Draft Scotland Act 1998 (Increase of Borrowing Limits) Order 2025

Martin McCluskey Excerpts

Wednesday 21st May 2025 General Committees

[Martin McCluskey (Inverclyde and Renfrewshire West) (Lab)]

I beg to move,

That the Committee has considered the draft Scotland Act 1998 (Increase of Borrowing Limits) Order 2025.

It is a pleasure to serve under your chairmanship, Mr Efford. This draft order was laid before the House on 23 April 2025, and I am grateful for the opportunity to debate it today. As with all Scotland Act orders that have appeared before Committees in this Session, it is the result of collaborative working between Scotland’s two Governments and upholds the 2023 fiscal framework agreement.

The 2023 agreement, made by the Scottish Government and the last UK Government, builds on the agreements made by the Smith Commission in 2014, which devolved significant powers to the Scottish Government, including those over welfare, tax and borrowing. The Scottish Government’s borrowing powers apply to both resource and capital and, as agreed between the Governments, are limited. In resource borrowing, the Scottish Government may pursue borrowing within the limits for in-year cash management and for forecast error in relation to devolved and assigned taxes and demand-led welfare expenditure that arise in specific circumstances. Capital borrowing is again set by the limits in legislation, and they are in addition to the Scottish Government’s block grant.

The draft order deals with the cumulative borrowing limits for the Scottish Government. As with the increase in borrowing limits introduced by the Scotland Act 1998 (Increase of Borrowing Limits) Order 2024—introduced by the hon. Member for Berwickshire, Roxburgh and Selkirk in May 2024—this order, if made, will increase the Scottish Government’s cumulative capital and resource borrowing limits to reflect inflation. The draft order would be made under sections 67 and 67A of the Scotland Act 1998, which set out the amounts available to borrow under section 66. As specified in these sections, we are bringing forward this order with the consent of the Treasury.

Turning briefly to the detail of the order, in the 2023 agreement, the UK Government agreed to amend the Scotland Act 1998 to increase these limits as necessary. The 2023 agreement sets out the cumulative limits for capital and resource borrowing. This order will increase these limits based on the Office for Budget Responsibility’s GDP deflator forecast at the time of the Scottish Government’s draft budget. This order amends section 67(2) of the Scotland Act 1998 and, if made, would increase the cumulative resource borrowing limit from £1,779.351 million to £1,834.303 million. It would also increase the cumulative capital borrowing limit from £3,050.316 million to £3,144.519 million.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

Hear, hear!

--- Later in debate ---

[Martin McCluskey]

I am looking at the hon. Gentleman because he clearly struggled with these figures last year as well.

The order provides the Scottish Government with certainty over the cumulative borrowing limits for this financial year. It is for the Scottish Government to decide how they use these borrowing powers and the increased limits, and they are accountable to the Scottish Parliament for these decisions.

In making this order, the UK Government uphold our commitment to the 2023 agreement and deliver for the people of Scotland. As ever, Scotland Act orders are possible only with the joint working of officials in both Governments, and I thank officials in the Scotland Office, the Treasury and the Scottish Government for their work on this order. This positive way of working delivers for the people of Scotland. I commend the draft order to the Committee.

--- Later in debate ---

[Martin McCluskey]

I thank hon. Members for their contributions, which I will address in turn. For the record, this year’s increase is 2.37%, and that is based on the OBR’s GDP deflator at the time of the Scottish Government Budget.

I am slightly surprised by Opposition Members’ comments about the devolution settlement. These are issues for the Scottish Parliament, and it is for the Scottish Parliament to scrutinise the Scottish Government. Opposition Members may not have confidence in Conservative Members of the Scottish Parliament to appropriately scrutinise the Scottish Government, but I have confidence in Labour Members of the Scottish Parliament to appropriately scrutinise the decisions of the Scottish Government.

The hon. Member for Berwickshire, Roxburgh and Selkirk will be familiar with the 2023 fiscal framework from his time as a Minister. It contains provision for the Scottish Government to notify the Treasury monthly on any planned capital borrowing, outstanding debt and the repayment profile. Obviously, that all has to be set within limits.

As I said earlier, resource borrowing can take place only in very specific circumstances. It is not unconstrained, but is specific to two categories, which I laid out in my speech a moment ago.

I agree with the hon. Member that the Scottish Government could do a lot more with their powers, and if there were any SNP Members on the Committee, we might hear about some of their plans. Whether or not we were MPs at the time, I think we all remember that extensive powers were devolved to the Scottish Parliament through the 2014 Smith Commission, and many of those are gathering dust on the Scottish Government’s desk. I am thinking specifically about welfare powers, but others could be taken up by the Scottish Government and have not been. I would have liked to have heard from some SNP Members about how they planned to use those powers.

In conclusion, the draft order is an expression of joint work between the Scottish and UK Governments. I thank officials on both sides for their work on it. I commend the order to the Committee.

Question put and agreed to.