Scotland Bill

My Lords, the short answer to the noble and learned Lord, Lord Davidson of Glen Clova, is that the additional safeguard proposed in his amendment does not need to be written into the Bill in this way because the limit and sources of borrowing are already controlled in the legislation and the Command Paper. I could leave it that, but I feel that I should say a little more, because I understand what the noble and learned Lord and the noble Lord, Lord Browne, are driving at in their amendment. I agree that control over the borrowing powers needs to be careful and considered. They have given us an important opportunity to look at this matter and to confirm what I believe to be the case; namely, that sufficient controls exist. The extended current borrowing facility proposed will provide Scottish Ministers with a lever to deal with the deviation between forecast and actual outturn receipts from devolved taxes. It will also enable them to deal with the volatility in revenue flows from taxes as they enter the Consolidated Fund at different times over the tax year and beyond. The current borrowing power will come into operation when the taxes are devolved, up to a limit of £500 million. I do not think that the noble and learned Lord is suggesting that there is anything inappropriate about that—he is confirming that he does not challenge the logic of that. In addition to the current borrowing facility, Scottish Ministers will have the power also to borrow to fund capital expenditure to a limit of up to 10 per cent of the Scottish capital budget in any year, with the overall stock of debt for capital purposes not exceeding £2.2 billion. Such borrowing will need to be self-financed through increased revenue from taxation in Scotland or a reduction in public spending. So there are controls in place on the levels of borrowing, as there must be. On that basis, the Bill allows Scottish Ministers to access the most competitive source of lending, which is the National Loans Fund. All other things being equal, Scottish borrowing will increase UK borrowing and debt. The limits in the Bill and the controls set out in the Command Paper will ensure that the Scottish debt is affordable from within the UK fiscal position. While I support the intention behind the noble and learned Lord's amendment, which is that borrowing by Scottish Ministers must not risk the UK's fiscal position, I believe that the borrowing limits reflect a judgment of what is affordable and do not put that position at risk. The limits on borrowing for capital expenditure were judged by my right honourable friend the Chancellor of the Exchequer to represent an acceptable level of risk that he was willing to place on the UK's public finances. The limits on borrowing for revenue expenditure were based on an assessment of the size of forecast errors in income tax in normal times. Unlike capital expenditure, where a stock may build up, borrowing for revenue expenditure is related to a technical assessment of forecast errors and the timing implication. The protections already in place in the Bill are sufficient to ensure that the UK's fiscal position is fully protected. I again thank the noble and learned Lord for stimulating this short discussion, but ask him to withdraw his amendment.