Holyrood borrowing powers demand to tackle Covid pandemic in Scotland

Scotland should be handed more borrowing powers to help prop up the economy and public services during major civic emergencies like the Covid pandemic, a report by MSPs states.

Chancellor Rishi Sunak works on his Spending Review speech. Picture: Simon Walker/HM Treasury

It would mean the devolved administration at Holyrood could tailor its own policy responses to the current pandemic and economic recovery, according to Holyrood's Finance and Constitution committee.

The MSPs say the current funding arrangements between Scotland and Westminster - the Fiscal Framework - has helped protect Scotland’s budget from a UK-wide economic shock this year.

But an "imbalance" has emerged that has left the Scottish Government dependent on policy decisions at a UK level when determining its own Covid-19 spending and policies, the committee’s pre-budget scrutiny 2021/22 report finds.

“On the one hand, Scotland has benefited significantly from the unprecedented peacetime levels of UK Government borrowing both in terms of UK-wide economic measures and from Barnett consequentials in devolved areas," said committee convenor Bruce Crawford.

“However, without its own borrowing powers to fund day-to-day spending, the Scottish Government is largely constrained by UK spend and policy decisions when determining its own Covid-19 related spending and policies.

“For example, it would be very challenging for the Cabinet Secretary to continue with policies like business rates relief, in its current form, without Barnett consequentials.”

The reports urges the UK Treasury to look at providing greater access to borrowing for the devolved administrations via the National Loans Fund in emergency situations such as the existing Covid crisis.

“This could allow the devolved governments to tailor their own spend and policy response to the pandemic and economic recovery in Scotland depending on how this evolves differently from the situation in England,” Mr Crawford adds.

The call for greater borrowing powers was backed by Labour finance spokeswoman Jackie Baillie, but she urged the SNP to do more with the powers it has available.

“Scotland is deep in the midst of an unprecedented economic crisis and all options available to stimulate the economy must be considered,” Ms Baillie said.

“It is clear that the SNP-Tory Fiscal Framework is not fit for purpose in the context of an economic and public health crisis and needs to be reviewed.

“Scottish Labour supports the call for greater borrowing powers for the Scottish Government to fund the economic recovery in the context of this unprecedented crisis, but there is much more that the SNP can be doing now to protect our economy.

“It’s time for Kate Forbes to deploy some of the unallocated £2.2 billion Barnett consequentials to protect businesses and kickstart our economy.

"There is no point saving for a rainy day when the roof is leaking like never before. Businesses are going to the wall now and jobs are being lost in every community across Scotland – they cannot afford to wait much longer.

“Over a decade of SNP misrule has left Scotland’s businesses and workers at the mercy of economic events outwith their control. Scottish Labour will continue to fight for a healthy economy and a fairer, prosperous society that can weather the economic storms of the future.”

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