Debt to hit £1bn as new borrowing powers used '˜to the max'

Finance secretary Derek Mackay is preparing to use the Scottish Government's new borrowing powers 'to the max'. Picture: Greg Macvean

As part of the devolution of new post-referendum Smith Commission powers, Scottish ministers will be able to borrow up to £3bn, with a maximum annual limit of £450 million. Borrowing powers have also been available for the previous two years under the Calman Commission powers and the Scottish Government said about £1bn will have been used by the end of 2017-18.

Holyrood’s finance committee grilled Mr Mackay on his spending plans for 2017-18 yesterday.

Mr Mackay said: “In terms of our new powers from the Scotland Act, we will use them to the max.

“Our proposal is to set out further spending plans around borrowing and we ­fully anticipate using them to the cap of £450m. We do intend to use them over the course of the year.”

He defended the SNP administration’s income-tax plans – the Conservatives have raised concerns Scotland will be the highest-taxed part of the UK.

While the UK government is to raise the earnings threshold for the higher 40p tax rate from its current level of £43,000 to £45,000, the Scottish Government has insisted it will not pass on the “Tory tax cut”. Instead, the threshold in Scotland will rise in line with inflation, initially to £43,430.

Following adjustments to the Scottish block grant, this will raise “around £79m” in revenue for the Scottish Government, the finance secretary said.

Conservative MSP Murdo Fraser said a “differential“ income tax system exists in Scotland.

Mr Fraser added: “There is a risk this sends out a message about Scotland being the highest-taxed part of the United Kingdom and the impact this might have on the ability to attract investment.”

The finance secretary accused Mr Fraser of having “put out quite a negative message” on tax.

Mr Mackay said: “We’re not passing on the tax cut for some of the richest in society, I think that’s the right thing to do.

“But 99 per cent of adults will pay no more tax, given their current level of income, than in 2016-17.

“The message that Scotland is high tax has really been put out by the Conservatives, and I think that is unhelpful when it’s the wider package that is important around taxation.”