19 September 2008
Leading public finance officials have called for a review of the Scottish Government's powers to determine whether it should be able to borrow to fund major projects.
In a submission to the Calman Commission, set up by Opposition parties to examine the Parliament's powers, CIPFA in Scotland pointed to the apparently anomalous position where local government can borrow but the Scottish Government cannot.
'Some ten years on from the Scotland Act, it is difficult to avoid the conclusion that in a devolved arrangement, where local government has greater fiscal powers than national government, then that position is at least worthy of review,' CIPFA said.
If the devolved government were given borrowing powers, the Holyrood Parliament would need a mechanism to ensure these were used in accordance with both legislation and professional good practice.
CIPFA suggested its Prudential Code for Capital Finance in Local Authorities as a model for consideration. This professional code replaced a detailed legislative regime for local authority capital finance and enables control of capital investment to be managed locally rather than nationally.
The code requires that elected members approve the capital investment plans of the local authority put forward by its director of finance. The finance director must demonstrate that the plans are affordable, prudent and sustainable.
CIPFA said: 'It would be vital, if borrowing powers were extended to the Scottish Government, that an equally robust mechanism were in place to enable effective parliamentary scrutiny.'
Don Peebles, policy manager for CIPFA Scotland, told Public Finance: 'We have drawn attention to the fact that we have a situation where local government has the powers to borrow but national government does not. That in itself means there is a case for a review.'
The submission coincides with the Scottish Government's announcement that it is to set up a new body called the Scottish Futures Trust to replace the Private Finance Initiative.
Finance directors have warned that private sector borrowing, which would still be required under the SFT plan, is more expensive than money obtained through the Public Works Loan Board.