Plan to create £700m Scotland Reserve fund

John Swinney. Picture: TSPL
John Swinney. Picture: TSPL
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Holyrood ministers could plunge Scotland into the red by up to £1.75bn as part of a package to deal with any future financial crash, John Swinney has revealed.

Plans for the creation of a new £700 million “Scotland Reserve” fund were also unveiled by the Deputy First Minister today.

The beefed up new borrowing powers are among the key financial measures in the historic Scotland Bill agreed yesterday which hands sweeping new controls over tax and welfare to MSPs.

Mr Swinney told Holyrood’s finance committee that up to £600m a year can be borrowed by ministers to deal with the impact of “economic shocks” and forecasting errors.

This will feed into an an overall debt stock of up to £1.75 billion which ministers can build up through ongoing “resource” borrowing - funding of day to day services.

“I should say that the repayment period for that £1.75 billion debt stock is between three and five years to be determined by Scottish ministers,” Mr Swinney told MSPs.

The Scotland Act will also separately increase the Scottish Government’s “capital” borrowing to £3 billion for major building projects, up from the £2.2billion.

The new Scotland Reserve fund will draw together the current cash reserves created by the Scotland Act and the “budget exchange facility” which allows ministers to carry parts of its unspent budget from one year to the next.

Mr Swinney said: “It will create a single Scotland reserve that will be capped in aggregate at £700m with an annual drawdown maximum from the cash reserve of £250million for resource and £100 million for capital.”

The Finance Secretary also played down claims by Scottish Secretary David Mundell that many of the powers being devolved through the Scotland Bill could in place soon after the Holyrood elections in May.

“What I’ve agreed with the Chief Secretary to the Treasury is that income tax powers will be able to be exercised in April 2017, APD in April 2018, the borrowing powers in April 2017,” he added.

“On welfare powers we will have to essentially do some further work on when that can practically be undertaken, the approach will be informed by the output of the joint ministerial committee.

“VAT assignment we expect probably in the financial year 2019/20.”