Coronavirus: Scottish government calls for new borrowing powers

Coronavirus: Scottish government calls for new borrowing powers

Kate Forbes Image copyright Getty Images
Image caption Ms Forbes said the pandemic meant a "robust" review of funding arrangements was now needed

The Scottish government has requested new financial powers from the Treasury, saying they are vital to economic recovery from the coronavirus crisis.

Finance Secretary Kate Forbes said she wanted temporary powers that would allow her to borrow up to £500m this year.

And she said she needed flexibility to reallocate any unused capital funding on day-to-day spending.

Prime Minister Boris Johnson has said he will consider the request.

He has argued that Scotland has already received £3.8bn through Barnett consequentials because of the UK government's response to coronavirus.

Mr Johnson added: "We will continue to invest massively in Scotland because Scotland – like the whole of the UK – benefits from being part of the oldest and most successful political partnership anywhere in the world."

However, in a letter to Stephen Barclay, the chief secretary to the Treasury, Ms Forbes said the crisis meant a "robust" review of funding arrangements was now needed.

She said: "To be clear, this request is not about permanently revising the existing framework.

"Rather, it is about providing enabling relatively minor flexibilities given the extraordinary pressures that the devolved governments are currently under, to ensure that our fiscal powers are commensurate with the risks we face.

"However, our fixed budget could respond more effectively with some relatively minor fiscal flexibilities. I cannot emphasise how critical these are to our ability to support recovery. "

Image caption Bars, restaurants and non-essential shops are not yet able to open in Scotland

The letter was sent ahead of a meeting of finance ministers from administrations in Wales, Northern Ireland, Scotland and the UK government on Friday.

The letter makes three key requests:

  • the ability to reallocate capital underspend on day-to-day spending
  • the ability to borrow up to £500m, with repayment periods extended to a maximum of 10 years from five years
  • more flexibility on drawing down reserve money, with the limit increased to £220m

Increased spending to tackle Covid-19 means the Scottish government's overall budget for the 2020-21 financial year currently stands at more than £52bn, up from an earlier estimate of £49.25bn.

Speaking to the BBC's Good Morning Scotland programme, Ms Forbes said she was "grateful" for additional finance from the UK government, but said it did not meet the cost of dealing with the crisis.

She added: "As an example, any underspends I have on capital projects I cannot then reuse for day-to-day spending on education, business grants, on the transport system.

"I am asking for a review of the rules. These are relatively minor flexibilities to be able to manage our budget and to reject austerity."

Ms Forbes also repeated her call for the UK government's furlough scheme to be extended again, arguing that it otherwise risked merely "paying wages for a few months rather than saving jobs".

She pointed to the Royal Mail announcement of 2,000 job cuts as evidence that the UK government needs to do more to support the economy, and suggested that packages of support for key organisations and businesses should be put in place.

Many economists believe the financial impact of the coronavirus pandemic could be worst for young people.

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