By David Scott in Edinburgh
12 June 2009
The case for limited borrowing powers for the Scottish Government is gaining support as the Calman Commission on devolution prepares to publish its final report on June 15.
An expert group of senior economists advising the commission has recommended that ministers in Scotland should be granted additional borrowing powers for capital spending.
The group, headed by Professor Anton Muscatelli, vice chancellor of Heriot-Watt University in Edinburgh, ruled out borrowing for current spending. But it added: ‘We do think the financial autonomy of the Scottish Parliament could be increased by conferring Scottish ministers additional borrowing powers limited to capital expenditure only. Such borrowing would be obtained directly from the Treasury.’
The Scottish National Party administration at Holyrood has already called for borrowing powers similar to those already held by local government. The proposal is now backed by Labour, the main opposition party in the Scottish Parliament.
Labour leader Iain Gray said the party was delighted the expert group had accepted in principle the idea that the Parliament should have power to borrow.
‘There are benefits in opening up borrowing powers to the Scottish Government under the current financial agreement, but for capital budgets only,’ he said.
Scottish Liberal Democrat finance spokesman Jeremy Purvis said: ‘The issue of borrowing powers to the Scottish Parliament is surely now one of precisely how and when, rather than if.’
The expert group said borrowing powers should be conferred on a similar basis to the CIPFA Prudential code for capital finance in local authorities, which currently gives councils limited freedom to borrow.
The head of CIPFA in Scotland, Angela Scott, said the institute had highlighted the prudential code in its evidence to Calman.
She added: ‘We're pleased that the strengths of this important control mechanism have been formally recognised and commended by the expert group. The recommended borrowing powers for capital investment under the existing financial arrangements is one which we will study carefully.
‘Borrowing, however, will require the transparency of a Scottish balance sheet, something which Scotland does not have at the moment but which we also recommended.’
In a separate report, the expert group said the allocation of a share of oil and tax revenues to Scotland would be justified only if there was a substantial difference in taxation policies between the Holyrood and Westminster governments.
