Chamber
Meeting of the Parliament 09 June 2011
09 Jun 2011 · S4 · Meeting of the Parliament
Item of business
Scotland Bill: Borrowing Powers and Growing the Economy
In the run-up to the 1997 UK election, Tony Blair once famously claimed that it would be odd if the Scottish Parliament did not enjoy the same powers as an English parish council. He no doubt came to regret that statement as it was often misinterpreted, but it seems particularly appropriate to this debate as parish councils have a glaring power that we do not: they have at least some borrowing powers.
I think that members on all sides of the chamber accept that the financial arrangements that were put in place for the Scottish Parliament in 1999 need to be changed and that the addition of borrowing powers must be part of those changes. However, the measures that the current Scotland Bill contains are neither sufficient nor appropriate for Scotland’s needs.
Much of the Scotland Bill Committee’s work during the previous session of Parliament was controversial to say the least, but one aspect on which all members agreed was—as Richard Baker said—that the proposed borrowing powers do not go far enough.
One consequence of the proposals to fund a sizeable part of the Scottish budget from a portion of income tax receipts—which the SNP has consistently warned about—is that we will become intensely vulnerable to fluctuations in the amount of income tax that is generated from year to year. It is a situation in which no normal independent country would find itself, as any other country—or indeed any federal state—would rely on a range of taxes to ensure that its budget was not subject to wild fluctuations in the receipts from a single type of tax from year to year. However, if that is the position in which the Parliament finds itself, borrowing to cover fluctuations in tax receipts will at least mean that public spending reflects longer-term trends, instead of having to rise and fall based on year-to-year changes.
I think that members on all sides of the chamber accept that the financial arrangements that were put in place for the Scottish Parliament in 1999 need to be changed and that the addition of borrowing powers must be part of those changes. However, the measures that the current Scotland Bill contains are neither sufficient nor appropriate for Scotland’s needs.
Much of the Scotland Bill Committee’s work during the previous session of Parliament was controversial to say the least, but one aspect on which all members agreed was—as Richard Baker said—that the proposed borrowing powers do not go far enough.
One consequence of the proposals to fund a sizeable part of the Scottish budget from a portion of income tax receipts—which the SNP has consistently warned about—is that we will become intensely vulnerable to fluctuations in the amount of income tax that is generated from year to year. It is a situation in which no normal independent country would find itself, as any other country—or indeed any federal state—would rely on a range of taxes to ensure that its budget was not subject to wild fluctuations in the receipts from a single type of tax from year to year. However, if that is the position in which the Parliament finds itself, borrowing to cover fluctuations in tax receipts will at least mean that public spending reflects longer-term trends, instead of having to rise and fall based on year-to-year changes.
In the same item of business
The Presiding Officer (Tricia Marwick)
NPA
The next item of business is a debate on motion S4M-00235, in the name of John Swinney, on borrowing powers and growing the Scottish economy.14:30
The Cabinet Secretary for Finance, Employment and Sustainable Growth (John Swinney)
SNP
Last week, I set out to Parliament the Government’s strategic aims on the economy, and we had a valuable and constructive debate on the economic priorities f...
Willie Rennie (Mid Scotland and Fife) (LD)
LD
The Cabinet Secretary for Finance, Employment and Sustainable Growth quite rightly says that investment in transport infrastructure is important. He says tha...
John Swinney
SNP
Our election manifesto set out the argument that the savings to the public purse that the excellent and well-run procurement project generated, which were sa...
Gavin Brown (Lothian) (Con)
Con
Not yet.
John Swinney
SNP
Mr Brown says, “Not yet,” but a fixed-price contract applies.
David McLetchie (Lothian) (Con)
Con
We have heard that one before.
John Swinney
SNP
I say to Mr McLetchie that a fixed-price contract is a fixed-price contract. We have such a contract for the M74 project, which will be completed early, and ...
Richard Baker (North East Scotland) (Lab)
Lab
We believe that the question that requires to be answered when we debate whether the Parliament should have new powers is this: will the devolution of the po...
John Mason (Glasgow Shettleston) (SNP)
SNP
Is the member arguing that, in the long run, a private finance initiative approach makes better sense than the Scottish Futures Trust?
Richard Baker
Lab
It certainly made no sense to delay those projects at that time. I make it clear that I am happy that we can instead endorse a strategy on borrowing powers f...
Patrick Harvie (Glasgow) (Green)
Green
I understand entirely the member’s point that the amount of borrowing should not exceed the amount that can be serviced through devolved taxation. However, I...
Richard Baker
Lab
We are discussing what can be achieved in the current negotiations and through proposed legislation that is in process. From that point of view, I am trying ...
David McLetchie (Lothian) (Con)
Con
As a member of the Scotland Bill Committee in the previous session, it gives me great pleasure to open the debate on behalf of the Scottish Conservatives. Th...
John Swinney
SNP
Is Mr McLetchie developing an argument for the limitations in the Scotland Bill to be a firm cap, as envisaged in the current proposals, or is he persuaded b...
David McLetchie
Con
I am happy that there should be a principles-based approach to the determination of the appropriate figure. Whether an absolute figure or a formula and mecha...
John Swinney
SNP
Will the member give way?
David McLetchie
Con
No, thank you—I have to make progress.Members: Oh!
John Swinney
SNP
That is a last-minute trick.
David McLetchie
Con
Presiding Officer, can I take Mr Swinney’s intervention and have some extra time?
The Deputy Presiding Officer (Elaine Smith)
Lab
If Mr Swinney is brief.
John Swinney
SNP
Mr McLetchie went on at great length about constraints and limitations on borrowing. One of the constraints on private borrowing by Scottish Water is the rig...
David McLetchie
Con
It is because Scottish Water is in the public sector, which is exactly the point that we are coming to. How disappointing—I thought that we were going to be ...
The Deputy Presiding Officer
Lab
I remind members to speak through the chair.15:02
Maureen Watt (Aberdeen South and North Kincardine) (SNP)
SNP
In the run-up to the 1997 UK election, Tony Blair once famously claimed that it would be odd if the Scottish Parliament did not enjoy the same powers as an E...
Neil Findlay (Lothian) (Lab)
Lab
Is one of the fluctuations to which the member refers the huge fluctuation in corporation tax that may follow, should the SNP get corporation tax powers? Is ...
Maureen Watt
SNP
I was referring to the fact that it will cause severe problems if we can make changes only to income tax. If we have corporation tax powers, there will be at...
Gavin Brown
Con
What kind of impact would such fluctuations have on a local income tax?
Maureen Watt
SNP
I am sure that that issue will be examined when a local income tax is considered. At least local councils have the option of borrowing for projects, which th...
Rhoda Grant (Highlands and Islands) (Lab)
Lab
I welcome the debate, and I believe that we can reach some consensus on the issue—certainly in principle. Capital borrowing powers were introduced by the Cal...