NICE work if you can get it. That was the understandable reaction of many Scots to the news that HSBC, the third biggest bank in Britain, is to receive GBP1m in state funding virtually to double its 300-strong workforce in Scotland by creating 257 fund management jobs in Edinburgh. The aid comes from the Scottish Executive in the form of Regional Selective Assistance (RSA) and is equivalent to the profit racked up by the bank each hour. With earnings like these, does HSBC really need a leg-up from the taxpayer?

The response of critics (who include the SNP, the Scottish Socialists and small businesses) is that money-making machines such as HSBC do not. While the award has caused genuine disquiet, it is important to put it in context. A Cumbernauld-based bedroom furniture manufacturer will be given the same sum to safeguard some 50 jobs and increase the workforce by 42. Gemfire, an optoelectronics business in Livingston, will receive GBP1.7m to support plans by its American owner to increase its employee numbers tenfold. Is the HSBC money so excessive, after all?

Given the financial clout of HSBC, would it not have absorbed the total cost of investing in Scotland to create new jobs anyway, without the carrot of Holyrood cash? Critics maintain the answer is yes, but it is not certain. Multinationals like the bank are mobile and adept at playing governments off against each other to secure the best aid package. Scotland is in a highly competitive market-place for inward investment. The rivalry is especially intense when highly-skilled jobs are at stake (as is the case with HSBC). Surely we cannot afford to put ourselves at a disadvantage by, in effect, banning some bidders for aid because they are cash rich when other countries have no such qualms.

What would the criteria be for imposing restrictions? And the consequences for the economy of playing the game with one hand tied behind our backs? It is worth noting that Scottish companies were paid more than GBP9m in RSA in the three months to the end of 2004. By their nature, these tend to be smaller businesses, but the jobs they protect and create are no less valuable for that.

This is not to say that RSA is perfect. The Scottish economy has suffered from throwing subsidies and sweeteners at international enterprises in the ultimately pious hope of creating long-term jobs in their thousands. We have rightly become more cute when disbursing grants and will have to become even more so when the rules for RSA across the EU are tightened next year (had they been in place now, HSBC would not have qualified). Against that backdrop, fiscal autonomy looks more attractive as an alternative because it would enable the executive to offer preferential corporation tax rates, as other countries do.

Are ministers bold enough?