Constitutional Law
(6 months ago)
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The Parliamentary Under-Secretary of State for Scotland (John Lamont)
I beg to move,
That the draft Scotland Act 1998 (Increase of Borrowing Limits) Order 2024, which was laid before this House on 17 April, be approved.
I am grateful for the opportunity to debate this order, which is the result of collaborative working between the two Governments in Scotland and upholds the 2023 fiscal framework agreement. This order will increase the Scottish Government’s cumulative capital and resource borrowing limits to reflect inflation. The order is made under sections 67 and 67A of the Scotland Act 1998, which set out the amounts that can be borrowed under section 66. We are making this order with the Treasury’s consent, as required in those sections.
Scotland Act orders are a demonstration of devolution in action, and I am pleased to say that the Scotland Office has taken through more than 250 orders since devolution began. The 2023 agreement set out that the annual limits for capital and resource borrowing will increase in line with the Office for Budget Responsibility’s GDP deflator forecast at the time of the Scottish Government’s draft budget. The United Kingdom Government agreed, in the 2023 agreement, to amend the Scotland Act to increase these limits as necessary.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (Ind)
What are the spending limits on the UK Government? Is it not the case that the UK Government have balanced their books in only 11 years since 1945, and have paid back only about 1.7% to 2% of the debt accrued, if that? It is entirely erroneous to try to put shackles on the Scottish Government and what the Minister often calls the most powerful devolved Parliament in the world. Scotland should be going in the same direction as any normal country, and towards independence.
John Lamont
This Conservative Government have prudently managed this country’s finances, unlike the Scottish Government, who continue to slash frontline public services across Scotland, despite a record-breaking block grant from the UK Government. Those spending choices were, of course, made by the SNP, rather than the UK Government. This order will increase the resource-borrowing limit by £29 million, from £1.75 billion to £1.78 billion, and the capital-borrowing limit by £50 million, from £3 billion to £3.05 billion. The exact figures are set out in the order we are considering. The timing of this order gives the Scottish Government certainty over the cumulative borrowing limits for the 2024-25 financial year. It is important to note, however, that the Scottish Government still remain accountable to the Scottish Parliament and the people of Scotland in how they choose to use these increased borrowing powers.
Angus Brendan MacNeil
Is it not a fact that had the recent blood scandal happened only in Scotland, the Scottish Government would not have had the means to do anything that might be asked of them, because of all these spending restrictions and the handcuffs put on them by Westminster? Are these real-world events not another reason that the Scottish Government should not be a hostage of the UK Government, as they or any Scottish Government are under the devolved set-up?
John Lamont
The hon. Member and his hon. Friends on the nationalist Benches continue to obsess about independence, but he seems to forget that the people of Scotland had their say back in 2014 and voted in record numbers to remain part of a strong United Kingdom. I suggest that SNP Members focus on delivering for frontline services in Scotland by supporting our NHS, schools and transport networks and get on with the day job of governing Scotland, rather than talking perpetually about referendums and independence.
In summary, the order amends UK legislation to increase the cumulative borrowing limits of the Scottish Government ahead of the next financial year. In doing so, the UK Government uphold their commitment to the 2023 agreement and deliver for the people of Scotland. It is positive to see both Governments working together. On that note, I commend the order to the House.
Ian Murray (Edinburgh South) (Lab)
The fact that we are considering this statutory instrument on the Floor of the House, when such instruments are normally done in Committee, demonstrates that the Government have absolutely nothing left to bring to the Chamber. In fact, this debate was scheduled for a Committee Room upstairs but was subsequently cancelled and brought to the Floor of the House. It shows that the Government are desperate to try to fill time in this Chamber rather than send us all away early again. I know I speak for the Opposition and millions of people up and down the country when I say that this nonsense has to end: a general election must be called soon on this zombie Government. They may be able to run for now, but they certainly cannot hide. The people are fed up of 14 years of complete failure.
We are here to consider increased borrowing limits for the Scottish Government. I wonder whether the Minister could answer a few questions. As per the August 2023 fiscal framework agreement, which came two years late, can the Minister tell the House how the increase amounts have been calculated?
Secondly, the fiscal framework allows for £3 billion, and slightly more given this order of debt for capital purposes at £450 million a year. How much of that just over £3 billion has been drawn down to this stage?
Thirdly, the resource-borrowing powers can be drawn down by up to £600 million per annum up to a maximum of just over £1.75 billion. How much of that has been drawn down? The reason I ask that latter question is that at the Finance and Public Administration Committee of the Scottish Parliament this morning, the permanent secretary warned the First Minister that there is a looming £1.9 billion fiscal deficit in the Scottish Government, because of spending promises that have been made by the current Scottish Government, and that the First Minister will have to come to Parliament regarding the redrawing of those priorities to try to reduce that £1.9 billion fiscal deficit.
Christine Jardine (Edinburgh West) (LD)
Does the hon. Member agree that, notwithstanding the fact that the fiscal framework has brought the two Governments to the table, the problems we are seeing with spending and the constant arguments are not in the best interests of the people of Scotland? What they really need is two Governments who work more closely together and in concert for Scotland.
Ian Murray
I could not agree more. If the Prime Minister wishes to go and see His Majesty the King at some point soon, we might get at least one half of those two Governments working together after the general election.
Angus Brendan MacNeil
What do he and the hon. Member for Edinburgh West (Christine Jardine) have against the Republic of Ireland? It has one Government, which is doing very well and has a budget surplus, unlike the UK that has the mishmash and a mess, with a Scotland underperforming in the UK and looking at an Ireland that is overperforming having left the UK. There are lessons to be learned for himself and other colleagues.
Ian Murray
There are certainly lessons to be learned for the UK: not to have a Tory Government. If we had a Labour Government, things would be in a much better position. I am sure the hon. Gentleman will be encouraging all his constituents to vote Labour at the general election in order to make that change.
My fourth question to the Minister is that the fiscal framework of August 2023 suggests that these figures will be increased by inflation from 2024-25 onwards. Will the Minister confirm that is correct? What inflationary measure will be used to do that? Every household in Scotland, and up and down the UK, knows the impact the current Government have had on borrowing overall. Crashing the economy and trebling the national debt has had consequences for everyone. The interest payments on Government debt alone as a share of the economy are now the highest since in early 1950s.
Thanks to the former Prime Minister’s disastrous premiership, interest rates that homeowners are now paying have gone through the roof, taking away home ownership for many in this country. We are in the midst of a cost of living crisis that was made in Downing Street but is being paid for by working people all over the country. If it is possible to sum up this dreadful Government in one individual’s actions and behaviours, it is the crashing of the economy, accompanied by the highest tax burden on working people in 70 years, and the largest fall in living standards since records began in the 1950s. They are reckless, incompetent and unapologetic for the chaos they have wrought across the country.
But the Government seem to want to go further. They have looked at the former Prime Minister’s chaos inflicted on the country by the £45 billion unfunded tax cuts for the richest, and decided to trump that with a £46 billion unfunded tax cut to scrap national insurance, but will not tell us how they will pay for it. [Interruption.] There is chuntering from the Treasury Bench. Instead of chuntering, perhaps they will tell us how they will pay for that £46 billion unfunded commitment. When the Minister responds, will he take the opportunity of this rare occasion of a Scottish statutory instrument being discussed on the Floor of the House to answer my fifth question, about where the money for the £46 billion unfunded commitment will come from?
We have had three failed Prime Ministers in the UK over as many years, an embarrassing statistic the SNP could not help but match, with three First Ministers in Scotland in as many years. They have brought back former leaders to take charge, although the party in government in this Parliament have not done that for the top job, or certainly not for now anyway. Scotland is governed by a man who is responsible for many of the problems we face in the first place—he will have to take charge of these borrowing requirements—the Education Secretary who wrecked our education system, the Finance Secretary who decimated local government finance and the leader who led them to their worst ever election result.
Edward Timpson (Eddisbury) (Con)
I am very much enjoying the hon. Gentleman’s jousting, although I suspect he will have to wait quite a while before he gets to do it again for real in the general election, but will he be supporting that statutory instrument today?
Ian Murray
Yes, we will be supporting the statutory instrument, but it is worth putting it into the context of where these borrowing powers will have to be spent and the requirements of that. I know the hon. Gentleman would hardly wish to defend the Scottish Government’s record on spending; Members on the Opposition Benches certainly will not do that. What is happening in Scotland because of having two bad Governments needs to be completely exposed—[Interruption.] Oh, SNP Members are awake.
Alison Thewliss (Glasgow Central) (SNP)
The hon. Gentleman was making us nod off.
Ronnie Cowan (Inverclyde) (SNP)
As we look towards a general election and the almost certain prospect of a Labour Government, with Labour Members switching places with those now on the Government Benches, would the hon. Member for Edinburgh South (Ian Murray) be prepared to commit a Labour Government to restoring the Scottish block grant?
Ian Murray
I would commit the Labour Government to the fiscal framework agreement that has already been put in place. It was negotiated and agreed in August 2023, and lays out the fiscal framework for the years ahead. When Labour Members move from the Opposition to the Government Benches come the general election, I am not sure if the hon. Member for Inverclyde (Ronnie Cowan) will be still be in his place. We have had 14 years of Conservative failure in this place and 17 years of SNP failure in Scotland too. That is the context in which these orders come forward. There is an enormous black hole in Scotland’s public finances, while one in six Scots are on NHS waiting lists. Real earnings in Scotland today are lower than they were in 2007. The only response to this crisis from either Government has been to increase taxes.
Patrick Grady (Glasgow North) (SNP)
I wonder whether the hon. Member agrees with his shadow Health Secretary who said at the weekend that, right across the UK, every part of the NHS is in crisis. All roads lead back to Westminster, because, even though this is a devolved matter, decisions taken in Westminster have an impact on the NHS across the whole country.
Ian Murray
The conclusion is that all roads must lead to a Labour Government to resolve the issue. That is where we end up.
The only response to this crisis from either Government has been to increase taxes. [Interruption.] Those on the Treasury Bench are still chuntering. I wonder whether they can still chunter about where the £46 billion unfunded spending commitments are going to come from. Those on the Treasury Bench have presided over the highest tax burden on working people in 70 years, and the SNP went even further, with any Scot earning over £28,500 a year paying more tax than anywhere else in the UK—that is nurses, teachers, police officers, firefighters and council workers all paying for their Government’s incompetence.
Angus Brendan MacNeil
The hon. Gentleman earlier mentioned the previous Prime Minister and the high interest rates in the sterling zone. Will he apologise for buddying up with the Tories in 2014, wearing his Union Jack jacket, saying that Scotland should stick with the Tory Government, stick with the risk of a Prime Minister doing what she did, and stick with the risk of a currency zone that has hammered people’s mortgages and hammered people’s standards of living. He can apologise from the Dispatch Box if he wants.
Ian Murray
Mr Deputy Speaker, I am so looking forward to the hon. Gentleman bringing forward yet another financial perspective to what independence would look like, but it would absolutely trash our economy and make what is currently going on look like a picnic in the park. He cannot answer any of the basic questions about how that would work.
At the same time as hammering working people in Scotland with tax increases, the SNP has U-turned on its U-turn and, again, will not take any more money from the oil and gas giants’ excess profits, but will, instead, take more money from our nurses in income tax. Working people are paying the price and getting less. The truth is that this motion today is not what the people of Scotland and the UK are calling out for; they are speaking with clarity that they want change—change from a cruel and failing Conservative Government and change from a tired and failing SNP Administration. They want change. Let us get this general election and deliver that change.
Tommy Sheppard (Edinburgh East) (SNP)
I must start by reflecting how glad I am to see that this topic has captivated the imagination of the House with the participation here today.
Let me start by agreeing with the shadow Secretary of State on one point: if anything reflects the zombie nature of this Parliament, it is the fact that we are spending 90 minutes on the Floor of the House discussing something that usually would be decided by 12 people in the attic and, at best, go to a deferred Division.
Clearly, the Government are very thin when it comes to stuff to put before the House, but given that this measure is here, I am happy to debate it. Let me also say that there has been suggestion that there is nothing to see here—that all that is happening is a statutory instrument to give effect to an agreement that has been reached between the Scottish and UK Governments. That is not quite the case, though, is it? Of course, officials in both Governments have worked out agreements on how things should be calculated—how inflation and various other factors should be determined—and it is good to see that officials in both Governments are singing from a common hymn sheet when it gets to analysing the situation before them. But that is not to pretend that the quantum of money involved is the subject of consensus or agreement.
I would have thought that even Scottish Ministers would be a little concerned to suggest that this is an inflation-related increase in borrowing limits. The increase is 1.6% over seven years, for money that mainly goes to the construction industry where we have been looking at 40% or 50% inflation over the same period. I do not even know how they can keep a straight face in describing this as an inflation-rated increase.
The truth is that these borrowing limits are not a matter of negotiation between the Scottish and UK Governments. They are not subject to a legislative consent motion; they are something that is determined by the UK Treasury, and that is the statutory position. This UK Treasury has determined what the figures are, and, to be frank, it has the Scottish Government over a barrel because the only option is to agree to this proposed increase, or to get no increase at all. The Government have us over the same barrel, because we either agree to this 1.6% increase, or the status quo ante will prevail and there will be no increase at all.
Angus Brendan MacNeil
Further to the point made by the hon. Member for Glasgow North (Patrick Grady) about the shadow Health Secretary pointing out that all roads lead to Westminster, and that the spending constraints and austerity that have been chosen were foisted upon everybody, it is a ridiculous situation, surely, when Scotland’s hands are tied like no other country in Europe. Spain does not decide its priorities for health spending based on what France is spending, so why should Scotland or Wales do similarly? Why also do the Barnett consequentials stem from only one of the nations of the UK? Wales probably has the greatest health needs, but we do not see money for England as a consequence of Welsh needs or Scottish needs. Why does it all stem from the one part? That is something those of the Tory-Labour “Better Together” agenda have never addressed: the imbalance of the UK, with one partner in the lead and the rest having to follow with the choices they make for us.
Mr Deputy Speaker (Mr Nigel Evans)
That intervention was longer than many speeches I have given here.
Tommy Sheppard
I think I agree with the sentiments expressed by the hon. Gentleman. To come back to the discussion on capital borrowing requirements, the other important point that must surely be made, which reflects what he says about who is responsible, is that there is context. That context is a 16% cut—16.1%, to be exact—in the block grant available for capital funding of public services in Scotland. That is not my figure; it was provided by the House of Commons Library in an analysis done on figures provided by the Treasury. That is the real-terms cut that central Government are making, and it means that the borrowing limits available to the Scottish Government have then to be used to compensate for those cuts and to mitigate their effects.
There has been discussion about how these borrowing limits came about as a result of the Smith commission proposals, but this order is in direct contravention of the spirit of the Smith commission. The proposal from the Smith commission was not that UK capital spending that takes place in Scotland should be devolved to the Scottish Government and the Scottish Government should take control of it. That was not the proposal; I might have considered that and supported that, as somebody who supported full fiscal autonomy for the Scottish Government at the time, but that was not what we were discussing.
The proposal that came from the Smith commission was for a supplemental capacity for the Scottish Government to borrow additional moneys to fund particular projects and public services in Scotland if they had a mandate to do so. It was not meant to compensate for core capital funding. Therefore, as the Scottish Government are now being forced to do that, the cost of UK capital spending in Scotland is being incrementally transferred from the UK Exchequer to the Scottish Government. That, my friends, is a Union dividend in reverse. That is a Union penalty. That is the price we are having to pay for being part of these arrangements.
Alison Thewliss
My hon. Friend is making some excellent points on the impact of the budget cuts to capital funding. Does he appreciate that for constituents of ours there are direct consequences of that, combined with the inflation we have seen? The rebuilding of the quay wall at Windmillcroft Quay in my constituency is now facing real problems, because the shortfall in the project budget is in the region of £25 million as a result of the inflation in construction and other things. When the capital grant gets cut, there is no way of making that up.
Tommy Sheppard
I agree with that. I was just coming on to talk about the impact of these cuts and the fact that, even with increased borrowing by the Scottish Government, we are still talking in overall terms about a 9% reduction in the capital budget in Scotland. A 9% reduction means that some big projects are going to be delayed and some are going to be shelved. People who are looking for a new building or a new piece of infrastructure in their constituency should understand, when they are told delays are going to take place, that those are a consequence of what we are deciding here.
Of course, not all capital spending is to do with big, grandiose projects; a lot of capital spending is focused on improving the day-to-day operational delivery of public services, and therefore the consequences of cuts and delays will have an impact on revenue budgets as well. If we cannot improve the energy efficiency of a particular building through capital improvements, it will cost more to run that building. If we have to provide temporary facilities, that will cost more.
There is a double whammy. Not only is the capital budget having to be funded in part by a charge on the revenue budget to Scottish taxpayers, because of the borrowing the Scottish Government undertake, but the revenue consequences elsewhere in operational budgets will put them under considerable additional strain.
Tommy Sheppard
I will not, if the hon. Gentleman does not mind, because I am just about to—
Angus Brendan MacNeil
The hon. Gentleman is making a good point on capital spending. The Scottish Government and a small Scottish island cannot build a replacement hospital at the moment because of those capital constraints. Meanwhile, independent Ireland has so much money from its surplus that it is funding nurses and Erasmus students not just in its own territory, but in Northern Ireland, which is currently part of the UK.
Tommy Sheppard
Indeed.
This is the final point that I want to make. Let us remember that when we talk about Scottish Government borrowing—the entire thing that we are talking about here—it is borrowing with the permission of, and guaranteed by, the UK Treasury. It is not possible for the Scottish Government to do a deal with a private sector house builder and get some private finance to build more social housing as an additional project in Scotland. That is not possible unless it is agreed to by the UK Treasury and comes within these limits, so the Scottish Government, who are heralded as the most powerful devolved regional Government in the world, do not have the financial capital powers that even a medium-sized business has to manage its own affairs.
That is why, in the end, the argument should really be for a Government in Scotland who have the capacity to make decisions about capital spending and other aspects of our finances based upon the needs and requirements of the people of Scotland, rather than the needs and requirements of mandarins in the Treasury in Whitehall. That is why we should have independence for Scotland.
John Lamont
I am grateful to hon. Members for their important contributions to the debate. A number of Members expressed surprise that we are having this debate. I am surprised by their shyness and reluctance to come to the mother of Parliaments to debate this important matter. We are here on behalf of our constituents to talk about how additional resource will be allocated to people in Scotland. We should all welcome that rather than being slightly uncertain about it. I am certainly relishing the opportunity to talk from the Dispatch Box about the additional resource that the people of Scotland, including those in my constituency, will get.
Alison Thewliss
The Minister is talking about additional resource, but he cannot deny that there has been massive inflation in construction costs as a result of Brexit, covid and his previous Prime Minister. In that spirit, will he address the problems that have been caused by his Government, and will he commit to the extra £25 million needed for Windmillcroft Quay, the Citizens Theatre and the Govanhill baths in Glasgow, which have all seen huge inflation in construction costs?
John Lamont
I am grateful to the hon. Member for making that point, and I will come to some of the allegations made about Scotland’s budget shortly.
The hon. Member for Glasgow South made a number—[Hon. Members: “Edinburgh South!”] My apologies. The hon. Member for Edinburgh South (Ian Murray) made a number of points about how annual limits are calculated. Annual limits are calculated in accordance with the 2023 agreement and are based on the OBR’s GDP deflator forecast at the time of the Scottish Government’s draft budget. I can confirm that the GDP deflator used to calculate the new limits for this order was 1.677%.
Let me respond to the other questions asked by the hon. Member for Edinburgh South. Some £1.76 billion of the national loans fund long-term loan remains outstanding and counts against the £3 billion statutory limit, including the £300 million borrowed in March 2024. I will write to him on his other points. He made a general point about the levels of Government debt, but we should not forget that the reason we have such significant debt is the huge interventions that the Government made to support jobs and communities during the pandemic. Had we not made those interventions to support jobs, including in the hon. Member’s constituency of Edinburgh South, many people would be out of work and many more businesses would have struggled to survive the pandemic. If he and Labour Members are now saying they were opposed to those interventions, I think our constituents would want an explanation of why they would not want a Government to make those types of interventions to help during a pandemic. From my experience of my own constituency, I know that the furlough scheme, for example, and the huge amount of additional support that went in to support businesses were very much welcomed, but Labour Members now seem to be opposed to those things.
The hon. Member for Edinburgh East (Tommy Sheppard) suggested that this agreement has in some way been imposed on the Scottish Government. That is just not the case: it is a great example of both Governments working together, both at an official level and at a ministerial level. Again, the two Governments in Scotland working collaboratively to deliver for the betterment of our country is something that all of our constituents would expect to see, and would very much welcome.
Tommy Sheppard
All I am trying to establish is whether the UK Government are telling us that the quantum of these borrowing limits is to be agreed between the UK Government and the Scottish Government, or whether in law, that figure is determined by the UK Treasury. Which is it?
John Lamont
I could not be clearer that this is an example of both Governments working together to agree what is in the best interests of Scotland. It is now for the Scottish Government to decide how they use those additional spending and borrowing powers.
A number of hon. Members have suggested, both in speeches and in interventions, that the UK Government have in some way cut the capital budget for Scotland. The SNP has cut its own budgets by wasting so much taxpayers’ money on failed projects in Scotland. [Interruption.] Hon. Members scoff from a sedentary position, but the SNP spent more on trying and failing to build two ferries than it claims it would cost to set up a whole new state when it is proposing an independent Scotland. They have also suggested that the UK Government have cut Scotland’s overall budget, but Scotland’s block grant is at a record high. However, the SNP Scottish Government have hugely cut local government funding, which is impacting frontline services the length and breadth of Scotland—that is the cut that SNP Members should be talking about. A spokesman for the Convention of Scottish Local Authorities said that the SNP’s last budget was
“not a good budget for Scottish local government”.
I could happily put SNP Members in touch with that spokesperson, but I suspect that they are already in touch with that person, given that those were the words of an SNP councillor. Even their own side are complaining about the level of funding that the SNP is giving to local councils across Scotland.
To conclude, this order demonstrates the continued commitment of this United Kingdom Government to work with the Scottish Government to deliver for the people of Scotland and maintain a functioning settlement for Scotland. On that basis, I commend it to the House.
Question put and agreed to.
Resolved,
That the draft Scotland Act 1998 (Increase of Borrowing Limits) Order 2024, which was laid before this House on 17 April, be approved.
Business of the House (Today)
Ordered,
That at this day’s sitting, the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of Secretary Mark Harper relating to the High Speed Rail (Crewe - Manchester) Bill: Instruction (No. 3) not later than 90 minutes after the commencement of proceedings on the Motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings on that Motion may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Penny Mordaunt.)