.

"If we were to get a minority SNP administration that has to win the support of the three Unionist parties to get anything, I don't think that would be such a bad situation."

Meanwhile the SNP has published figures showing they are now the largest party in Scottish local government, with 363 councillors, compared with Labour's 348. The Nationalists claim that the figures show the scale of Labour's defeat last week, and mean they no longer control local government north of the Border.

The Greens were also meeting in Edinburgh yesterday to discuss their next move. A party spokesman said: "We haven't ruled anything in or out and we are considering all the options."