Kate Forbes asks UK Government for new powers over Scottish budget

Finance secretary Kate Forbes has asked the UK Government for new budgetary powers to help deal with the economic impact of the coronavirus lockdown.

Forbes wrote to Chief Secretary to the Treasury, Stephen Barclay, asking for greater “flexibility” in the rules governing the fiscal framework to allocate and spend money in different ways as well as to borrow up to £500m a year.

She said that such new powers would only be temporary and would be “critical” to the Scottish Government’s ability to support economic recovery.

Forbes wrote to Barclay before a meeting of the four finance ministers from the UK, Scottish, Welsh and Irish governments.

She wrote: “Given the nature and scale of this crisis, and the economic impact it is having, I believe there is a strong case for temporary additional powers and flexibilities beyond those currently set out in the Fiscal Framework, alongside continued discussions on establishing clear and certain levels of consequential COVID-19 funding.”

The additional powers Forbes asked for includes the ability to offset capital underspend against resource expenditure, something the rules of the current fiscal framework prohibits.

Forbes asked to be able to switch up to £500m of annual capital underspend to resource spending for the COVID-19 response, after the greater flexibility in this area was backed by the chair of the Scottish Government’s independent advisory group on economic recovery, Benny Higgens.

In order for this to work, Forbes wrote, the UK Government would have to guarantee not to reduce the Scottish budget through negative Barnett consequentials.

In addition, Forbes also asked for the powers to borrow up to £500m this year.

She wrote: “This would be in addition to the already planned resource borrowing of £207 million to fund the tax reconciliation impact, and so would also require a one-off extension of the total annual limit of £600 million for all resource borrowing set out in the Fiscal Framework.

“In addition, repayment periods for borrowing this year should be extended to 10 years (from the 3-5 years currently in the Fiscal Framework), to allow the repayments of this larger sum to be managed in a way that limits the annual impacts of this additional borrowing on planned spending.”

She also asked for the limits of carry over and drawdown of capital to be increased to £220m.

Forbes said that these new powers should be temporary, allowing the Scottish Government to mitigate the impact of the pandemic.

She wrote: “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.”