Covid-19 Fiscal Implications

Part of the debate – in the Scottish Parliament on 16th June 2020.

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Photo of Maurice Golden Maurice Golden Conservative

It is funded through the £10 billion package that the UK Government has offered to Scotland. We should all welcome that £10 billion, which includes £3.8 billion from Barnett consequentials, to help to fund measures.

We require further action from the Scottish Government, in tandem with the UK Government’s efforts. When we consider the response over the past few weeks, it is worth noting that construction sites in Scotland were allowed to reopen only last week, despite their having drawn up safe working plans and English sites having been open for weeks.

On the manufacturing front, Scottish firms that have been safely producing orders for the national health service have been barred from fully reopening and competing for contracts to secure their future.

Businesses need more information about plans, so that they can prepare to get staff back, take bookings and open their doors again. We need an open conversation with businesses about delivering a balanced restart of our economy.

The finance secretary has called for more borrowing powers and even fiscal autonomy. She says that more powers are required to tackle the crisis. The reality is that full fiscal autonomy would lead to cuts and austerity. Public spending was almost £14,000 per person in Scotland before the coronavirus, which is considerably higher than the UK average of £12,000. Full fiscal autonomy would mean an end to that extra spending. In the middle of an economic crisis, making every man, woman and child in Scotland £2,000 poorer is the last thing for which anyone should be arguing.

More borrowing powers for revenue are not the answer, either. I am not making a political point; this is purely an economic argument. We are talking about a bizarre scenario in which the Scottish Government would utilise funds from the Bank of England without its having the regulatory oversight required as the lender of last resort. Without a union lock on such proposals, the likelihood of a default would be high.

On a more general point, the Scottish Government had used up more than half its borrowing capacity before the crisis, with the outcome that growth was projected to lag behind that in the rest of the UK for years.

Full use of existing powers and the billions of pounds in support for Scotland should be the priority, not arguments about new powers.

Just the other week, the associate director of the IFS told the Finance and Constitution Committee:

“The borrowing powers were not designed to make up for long-term shortfalls”—[

Official Report


Finance and Constitution Committee

, 5 June 2020; c 26.]