13/06/2011 Newsnight Scotland

poorest. That is why I am excited about this second career I have.

Thank you all very much. On Newsnight Scotland tonight, the

Treasury have called it the biggest ever transfer of fiscal power to

Scotland. But does some new borrowing and some promising noises

about bonds really satisfy the aspiring Scottish electorate?

Good evening. There has been some movement in the standoff between

the UK and Scottish governments over increased financial powers for

Holyrood. The Treasury looks set to allow the Scottish government to

issue bonds to borrow money, but only if there is no impact on UK

borrowing. But as David Allison reports, it is still far from clear

how much financial freedom the Scottish government will really

have. Money, the root of all evil, but try and do anything without it.

The Scottish government are making efforts to change the Scotland bill

which is going through Parliament, to give them more fiscal powers. On

closer inspection, the Government is just promising a review of the

bond issue over other forms of borrowing and will consider

extending Scottish ministers' powers will this just not

jeopardise the fiscal position of the United Kingdom Government.

are looking forward for detailed proposals to come through and look

at them. But we will take decisions on the basis of what is in the best

interests of the people of Scotland, not the best interests of the

Scottish National Party. At the same time, the Scottish Office

proposed an immediate advance, to work on the Forth road crossing.

have made some steps, but there is still a significant distance to be

travelled. We need to have fiscal autonomy so that we can support new

jobs and new initiatives. If the bond is been raised to fund the

Forth road crossing and there is no expectation of the road user charge

or a tall been put on that road then the ultimate guarantor will be

the Scottish government and, ultimately, the UK Government,

because funding for Scotland ultimately comes from the UK

Government and the moment. If, however, it is used to fund the

date of Scottish Water, where the users are funding debt for that

company, it could be argued that the Scottish government is

responsible to that. So it all depends what the money is being

used for. The Scottish government is very keen to see small print of

this. If it does not actually increase capital investment, then

we have not moved forward at all. These are some of these detailed

questions the we need answers to. The crux of this will be whether

this is good for the people of Scotland and for the Scottish

taxpayers. In many circumstances, the UK Treasury may remain the

Alternate underwriter. Will the Scottish governments and we just be

on a long leash from Whitehall? may actually increase

accountability and transparency for the Scottish government and the

House late mean there is less of the lean back to the UK. There are

waiting the Treasury review on what the outcome may be of this bond

issuer idea. A short while ago, I was joined

from our Edinburgh studio by John Maciver, a partner in the banking

and finance practice at the law firm McGrigors.

He told me that a bond was just like an IOU that bears interest

throughout the term of the loan. The rate of interest will depend on

the credit worthiness of the borrower, are amongst other things.

At the end of the bond, the Border Arrow will repeal a capital sum. -

- in the border war. It bears interest during the term and must

be repaid at the end. What is the appeal in all this? I've think it

is the ability to go into the market directly and raise finance.

They can do that without taxation. It is the ability to borrow money

or very long term in order to make capital investment and not have to

pay for it all very short period. And idea say, there are political

attractions, particularly for the Scottish National Party in gaining

the power to do this. What about the argument that the cost and

benefits are spread out over time and there would be fairer, if you

went down the taxation writ? Anyway, it is a bit like buying a house.

Most people are not able to buy a house using cash. In many ways, it

is only affordable if you do it in the long term. The country's

decision making in issuing a bond to cover long-term spending uses

the same principles. The Treasury's announcement that this would not

only be issued if it did not affect the fiscal ability of the UK, is

that not simply a foetal? In it was an interesting remark. It will be

interesting if it is the foetal or simply an advisory major been

imposed by the Treasury. At this It is highly significant if the

Scottish Government has the ability to issue bonds directly to the debt

capital market. The devil will be in the detail as is inevitable. If

it cannot be done without the treasure they's permission, I do

not know if you could fairly despite -- described that as a

power. For Thank you very much. And joined

by the Scottish Liberal Democrat leader and by the SNP's finance

spokesman, and from Edinburgh up by a Scottish Labour's finance

spokesman. Looking at George Osborne's comments about not

undermining the overall fiscal position of the UK, do you think

this will work as a veto by the Treasury?

We do need to see the detail. We have this advanced modelling, the

removal of the need to absorb dead before borrowing can take place,

the creation of a cash reserve in advance and the possibility of bond

issue rents. That is a step forward. If this ends up being a veto, order

that is just the Treasury being cautious about overall debt levels,

remains to be seen. If you are able to issue a bond but

the money is clawed back, you have achieved nothing. That is right.

The advantage would be that the dead would be repaid over a longer

term but John is right, if the money was clawed back elsewhere, it

would be profoundly unhelpful. When you look at the amounts

involved, is this not just as a political gesture rather than

anything valuable economic folly? think it has been described quite

well in terms of advance borrowing far worse. This would allow us to

build the third for bridge crossing. This is moving to the fiscal

federalism that the Liberal Democrats in the past which said

they prefer? We have always preferred home rule with a powerful

Scottish Parliament in a UK setting. That cannot be bad. You have to

accept this would not happen without an SNP majority. None of

this would have happened without us because we have been constructive

players for decades. We have always made the case, working

constructively with partners across the UK, to deliver these things.

How are you describe in yourself? MSPs as well? Yes, the whole party.

In previous years, why was there not something more dynamic brought

forward by the coalition? delivered the Scottish Parliament

together with other partners, and this is the next stage. It is

radical but not reckless. Do you think the sums involved are

significant? They are very significant and that is why one

thing we did not here today from the UK Government and what was a

welcome statement and a move for work was anything about increasing

the total borrowing which the Scottish Government will be able to

enter into after the Scotland Bill is passed because at the moment

limits are set at �2.2 billion for capital borrowing and �500 million

for short-term borrowing. At the last Parliament, it was said that

those limits should be increased. That has not happened today. We

need investment in infrastructure projects. We need to hear more from

the UK Government about those issues. You are arguing for greater

fiscal autonomy here? What I am arguing for is exactly what the

Scottish Parliament Scotland Bill committee asked for in the last

Parliament - to look at the limits placed in the current Scotland Bill

on capital borrowing and short-term borrowing. The cross-party

committee said that those limits should be his -- should be

increased and that was agreed last week, but that is not in this

statement from George Osborne today. There will need to be further

negotiation on those important issues. We need to have the right

flexibility so that the Scottish Government can borrow to invest in

important infrastructure projects. Again, I would have to say, none of

us would have been having this conversation if there was not an

SNP majority. You are wrong and why is because the Scotland Bill,

comprised of all of the parties, made these points. We need

additional bother when powers, additional powers from those

already proposed. -- borrowing powers. I hope for more progress

still. I want those limits on borrowing capacity increased in

future. Before we move on to the details of

this arrangement, what to you feel when you hear that language?

I am very pleased but beware recommendations in the Calman

report which never saw the light of day. There were recommendations. We

tabled an amendment to provide that led to test -- legislative

framework. Labour and the Liberals voted against so I am glad we are

moving forward. The devil will be in the detail. We will have to make

sure all parties stay on board and keep moving in the right direction.

Do you think this is targeted enough for Scotland to have these

specific fiscal stimulus that John Swinney has spoken of in the past?

I think we would all rather have Corporation Power has added to the

income tax powers, and control over the Crown Estate as well in order

to stimulate the green economy. This is a welcome component and

what we need to do is build on this to get a more rounded package. From

a second reading and onwards, we will try to make the Scotland Bill

better. Do you accept that this will only

work to its maximum benefit if other powers, on board as well?

has been made clear that is the SNP government come forward with

worked-out plans, he will listen, but so far we have not had those

plans. We had his on borrowing, worked that through and if he wants

other things, he will need more than a press release. What do you

think is the poorer when limit? floor is 2.2.

That is an into prep -- interesting interpretation.

What I have a Reds in the Scotland Bill is that of the borrowings

shall not exceed �2.2 billion. If we are getting an indication that

that is a flaw, that is something different. We need more clarity on

whether that is a floor on a ceiling but be billed as implied

that is a ceiling. I would take up, that the proposals on additional

borrowing whether agreed by all parties in the last parliament and

this is something we have had unity on for some time.

The language - this is a form, not a ceiling. We say this often, but

we seem to be in territory we have not been then before.

We are. The Scottish Secretary has said this is a limit that could be

increased over time but it is certainly a ceiling has father Sam

concerned. -- as far as I am concerned. If the issue is that 2.2

billion is too low - and I agree it is - let us see if we cannot agree