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
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 from the Scottish Government that is all about avoiding delay in establishing new infrastructure and, I hope, preserving and encouraging employment in these challenging times.
With additional flexibility being given to ministers, it will be for them to ensure that crucial projects go ahead, from the sick kids hospital in Edinburgh to the transport projects in Aberdeen that are close to my heart and to the heart of Lewis Macdonald. I am sure that Lewis Macdonald will refer to a number of key projects in his closing remarks. We support bringing forward the use of the powers in question and hope that the UK Government has now accepted that point as well.
The point of gaining borrowing powers is to be able to pump-prime the economy and create jobs and wealth. We cannot afford to wait for too long, as every delay can mean the difference between new jobs and no jobs.
We have previously suggested that the powers should be available earlier so, if they are to be introduced in the current financial year, that is welcome. Given that that is within the same spending review period as under the previous plan to introduce the powers in 2014, we believe that it is eminently achievable. So, in one sense, there should be no surprise at the announcement from the Deputy Prime Minister earlier today.
The Scottish Government is facing a cut in its capital budget of £790 million in this financial year, which is why there is urgency in the debate about how ministers can access additional borrowing. We believe that the case has been made for increasing the amount that the Scottish Government should be able to borrow for capital beyond the £2.2 billion cap that is proposed in the Scotland Bill and the limit of 10 per cent of the Scottish capital budget in any one year. As the cabinet secretary mentioned, the Scotland Bill Committee did not believe that there was a “principled basis” for those limits, and several witnesses made the point to the committee that the levels that are proposed in relation to the Scottish budget and future tax revenue are modest. We believe that ministers should be given more flexibility. It has been helpful to hear from the cabinet secretary his current thinking on what an appropriate extent of borrowing might be. He referred to the £5 billion figure that the committee discussed. We think that those are sensible directions in which to travel.
On short-term borrowing, we agree with the Scotland Bill Committee that the currently proposed limits should be increased, not least because of the penalties that the Scottish Government would face under the bill if the revenue that the Government received in tax was lower than forecast. However, we believe that that issue also needs to be reconsidered and that, as the committee said, those provisions should be removed from the bill. Professor Anton Muscatelli said:
“doubling that limit would not be exaggerated in terms of prudence and in terms of giving the Scottish Parliament a bit more room for manoeuvre”.
We also agree with the committee that the four-year timescale to repay short-term borrowing is unnecessarily short and should be extended.
The Government’s motion calls for the Scottish Government to have access to wider sources of borrowing. The Scotland Bill already provides for the Scottish Government to borrow from the national loans fund to attract favourable interest rates, as well as to borrow finance commercially. The motion raises the issue of the potential for the Scottish Government to issue bonds. We believe that that should also be on the table for discussion between the Scottish and UK ministers, particularly given the Scotland Bill Committee’s view that there is no reason why there should be an impediment in statute to their use by the Scottish Government.
We believe that the extent of the powers can be increased in those ways while remaining entirely in line with a responsible approach to borrowing. Our amendment seeks to reinforce the point about the need for a sustainable approach and refers to the principle that was outlined in the Scotland Bill Committee report that the limit of borrowing should be set with reference to the level of debt that can be prudently serviced through tax revenue. The key issue is that borrowing levels should be affordable, and the cabinet secretary has made it clear that he agrees with the importance of that approach.
With additional flexibility being given to ministers, it will be for them to ensure that crucial projects go ahead, from the sick kids hospital in Edinburgh to the transport projects in Aberdeen that are close to my heart and to the heart of Lewis Macdonald. I am sure that Lewis Macdonald will refer to a number of key projects in his closing remarks. We support bringing forward the use of the powers in question and hope that the UK Government has now accepted that point as well.
The point of gaining borrowing powers is to be able to pump-prime the economy and create jobs and wealth. We cannot afford to wait for too long, as every delay can mean the difference between new jobs and no jobs.
We have previously suggested that the powers should be available earlier so, if they are to be introduced in the current financial year, that is welcome. Given that that is within the same spending review period as under the previous plan to introduce the powers in 2014, we believe that it is eminently achievable. So, in one sense, there should be no surprise at the announcement from the Deputy Prime Minister earlier today.
The Scottish Government is facing a cut in its capital budget of £790 million in this financial year, which is why there is urgency in the debate about how ministers can access additional borrowing. We believe that the case has been made for increasing the amount that the Scottish Government should be able to borrow for capital beyond the £2.2 billion cap that is proposed in the Scotland Bill and the limit of 10 per cent of the Scottish capital budget in any one year. As the cabinet secretary mentioned, the Scotland Bill Committee did not believe that there was a “principled basis” for those limits, and several witnesses made the point to the committee that the levels that are proposed in relation to the Scottish budget and future tax revenue are modest. We believe that ministers should be given more flexibility. It has been helpful to hear from the cabinet secretary his current thinking on what an appropriate extent of borrowing might be. He referred to the £5 billion figure that the committee discussed. We think that those are sensible directions in which to travel.
On short-term borrowing, we agree with the Scotland Bill Committee that the currently proposed limits should be increased, not least because of the penalties that the Scottish Government would face under the bill if the revenue that the Government received in tax was lower than forecast. However, we believe that that issue also needs to be reconsidered and that, as the committee said, those provisions should be removed from the bill. Professor Anton Muscatelli said:
“doubling that limit would not be exaggerated in terms of prudence and in terms of giving the Scottish Parliament a bit more room for manoeuvre”.
We also agree with the committee that the four-year timescale to repay short-term borrowing is unnecessarily short and should be extended.
The Government’s motion calls for the Scottish Government to have access to wider sources of borrowing. The Scotland Bill already provides for the Scottish Government to borrow from the national loans fund to attract favourable interest rates, as well as to borrow finance commercially. The motion raises the issue of the potential for the Scottish Government to issue bonds. We believe that that should also be on the table for discussion between the Scottish and UK ministers, particularly given the Scotland Bill Committee’s view that there is no reason why there should be an impediment in statute to their use by the Scottish Government.
We believe that the extent of the powers can be increased in those ways while remaining entirely in line with a responsible approach to borrowing. Our amendment seeks to reinforce the point about the need for a sustainable approach and refers to the principle that was outlined in the Scotland Bill Committee report that the limit of borrowing should be set with reference to the level of debt that can be prudently serviced through tax revenue. The key issue is that borrowing levels should be affordable, and the cabinet secretary has made it clear that he agrees with the importance of that approach.
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...