Malcolm counsels against the danger of viewing borrowing powers as a panacea
Finance: Borrowing powers for the Scottish Parliament Malcolm Chisholm (Edinburgh North and Leith) (Lab): As I said in the economics debate two weeks ago, although I support the introduction of borrowing powers for the Scottish Parliament, we have to consider them as part of the more general debate on fiscal powers. We also have to beware of regarding them as a panacea.

There are two obvious but important reasons why borrowing powers cannot be a panacea. First, we would have to pay back any borrowing from what will inevitably be tighter budgets over the next few years. Secondly - the SNP might not be happy about this - any borrowing that we undertake would be part of UK borrowing, which cannot expand without limit, partly because of our membership of the European Union and partly for sound macroeconomic reasons.

We benefit substantially from UK borrowing at the moment. It is important to say that in this debate because the impression might be given by some people that because we do not have borrowing powers we cannot benefit from borrowing. The reality is that because of the UK Government's borrowing, which the Conservatives have been so critical of, Scottish consumers, Scottish banks and Scottish public services are benefiting, as we heard once again in the budget debate yesterday.

The Liberal Democrats will be pleased to hear that the Scottish Labour Party will make a submission to the Calman report, so they do not need to intervene during my speech to ask about that. My view is that we should support borrowing powers for Scotland, but only as part of a package of fiscal changes. Individuals can contribute their views to that debate, but I believe that we need a combination of fiscal changes that would involve some assigned taxes, some devolved taxes and some remaining grant for this Parliament. If Calman produced a package of that kind, we would need borrowing powers to smooth over revenue fluctuations. Obviously, one of the purposes of borrowing powers even at the UK level is to deal with declining tax revenues.

As the Calman report implies quite clearly in the section on borrowing powers, the main purpose of borrowing powers is to benefit capital spending. The Forth bridge is the example that has been quoted most recently. The debate is important in the context of public-private partnership projects going on balance sheet, but the effect of that move on the Scottish budget is perhaps not as simple or as stark as the Scottish Government has been saying. We have not yet had the Treasury guidance on that, but it would be helpful if it were produced as quickly as possible.

John Swinney (The Cabinet Secretary for Finance and Sustainable Growth):
I am grateful to Mr Chisholm for his acknowledgement that it would help the Government if the Treasury were able to share with us not just the rules on how the international financial reporting standards will be treated but the implications that that will have for the structure of the Government's budget. That is the material piece of information that we still require.

Malcolm Chisholm:
I agree that that guidance would be helpful, but the corollary is that the Scottish Government should not speak publicly as if it knows for certain that the move will have the drastic effect that it has described.

I have only half a minute left in which to say that there has been a significant change since 1998. David Stewart referred to the limited provisions in sections 66 and 67 of the Scotland Act 1998. Since then, the growing awareness of the need for more financial powers for this Parliament and other, related developments, such as prudential borrowing for local authorities, mean that the time is right for the Parliament to have some limited borrowing powers. However, they must be considered in the round and in the context of the Calman commission.

February 5th 2009, (Column 14732 - 4)