Source · Select Committees · Scottish Affairs Committee
Recommendation 17
17
Deferred
Publish transparent analysis of Scottish Government borrowing limits based on various metrics
Recommendation
We recognise the arguments presented calling for reform to the Scottish Government’s current borrowing arrangements. We maintain that such borrowing should continue to be subject to interest payments, the same as it is for any other government when it borrows to cover for its own forecast errors. However, we agree with the Secretary of State that borrowing limits should be linked to the measure which offers the Scottish Government the highest level of flexibility but, crucially, we note that which metric delivers this remains undetermined. The UK Government should therefore publish a transparent analysis of what borrowing limits would look like based on the different metrics advised in the evidence for this inquiry. At the next Fiscal Framework review, we encourage the UK Government to consider reforming the Scottish Government’s capital borrowing powers, by automatically coupling borrowing to the metric which offers the highest limit. (Recommendation, Paragraph 114)
Government Response Summary
The government explained current borrowing limits are mutually agreed and uprated annually, stating they will consider further reforms to Scottish Government borrowing arrangements at the next Fiscal Framework review. They did not commit to publishing an analysis of different metrics as recommended.
Government Response
Deferred
HM Government
Deferred
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.