:00:07. > :00:12.poorest. That is why I am excited about this second career I have.
:00:12. > :00:15.Thank you all very much. On Newsnight Scotland tonight, the
:00:15. > :00:20.Treasury have called it the biggest ever transfer of fiscal power to
:00:20. > :00:26.Scotland. But does some new borrowing and some promising noises
:00:26. > :00:29.about bonds really satisfy the aspiring Scottish electorate?
:00:29. > :00:32.Good evening. There has been some movement in the standoff between
:00:32. > :00:36.the UK and Scottish governments over increased financial powers for
:00:36. > :00:39.Holyrood. The Treasury looks set to allow the Scottish government to
:00:39. > :00:43.issue bonds to borrow money, but only if there is no impact on UK
:00:43. > :00:45.borrowing. But as David Allison reports, it is still far from clear
:00:45. > :00:55.how much financial freedom the Scottish government will really
:00:55. > :00:59.
:00:59. > :01:03.have. Money, the root of all evil, but try and do anything without it.
:01:03. > :01:12.The Scottish government are making efforts to change the Scotland bill
:01:12. > :01:16.which is going through Parliament, to give them more fiscal powers. On
:01:16. > :01:23.closer inspection, the Government is just promising a review of the
:01:23. > :01:26.bond issue over other forms of borrowing and will consider
:01:26. > :01:34.extending Scottish ministers' powers will this just not
:01:34. > :01:38.jeopardise the fiscal position of the United Kingdom Government.
:01:38. > :01:44.are looking forward for detailed proposals to come through and look
:01:44. > :01:48.at them. But we will take decisions on the basis of what is in the best
:01:48. > :01:57.interests of the people of Scotland, not the best interests of the
:01:57. > :02:03.Scottish National Party. At the same time, the Scottish Office
:02:03. > :02:08.proposed an immediate advance, to work on the Forth road crossing.
:02:08. > :02:17.have made some steps, but there is still a significant distance to be
:02:17. > :02:27.travelled. We need to have fiscal autonomy so that we can support new
:02:27. > :02:30.
:02:30. > :02:36.jobs and new initiatives. If the bond is been raised to fund the
:02:36. > :02:41.Forth road crossing and there is no expectation of the road user charge
:02:41. > :02:46.or a tall been put on that road then the ultimate guarantor will be
:02:46. > :02:50.the Scottish government and, ultimately, the UK Government,
:02:50. > :02:56.because funding for Scotland ultimately comes from the UK
:02:56. > :03:05.Government and the moment. If, however, it is used to fund the
:03:05. > :03:09.date of Scottish Water, where the users are funding debt for that
:03:09. > :03:13.company, it could be argued that the Scottish government is
:03:13. > :03:19.responsible to that. So it all depends what the money is being
:03:19. > :03:29.used for. The Scottish government is very keen to see small print of
:03:29. > :03:29.
:03:30. > :03:34.this. If it does not actually increase capital investment, then
:03:34. > :03:41.we have not moved forward at all. These are some of these detailed
:03:41. > :03:44.questions the we need answers to. The crux of this will be whether
:03:44. > :03:53.this is good for the people of Scotland and for the Scottish
:03:53. > :03:57.taxpayers. In many circumstances, the UK Treasury may remain the
:03:57. > :04:07.Alternate underwriter. Will the Scottish governments and we just be
:04:07. > :04:07.
:04:07. > :04:12.on a long leash from Whitehall? may actually increase
:04:12. > :04:21.accountability and transparency for the Scottish government and the
:04:21. > :04:26.House late mean there is less of the lean back to the UK. There are
:04:27. > :04:30.waiting the Treasury review on what the outcome may be of this bond
:04:30. > :04:33.issuer idea. A short while ago, I was joined
:04:33. > :04:35.from our Edinburgh studio by John Maciver, a partner in the banking
:04:35. > :04:39.and finance practice at the law firm McGrigors.
:04:39. > :04:47.He told me that a bond was just like an IOU that bears interest
:04:47. > :04:51.throughout the term of the loan. The rate of interest will depend on
:04:52. > :05:01.the credit worthiness of the borrower, are amongst other things.
:05:01. > :05:06.At the end of the bond, the Border Arrow will repeal a capital sum. -
:05:06. > :05:15.- in the border war. It bears interest during the term and must
:05:15. > :05:23.be repaid at the end. What is the appeal in all this? I've think it
:05:23. > :05:29.is the ability to go into the market directly and raise finance.
:05:29. > :05:32.They can do that without taxation. It is the ability to borrow money
:05:32. > :05:42.or very long term in order to make capital investment and not have to
:05:42. > :05:42.
:05:42. > :05:47.pay for it all very short period. And idea say, there are political
:05:47. > :05:54.attractions, particularly for the Scottish National Party in gaining
:05:54. > :05:58.the power to do this. What about the argument that the cost and
:05:58. > :06:07.benefits are spread out over time and there would be fairer, if you
:06:07. > :06:13.went down the taxation writ? Anyway, it is a bit like buying a house.
:06:13. > :06:21.Most people are not able to buy a house using cash. In many ways, it
:06:22. > :06:30.is only affordable if you do it in the long term. The country's
:06:30. > :06:40.decision making in issuing a bond to cover long-term spending uses
:06:40. > :06:45.
:06:45. > :06:51.the same principles. The Treasury's announcement that this would not
:06:51. > :07:01.only be issued if it did not affect the fiscal ability of the UK, is
:07:01. > :07:06.that not simply a foetal? In it was an interesting remark. It will be
:07:06. > :07:16.interesting if it is the foetal or simply an advisory major been
:07:16. > :07:21.
:07:21. > :07:26.imposed by the Treasury. At this It is highly significant if the
:07:26. > :07:32.Scottish Government has the ability to issue bonds directly to the debt
:07:32. > :07:36.capital market. The devil will be in the detail as is inevitable. If
:07:36. > :07:40.it cannot be done without the treasure they's permission, I do
:07:40. > :07:44.not know if you could fairly despite -- described that as a
:07:44. > :07:48.power. For Thank you very much. And joined
:07:48. > :07:54.by the Scottish Liberal Democrat leader and by the SNP's finance
:07:54. > :08:01.spokesman, and from Edinburgh up by a Scottish Labour's finance
:08:01. > :08:05.spokesman. Looking at George Osborne's comments about not
:08:05. > :08:09.undermining the overall fiscal position of the UK, do you think
:08:09. > :08:15.this will work as a veto by the Treasury?
:08:15. > :08:19.We do need to see the detail. We have this advanced modelling, the
:08:19. > :08:24.removal of the need to absorb dead before borrowing can take place,
:08:25. > :08:32.the creation of a cash reserve in advance and the possibility of bond
:08:32. > :08:36.issue rents. That is a step forward. If this ends up being a veto, order
:08:36. > :08:42.that is just the Treasury being cautious about overall debt levels,
:08:42. > :08:47.remains to be seen. If you are able to issue a bond but
:08:47. > :08:52.the money is clawed back, you have achieved nothing. That is right.
:08:52. > :08:57.The advantage would be that the dead would be repaid over a longer
:08:57. > :09:02.term but John is right, if the money was clawed back elsewhere, it
:09:02. > :09:06.would be profoundly unhelpful. When you look at the amounts
:09:06. > :09:12.involved, is this not just as a political gesture rather than
:09:12. > :09:20.anything valuable economic folly? think it has been described quite
:09:20. > :09:29.well in terms of advance borrowing far worse. This would allow us to
:09:29. > :09:33.build the third for bridge crossing. This is moving to the fiscal
:09:33. > :09:40.federalism that the Liberal Democrats in the past which said
:09:40. > :09:48.they prefer? We have always preferred home rule with a powerful
:09:48. > :09:53.Scottish Parliament in a UK setting. That cannot be bad. You have to
:09:53. > :09:58.accept this would not happen without an SNP majority. None of
:09:58. > :10:02.this would have happened without us because we have been constructive
:10:02. > :10:07.players for decades. We have always made the case, working
:10:07. > :10:16.constructively with partners across the UK, to deliver these things.
:10:16. > :10:21.How are you describe in yourself? MSPs as well? Yes, the whole party.
:10:21. > :10:26.In previous years, why was there not something more dynamic brought
:10:26. > :10:31.forward by the coalition? delivered the Scottish Parliament
:10:31. > :10:36.together with other partners, and this is the next stage. It is
:10:36. > :10:42.radical but not reckless. Do you think the sums involved are
:10:42. > :10:46.significant? They are very significant and that is why one
:10:46. > :10:50.thing we did not here today from the UK Government and what was a
:10:50. > :10:55.welcome statement and a move for work was anything about increasing
:10:55. > :11:00.the total borrowing which the Scottish Government will be able to
:11:00. > :11:07.enter into after the Scotland Bill is passed because at the moment
:11:07. > :11:12.limits are set at �2.2 billion for capital borrowing and �500 million
:11:12. > :11:19.for short-term borrowing. At the last Parliament, it was said that
:11:19. > :11:27.those limits should be increased. That has not happened today. We
:11:27. > :11:35.need investment in infrastructure projects. We need to hear more from
:11:36. > :11:42.the UK Government about those issues. You are arguing for greater
:11:42. > :11:45.fiscal autonomy here? What I am arguing for is exactly what the
:11:45. > :11:51.Scottish Parliament Scotland Bill committee asked for in the last
:11:51. > :11:55.Parliament - to look at the limits placed in the current Scotland Bill
:11:55. > :12:00.on capital borrowing and short-term borrowing. The cross-party
:12:00. > :12:06.committee said that those limits should be his -- should be
:12:06. > :12:11.increased and that was agreed last week, but that is not in this
:12:11. > :12:16.statement from George Osborne today. There will need to be further
:12:16. > :12:22.negotiation on those important issues. We need to have the right
:12:22. > :12:28.flexibility so that the Scottish Government can borrow to invest in
:12:28. > :12:32.important infrastructure projects. Again, I would have to say, none of
:12:32. > :12:42.us would have been having this conversation if there was not an
:12:42. > :12:44.
:12:44. > :12:49.SNP majority. You are wrong and why is because the Scotland Bill,
:12:49. > :12:53.comprised of all of the parties, made these points. We need
:12:53. > :12:59.additional bother when powers, additional powers from those
:12:59. > :13:04.already proposed. -- borrowing powers. I hope for more progress
:13:04. > :13:08.still. I want those limits on borrowing capacity increased in
:13:08. > :13:13.future. Before we move on to the details of
:13:13. > :13:17.this arrangement, what to you feel when you hear that language?
:13:18. > :13:27.I am very pleased but beware recommendations in the Calman
:13:28. > :13:30.
:13:30. > :13:35.report which never saw the light of day. There were recommendations. We
:13:35. > :13:40.tabled an amendment to provide that led to test -- legislative
:13:40. > :13:44.framework. Labour and the Liberals voted against so I am glad we are
:13:44. > :13:49.moving forward. The devil will be in the detail. We will have to make
:13:49. > :13:54.sure all parties stay on board and keep moving in the right direction.
:13:54. > :13:59.Do you think this is targeted enough for Scotland to have these
:13:59. > :14:05.specific fiscal stimulus that John Swinney has spoken of in the past?
:14:05. > :14:10.I think we would all rather have Corporation Power has added to the
:14:10. > :14:16.income tax powers, and control over the Crown Estate as well in order
:14:16. > :14:24.to stimulate the green economy. This is a welcome component and
:14:24. > :14:28.what we need to do is build on this to get a more rounded package. From
:14:28. > :14:33.a second reading and onwards, we will try to make the Scotland Bill
:14:33. > :14:38.better. Do you accept that this will only
:14:38. > :14:42.work to its maximum benefit if other powers, on board as well?
:14:42. > :14:47.has been made clear that is the SNP government come forward with
:14:47. > :14:55.worked-out plans, he will listen, but so far we have not had those
:14:55. > :15:01.plans. We had his on borrowing, worked that through and if he wants
:15:01. > :15:09.other things, he will need more than a press release. What do you
:15:09. > :15:14.think is the poorer when limit? floor is 2.2.
:15:14. > :15:19.That is an into prep -- interesting interpretation.
:15:19. > :15:24.What I have a Reds in the Scotland Bill is that of the borrowings
:15:24. > :15:30.shall not exceed �2.2 billion. If we are getting an indication that
:15:30. > :15:34.that is a flaw, that is something different. We need more clarity on
:15:34. > :15:42.whether that is a floor on a ceiling but be billed as implied
:15:42. > :15:44.that is a ceiling. I would take up, that the proposals on additional
:15:44. > :15:49.borrowing whether agreed by all parties in the last parliament and
:15:49. > :15:55.this is something we have had unity on for some time.
:15:55. > :16:00.The language - this is a form, not a ceiling. We say this often, but
:16:00. > :16:06.we seem to be in territory we have not been then before.
:16:06. > :16:10.We are. The Scottish Secretary has said this is a limit that could be
:16:10. > :16:20.increased over time but it is certainly a ceiling has father Sam
:16:20. > :16:28.
:16:28. > :16:34.concerned. -- as far as I am concerned. If the issue is that 2.2
:16:34. > :16:39.billion is too low - and I agree it is - let us see if we cannot agree