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by Tom Freeman
22 January 2015
How should Scotland use its new borrowing powers?

How should Scotland use its new borrowing powers?

2015 sees Scotland get new borrowing powers as part of the pre-referendum Edinburgh agreement.

We asked the party finance spokespeople if they should they be used, and if so, what for? 

Patrick Harvie, Scottish Greens: The new borrowing powers still leave the Scottish Government and Scottish Parliament operating within financial constraints set by the UK Government. Until we can make our own choices on all economic matters, there would be a danger in using additional borrowing to compensate for poor choices made at Westminster, such as the cuts to the welfare state or other ongoing costs. That would be as poor a decision as the recent transfers from revenue to capital within the Scottish budget, which has worsened the scale of real terms public pay cuts. However, borrowing to invest in activity which will generate revenue could create lasting benefits. John Swinney has indicated that he intends to borrow for capital projects such as unnecessary roadbuilding schemes; instead we should be investing in public and community ownership of green energy projects, which will create future revenue streams and reduce reliance on the big energy companies.

Willie Rennie, Scottish Liberal Democrats: After 100 years of talking about home rule I am proud that we are in a place where we can talk in real terms about what we will do with home rule. The capital borrowing powers will mean the Scottish Government has no excuses when it comes to supporting the big infrastructure projects in places like the North East and Highlands. The AWPR [Aberdeen Western Peripheral Route] has hardly started and transport infrastructure is crumbling. We need to see concrete action from the SNP and these powers should mean there is no excuse for continuing to shortchange the North East and Highlands.

Gavin Brown, Scottish Conservatives: The borrowing powers should be used cautiously to support long-term capital projects that provide sustainable economic growth. So far as possible, I want to see segments of the borrowing being linked to specific projects, instead of a global sum used simply for capital spend in general. Two other points to make – firstly, they should be viewed as borrowing limits, as opposed to borrowing targets. Secondly, the Scottish Government should explore different sources and go for the most appropriate one.

Jackie Baillie, Scottish Labour: The Scottish Government in Edinburgh now has significant borrowing powers, with more to follow through the Smith Commission agreement. Scottish Labour will lead on the process of implementing Smith, drawing on an expert group to get the best deal for Scotland. What I would ask is that the SNP now take responsibility for the impact of decisions made in Edinburgh – they have the powers, what they need now is the will to act.

John Swinney, SNP: We plan to use the new capital borrowing powers delivered by the Scotland Act 2012 to maximise our infrastructure investment programme. The focus of our programme is on supporting strategic investments that underpin improvements in productivity, growth and wellbeing over the long term, such as investment in transport, digital and schools, as well as investing in affordable housing, energy efficiency and health facilities to help address the challenge of poverty and inequality to improve wellbeing for some of the most disadvantaged people and places in Scotland.
The 2015-16 Draft Scottish Budget, published in October 2014, sets out our intention to borrow up to £304m for this purpose in the coming financial year, which is 10 per cent of our capital budget and the maximum permitted under current powers.  
However, the capital borrowing powers provided by the 2012 Act are limited, and the limits which the UK Government has imposed on annual borrowing are arbitrary. We welcome the Smith Commission proposal that both the Scottish and UK Governments should consider the merits of introducing a prudential borrowing regime, which would enable us to exercise greater discretion over borrowing to support responsible investment decisions in Scotland’s economic interests.

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