Scotland Bill

I want to make it clear that Government amendment 32 would not grant the power of issuing bonds to the Scottish Government. However, it would enable us to move more quickly should that decision be made in future The Welsh Assembly Government are not alone in their status, although the amendment would enable us to move more quickly should we decide to proceed in that direction. Amendment 2, which was tabled by Her Majesty's Opposition, would bring forward the introduction of the capital borrowing requirement set out in clause 32 from April 2015 to April 2012. Amendment 26 would remove the role of the Treasury in approving capital borrowing and the restriction that such borrowing must be by way of a loan. Amendment 27 would introduce a new statutory code of practice, to be agreed between the Treasury and Scottish Ministers, to govern capital borrowing permitted by section 66(1) of the Scotland Act 1998. Amendment 28 would remove the £2.2 billion aggregate limit on capital borrowing by Scottish Ministers. Amendment 29 is consequential on amendment 28. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those with the approval of the House, clause 32(10) would no longer be necessary, because there would be no such secondary legislation. All amendments would have the effect of altering the time scale for capital borrowing and the conditions on capital borrowing. I shall first deal with the timetable for implementing the borrowing powers. The Government believe that the capital borrowing powers are an important part of the package to increase the financial responsibility of the Scottish Parliament. The Bill enacts that new power at the point when Scottish Ministers have the necessary fiscal levers to support borrowing. From 2015-16 onwards, Scottish Ministers will have control over devolved taxes and the Scottish rate of income tax. The new borrowing powers come into effect at the same time, when Scottish Ministers can support such borrowing. The House should be aware that, if the borrowing powers were introduced earlier in this spending review period, the UK's spending plans would be altered—plans which the International Monetary Fund recently endorsed, and plans from which I am sure hon. Members would not want to deviate and put the recovery of the UK public finances at risk and undermine the credibility of the Government's spending plans. The Command Paper allows Scottish Ministers to access partial borrowing powers in 2013, before the rest of the Bill comes into force, with the consent of the Treasury. That power can be used to make pre-payments to fund large capital projects such as the construction of the replacement Forth crossing. On 13 June, my right hon. Friends the Chancellor and the Secretary of State for Scotland confirmed that partial borrowing powers would be introduced two years earlier than originally intended to help Scottish Ministers to begin large capital projects as soon as possible. The Bill contains borrowing limits for important reasons, which I set out in Committee. I should place today's debate in context. First, the new £2.2 billion borrowing power is additional to the capital budget that Scottish Ministers will receive through the next spending review process. To give a sense of the magnitude of that sum, at the end of this spending review period, the Scottish Government's capital budget will be £2.3 billion. Secondly, Scottish Ministers have an unfettered power to switch resource spending to capital. Their borrowing does not represent free money. Those who pay the Scottish rate of income tax must pay the debt interest, but UK borrowing will increase as a result of increased Scottish borrowing. It is therefore surely right that the limit is determined by this House—first through its considerations of the Bill, and subsequently through the approval of any order to alter the limit. The Calman commission and the Scottish Parliament recognised the case for Scottish Ministers receiving new borrowing powers as part of their increased responsibility and accountability. Both recommended that the Treasury should have the ability to set conditions and a cap on the amount that Scottish Ministers can borrow in a year. The limit in the Bill is set initially at £2.2 billion, because that represents an acceptable risk for the UK finances that does not crowd out other priorities in the next spending review period.