Labour leader Iain Gray challenged First Minister Alex Salmond on his party's handling of the economy before he moves to the back benches.

Mr Gray challenged Mr Salmond to accept that the SNP administration's economic strategy - dubbed Plan MacB - was not working.

Mr Gray recalled that he had pressed him on the same issue last month, stating: "Four weeks ago I asked the First Minister how many Scots had to be unemployed before he would admit that his 'Plan MacB' was not working.

"Since then another 25,000 Scots have joined the dole. Will he now admit it is not working."

With figures on Wednesday showing Scottish unemployment had risen to 229,000, the First Minister said there was "no disagreement" between himself and his Labour rival that "unemployment, jobs the economy, the interruption of the recovery which is a substantial threat now, is the most serious issue of all".

But he stated that for most of the SNP's time in power, Scotland had outperformed the UK in terms of employment.

Mr Salmond said: "Under this SNP Government 72% of the time Scottish unemployment has been better than the UK average. 87% of the time, including this month, Scottish employment has been better than the UK average.

"The relevant figures when Labour was in control of this Parliament were 10% and 30%."

He added: "While we agree that this is the most serious issue of all, I hope we can also jointly understand that demand in this economy at the present moment is overwhelming controlled by the United Kingdom Government and therefore we should put our claim for an increased demand to confront the economic recession to the people who currently have the powers over us."

But Mr Gray hit back and said that the "229,000 Scots on the dole don't believe that we are outperforming the UK".

He added: "It was only three months ago that the First Minister was touring the TV studios boasting 'Scotland is the only place in the islands where unemployment is falling, therefore there must be something distinctive happening which is not happening in economies elsewhere in these islands. Plan MacB has a great deal to recommend it'.

"Now he says the problem lies somewhere else. He loves to claim the credit when things go well. Is he big enough to take responsibility when things go wrong?"

With a new Scottish Labour leader appointed this Saturday, Mr Salmond paid tribute to Mr Gray, who announced he was stepping down as leader after Labour's election defeat, saying he had "served his party with distinction".

The First Minister told the outgoing Labour leader: "I have greatly enjoyed our weekly jousts in this chamber and I know that whoever his successor maybe, he or she will have a hard act to follow."

He added: "I'm certain Iain Gray has a major role still to play in public life and I wish him well for the future."