We’ll borrow to cover FFA shortfall, says Sturgeon

Nicola Sturgeon on the campaign trail in Aberdeen a few days ago. The First Minister has accused her rivals of reviving 'Project Fear'. Picture: PA

The First Minister said yesterday she did not accept the £7.6 billion figure put on the funding gap by the independent Institute for Fiscal Studies (IFS) but confirmed extra borrowing would be “one of the tools used” to close it.

The third Scottish leaders’ televised debate in under a week was dominated by Ms Sturgeon’s pledge that SNP MPs will vote for full fiscal autonomy (FFA) in the first year of the next parliament after the general election.

FFA, which would see Scotland raise all its own taxes and pay a supplement to the rest of the UK for defence and foreign affairs, would leave a £7.6bn shortfall in the first year and around £40bn in five years, according to the FSA. Accusing the other parties of “reviving Project Fear” and “trying to talk Scotland down”, Ms Sturgeon said: “Even if you accept that figure, and there are reasons why you wouldn’t, that is a figure for one year.”

She added: “This is a debate about whether Scotland should take more control over our own economic decision-making. Do we take proper control over our finances or do we leave ourselves at the mercy of Westminster’s continued cuts?” However, she was pressed on the issue by BBC Scotland presenter Gordon Brewer, who asked her repeatedly how she would make up the £7.6bn shortfall.

On the eighth time of asking, Ms Sturgeon said: “Borrowing would have to be one of the tools we would have to use.”

Scottish Labour leader Jim Murphy said: “She’s making this up as she goes along. To make this £7.6bn up Scotland would have to grow at twice the rate of the rest of entire advanced world.”

And Liberal Democrat leader Willie Rennie said the SNP is in an “even deeper hole than before” after dropping a planned corporation tax cut under former leader Alex Salmond. He said: “They have no answers.”

Scottish Conservatives leader Ruth Davidson said to Ms Sturgeon: “You can’t say ‘I want control, I just don’t want it yet’, and then blame us for the fact that your sums don’t add up.”

Ms Sturgeon asked Mr Murphy “In billions, how many more cuts is Labour going to introduce?”

Mr Murphy said: “We have a different view. You’re thinking like a Tory. There’s a different way out of this. You don’t just have to cut your way out of a deficit. We grow our way out of the deficit.”

The SNP leader responded: “You’ve just made my argument for me. If you’re going to grow your way out of deficit, you need the powers to do it.”

Questioned about the prospect of another vote on independence, Ms Sturgeon reiterated that, for another referendum to feature in a future SNP manifesto “something would have to change” and people would have to vote for it.

After the debate, Ms Davidson said: “It is clear Nicola Sturgeon doesn’t care about safeguarding our country’s finances, and is threatening to make huge borrowing a key part of any deal with the Labour Party.”

Labour shadow Scottish Secretary Margaret Curran said: “Nicola Sturgeon was asked at least eight times if an SNP government would borrow its way out of a deficit before she conceded they would have to.

“Yet she still claims that Scotland, uniquely amongst the nations of the developed world, would achieve heroic growth levels in excess of 5 per cent to make up the shortfall.”

One of Scotland’s leading economists, Professor David Bell of Stirling University, warned Ms Sturgeon may have to ask the UK government to borrow money to cover Scotland’s full fiscal autonomy funding gap because of the potentially higher interest rates the Scottish Government would be asked to pay.

He said: “At the moment the borrowing allowed for the Scottish Government for revenue is £300 million so £7.6bn is a very considerable sum of money.

“Normally you would borrow to invest in capital projects, not to cover revenue shortfall, and such borrowing would need to be short term.

“The Scottish Government could ask the UK government to borrow the money and then it could get it at a reasonable rate, but it is hard to see why the UK government would do it.

“The Scottish Government then would have to go to the markets and would not have a long-term credit history so may well be asked to pay much higher interest rates.”

Presenting his election manifesto in Manchester today, Labour leader Ed Miliband will attempt to put economic responsibility at the heart of his party’s campaign, pledging to reduce the deficit at every Budget and promising no policies will require extra borrowing.

Mr Miliband will contrast his approach with that of the Conservatives, claiming that Chancellor George Osborne has failed to meet his own debt targets while the Tories are promising extra income and inheritance tax cuts and £8bn NHS cash without identifying where the money will come from.

He will say: “My case is simple: Britain can be better – for you, your family and our country. But only if we change the rules by which the country is run, the ethic that drives government, the leadership we offer. And everything we do is based on a simple truth: it is only when working people succeed that Britain succeeds.” He will warn that the Tory approach will lead to “broken promises and higher taxes.”

He will say: “In recent days you have seen the Conservatives throwing spending promises around with no idea of where the money is coming from, promises which are unfunded, unfair and unbelievable.

“That approach is bad for the nation’s books. And nothing is more dangerous to our NHS than saying you will protect it without being able to say where the money is coming from. You can’t help the NHS with an IOU.”

Manifesto vows will be funded via existing budgets or proposed tax rises on the wealthy, including reintroducing the 50p income rate for those earning £150,000 or more and bringing in a Mansion Tax for properties worth £2m or more.