By David Scott in Edinburgh
Leading public finance experts have warned that Scotland’s block grant from Westminster could be cut if Holyrood were given new powers to borrow.
Leading public finance experts have warned that Scotland’s block grant from Westminster could be cut if Holyrood were given new powers to borrow.In evidence submitted this week to the Calman Commission, which is examining the future of devolution, CIPFA in Scotland said it was difficult to see how a case could be made for the powers under the existing funding arrangements.
However, it would be a different matter if the Scottish Government had fiscal autonomy, with control over the taxes raised in Scotland and over the level of public sector spending.
‘The current funding arrangements would militate against any benefits that flexibility might bring,’ CIPFA said.
‘Under fiscal autonomy, where the devolved administration was subject to economic shocks, we could see the case for consideration of borrowing powers in order to smooth over revenue fluctuations.’
The Scottish National Party government and the Scots Liberal Democrats have argued that the administration should be given borrowing powers similar to those held by local authorities. The Scottish Labour Party also believes such powers should be considered.
An expert group that advised Sir Kenneth Calman and his committee stated that borrowing would increase capital spending flexibility at sub-national level.
CIPFA said that if the devolved administration in Scotland were given the power to borrow, it would expect that, as a result of the existing funding arrangements between Scotland and the Treasury, ‘there would be a corresponding reduction in the block grant’.
CIPFA concluded: ‘It is likely that if borrowing is introduced at sub-national level, the national government would wish to have constitutional safeguards that allowed it some control over regional borrowing, or a system of inter-governmental negotiations on the limits of borrowing.’
