The review of Scotland’s fiscal framework next year should include consideration of further borrowing powers, a new report says.
A joint document from the Scottish Government and two Holyrood committees says the review in 2021 must consider whether Scotland’s borrowing powers are adequate.
The fiscal framework governs the funding arrangement between the UK and Scottish Governments.
Ministers in Edinburgh have said the coronavirus crisis has demonstrated the need for more flexibility, while Chancellor Rishi Sunak has said any changes must be agreed in the “proper way”.
Finance Secretary Kate Forbes, along with Holyrood’s Finance and Social Security Committees, sets out a number of issues they want to be addressed in the 2021 review.
Ms Forbes said: “The global Covid-19 pandemic has demonstrated the limitations of the fiscal framework.
“While additional funding from the UK Government has been welcome, we cannot respond quickly to emerging needs due to limited borrowing powers and lack of clarity in relation to future UK funding decisions.
“While I continue to press for temporary flexibilities to address these immediate needs, this report makes clear that the review needs to consider whether the Scottish Government has sufficient levers to manage the risks of the fiscal framework, given the experience of Covid-19.”
Finance Committee convener Bruce Crawford said: “The fiscal framework has introduced a greater degree of volatility and uncertainty into Scotland’s budget process.
“We have highlighted before the potential risk to the future size of the Scottish budget that comes from Scotland’s decreasing working age population and its accelerating older population, which differs from trends in the rest of the UK.
“It is essential that the review examines whether the fiscal framework adequately addresses this risk and whether the Scottish Government has sufficient policy levers to address it.
“We also recommend the review should consider scope for simplifying the fiscal framework and how the Scottish Parliament can be given enhanced opportunities to scrutinise decisions by the UK Government that have a direct bearing on how the framework operates.”
An independent report is due to be presented to both governments by the end of 2021 before negotiations on the fiscal framework begin.
Responding to the report, a spokesman for the UK Government said: “We have protected hundreds of thousands of Scottish jobs through the furlough scheme, provided loans of nearly £3 billion to Scottish businesses and given the Scottish Government an additional £7.2 billion to tackle the impact of coronavirus.
“In 2016, the Treasury agreed new powers with the Scottish Government to enable them to borrow up to £450 million per year for capital investment and up to £300 million per year to help them manage their day-to-day spending.
“We look forward to working with the Scottish Government on the review of the framework to ensure it continues to be fair to people in Scotland and in the rest of the UK.”