The £1.3 billion Westminster cuts to Scotland’s budget next year – including an £800 million, or 25 per cent, cut in the capital budget – make the need for the Scottish Government to achieve financial and economic responsibilities, particularly real borrowing powers, “absolutely essential”. A spokesperson for Finance Secretary John Swinney said:
“Scotland’s GDP growth of 1.3 per cent in the second quarter of this year was not only higher than the UK as a whole, but was also above the G7 average of 0.7 per cent, the OECD average of 0.9 per cent, and the EU average of 1.0 per cent.
“Scottish growth was driven by a substantial rise in the construction sector, which in these difficult times is being greatly assisted by the Scottish Government’s capital investment programme for schools, hospitals, transport, and housing.
“We are building economic recovery in Scotland, but the UK Government’s damaging decision to slash our capital budget by a quarter next year – and by more than a third over the spending review period – threatens to take a wrecking ball to recovery.
“Westminster’s deep cuts to capital investment make the need for the Scottish Government to secure economic responsibilities, including real borrowing powers, absolutely essential.
“As things stand, we are expected to fund a once-in-a-generation project such as the Forth Replacement Crossing from within normal annual allocations, when it makes far more economic and financial sense to spread the cost over a longer period, given that it will benefit future generations. This point is widely recognised, and has been acknowledged both by the Council of Economic Advisers and the Calman Independent Expert Group.
“And the issue is even more stark and vital given that capital investment is bearing the brunt of the UK Government’s cuts, threatening to kill recovery.
“Holyrood needs to achieve borrowing powers in order to allow the flexibility to manage capital investment in Scotland in a cost-efficient and effective manner. There is broad agreement for such powers to be transferred to Scotland – as reflected in the Scottish Parliament vote as far back as 5 February last year.
“The weakness of the borrowing measures proposed by Calman is that they would be constrained to cash flow, i.e. the day-to-day balancing of books, with a limited provision for capital investment, and in any event there is no sense of when they would actually be in place. Borrowing to support the economy and public spending during downturns would actually be prohibited under Calman, which makes absolutely no economic sense.
“Even worse, the previous UK Government’s proposal reneged even on the Calman recommendation by insisting that any borrowing would have to be ‘self-financed’ by an automatic increase in taxes in Scotland, which is ridiculous and was widely criticised. For example, in Wales, the Holtham Commission final report concluded that such a framework was ‘unjustifiable’ and that ‘no UK interest is served by insisting that borrowing by a devolved administration should have to be financed by increased taxes’.
“Last week’s Comprehensive Spending Review underlined that we cannot trust Westminster with Scotland’s economy, and that we need real financial powers in order to keep building Scottish recovery, prosperity and social justice.”
Note: the Scottish Parliament motion of 5 February 2009 was: “That the Parliament believes that the acquisition of borrowing powers could enhance the autonomy and accountability of the Scottish Parliament and improve the Scottish Government’s ability to respond to changing economic circumstances; notes that borrowing powers could allow the Scottish Government to phase the funding of major capital projects such as the Forth Replacement Crossing sensibly and efficiently . . .”
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