LABOUR and Liberal Democrat leaders today struck a deal to form a new coalition government for Scotland for the next four years.
The agreement - now being presented for approval to both parties - includes a guarantee of a new voting system for the next council elections; tough measures on youth crime; free eye and dental checks; a commitment to build the Borders rail link; and a promise that a quarter of the ministerial posts will go to Lib Dems.
Labour’s Jack McConnell and Lib Dem leader Jim Wallace emerged with their negotiating teams from St Andrew’s House just after 1.30am to say they had reached a deal after eight days of talks.
Mr McConnell said: "Our discussion rightly concentrated upon the business of delivering for Scotland.
"I will present a proposed partnership agreement to the Labour group this morning that reflects the priorities that we set out in our election campaign - priorities that were supported the length and breadth of Scotland."
And Mr Wallace praised the scope and ambition of the draft deal.
"This agreement focuses on delivery and making a difference over the whole spectrum of public services, not least in health, education, transport and in stimulating an enterprising economy," he said.
"Our commitment to a radical agenda for the long term, will benefit every part of Scotland and every section of the community."
The hardest negotiations focused on the issues of proportional representation for local government and Labour’s controversial youth crime proposals, which included plans to jail parents who failed to control their youngsters.
The biggest prize for the Lib Dems was securing a commitment that the next council elections in 2007 will be fought under their favoured single transferable vote system, which will mean larger wards served several councillors being elected for larger wards.
Some Labour politicians, including backbench MSP Paul Martin, have argued PR is too high a price to pay for coalition and said the party should opt for minority government, rather than giving way on the issue.
But a Labour insider said although the party’s policy was to stick with the current first-past-the-post system, he was confident the PR plan would be approved by the Labour group.
He said there was now a majority in the parliament in favour of PR, which meant it could be pushed through regardless.
"There will be a recognition in Labour that PR is almost outwith their control. What is important is delivering on the issues set out in the manifesto and most of that is reflected in the document."
There were lengthy discussions in the negotiations about how the new voting system could be implemented to take account of both urban and rural areas.
And it is understood the deal on PR also involves a better financial package for councillors, including severance payments for those who leave local government.
The Labour insider said Mr McConnell’s insistence that youth crime and anti-social behaviour were top priorities was also reflected in the coalition deal.
But the Lib Dems strongly opposed the idea that parents could be jailed for their youngster’s crimes.
And a Lib Dem source said the agreement on youth crime was one which "both sides will find satisfactory".
It is understood Labour’s tough measures will be combined with a stronger emphasis on alternatives to custody and projects to divert youngsters, which were the Lib Dems’ keynote policies.
Free eye and dental checks, another Lib Dem manifesto pledge, will be introduced in a bid to extend health promotion.
Scrapping charges for the health checks had been part of the Lib Dems’ manifesto in 1999, but the party failed to get it included in the last coalition deal and Mr Wallace was under pressure to deliver on the policy this time.
The Lib Dems’ manifesto commitment to building the Borders Rail link from Edinburgh to Galashiels, opening up the Borders and Midlothian as commuter areas for the Capital, is also included in the deal.
And Labour have agreed that the Lib Dems should have a quarter of the ministerial posts in the new government to reflect the parties’ relative strengths in the parliament.
But the size of the Cabinet and who gets which portfolio has been left for further discussions between Mr McConnell and Mr Wallace.
Both sides played down talk of a "loyalty oath" designed to ensure Lib Dem backbenchers, in particular, did not rebel against coalition policies.
The deal was being considered today by separate meetings of the Labour and Liberal Democrat MSPs.
And it will be put to a larger meeting of around 100 Lib Dem representatives from all over Scotland in Edinburgh tonight.
If the deal is endorsed today, parliament is likely to meet tomorrow afternoon when Mr McConnell will be formally elected First Minister.
He will then have some formalities to complete - an audience with the Queen and being sworn into office by judges at the Court of Session - before he can start picking and naming his Cabinet.