Source · Select Committees · Scottish Affairs Committee
Recommendation 16
16
Acknowledged
Limited Scottish Government borrowing powers constrain ability to manage fiscal shocks
Conclusion
At present, the Scottish Government’s limited borrowing powers constrain its ability to manage fiscal shocks, as it is only able to borrow for resource purposes to cover forecast errors. Capital borrowing limits are currently linked to and grow in line with inflation, which may not necessarily be the highest metric of growth. (Conclusion, Paragraph 113)
Government Response Summary
The government acknowledges the conclusion by explaining that borrowing powers and limits were jointly agreed in the 2023 Fiscal Framework and are uprated annually by the GDP deflator to maintain real value, committing to consider these arrangements at the next Fiscal Framework review.
Government Response
Acknowledged
HM Government
Acknowledged
Resource and capital borrowing powers and limits have been jointly agreed by both the UK and Scottish Governments in the updated 2023 Fiscal Framework – these are fixed in 2023–24 prices and uprated annually using the GDP deflator at the time of the Scottish Government’s draft Budget to maintain their real value. The limits are linked to inflation as that maintains the real value of the borrowing arrangements over time. The scope of the next Fiscal Framework review will be determined by the Joint Exchequer Committee (Scotland) at least 3 months before the review is to start. Any future reviews would require mutual agreement between the Scottish and UK Governments. We will consider the Scottish Government’s borrowing arrangements at the Fiscal Framework review. Currently, the borrowing limits are uprated using the GDP deflator, with a methodology agreed with the Scottish Government.