Draft Scotland Act 1998 (Increase of Borrowing Limits) Order 2026
(5 days, 14 hours ago)
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The Secretary of State for Scotland (Mr Douglas Alexander)
I beg to move,
That this Committee has considered the draft Scotland Act 1998 (Increase in Borrowing Limits) Order 2026.
It is a genuine pleasure to serve under your chairmanship, Ms Vaz. I am grateful for the opportunity to debate this draft order, which was laid before the house on 20 April 2026. It is the result of collaborative working between two Governments of the United Kingdom and of Scotland, and it upholds the 2023 fiscal framework agreement, which I will refer to as the 2023 agreement.
The draft order deals with the cumulative borrowing powers of the Scottish Government, and it is not the first time that the House or its Committees have considered such an order. As with the increase in borrowing limits order this time last year, the draft order, if made, will increase the Scottish Government’s cumulative capital and resource-borrowing limits to reflect inflation. It is made under sections 67 and 67A of the Scotland Act 1998, which set out the amounts available to borrow under section 66 of the Act. As specified in those sections, we bring forward the order with the consent of the Treasury. This is the third such order to be brought forward. The first was in May 2024, under the previous Government, and the second was last year, under this Government. The draft order, like all Scotland Act orders, delivers the Government’s responsibilities for the effective functioning of the devolution settlement.
The 2023 agreement sets out that the cumulative limits for capital and resource borrowing will increase based on the Office for Budget Responsibility’s GDP deflator forecast at the time of the Scottish Government’s draft budget. In the 2023 agreement, the UK Government agreed to amend the Scotland Act 1998 to increase those limits as necessary. If made, this draft order would increase the cumulative resource borrowing limit from a little more than £1.83 billion to a little more than £1.91 billion, and the cumulative capital borrowing limit from a little more than £3.14 billion to £3.27 billion.
Peter Fortune (Bromley and Biggin Hill) (Con)
Will the Secretary of State give way?
Mr Alexander
I have almost finished. I am happy to respond to comments made in the course of the debate.
The draft order will provide the Scottish Government with certainty over the cumulative borrowing limits for this financial year. I wish to make it clear that the Scottish Government remain accountable to the Scottish Parliament on how they use those increased borrowing powers.
In summary, the order will make amendments to 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 our commitment to the 2023 agreement. As ever, Scotland Act orders are only possible with the joint working of officials in both Governments. I put on the record my thanks to officials across the Scotland Office, His Majesty’s Treasury and the Scottish Government for their work on the draft order. Such positive collaboration delivers for the people of Scotland.
John Cooper (Dumfries and Galloway) (Con)
It is a pleasure to serve under your chairmanship, Ms Vaz. At first blush, the draft Scotland Act 1998 (Increase in Borrowing Limits) Order 2026 is, as outlined by the Secretary of State—we are honoured to have him with us, and it is the second time I have seen him today, which is twice more than the First Minister has seen him since the First Minister was reappointed, which of course is the First Minister’s loss—a relatively modest uplift to the Scottish Government’s borrowing powers to reflect inflation. As respecters of the devolution settlement, His Majesty’s loyal Opposition will not object to the order.
Context, however, matters. It cannot be outwith the scope today to reflect that this change gives considerably more fiscal latitude to the governing party in Scotland, the Scottish National party, whose own finances and procedures are under intense scrutiny. Serious questions about its stewardship of public money and its tax compliance dangle unanswered.
Brendan O’Hara (Argyll, Bute and South Lochaber) (SNP)
I find it hard to believe that the Conservative party is trying to conflate the uplift for the Scottish Government with internal party finances. The hon. Member is either trying to make a cheap political gag, or he is seriously conflating the borrowing powers of the Scottish Parliament with party finances. Is he accusing the Scottish Parliament and the Scottish Government of the danger of misappropriation of funds? He should be clear, because at the moment he is in danger of falling between two stools—making a silly political partisan gag and a rather serious accusation.
The Chair
Order. I remind Members that we are just debating the increase in the borrowing limit.
John Cooper
Absolutely. I would like to clarify my point: it is not unreasonable in the context to look at this issue in the round. This is public money. The SNP wants to pretend that this is an internal matter for themselves, but question marks still hang over us about whether or not public money has been involved in what happened in Scotland. Also, there is the question of compliance with His Majesty’s Revenue and Customs.
Brendan O’Hara
If the hon. Gentleman insists on going down this road, which I strongly advise him not to, I assume that his party will be supporting the amendment in the Scottish Parliament for an independent review into party political finances conducted by a parliamentary Committee, to look into every political party.
The Chair
Order. I remind the hon. Gentleman that that is not quite within the scope of the legislation.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
The shadow Minister is raising some interesting points, though I think they probably are slightly out of scope of what we are debating. I want to ask him about the use of the GDP deflator—when I saw that, I thought it was referring to previous Conservative Chancellors, but of course, it is actually about the way that the framework is set. The Scottish Affairs Committee recommended moving to a new system to use the highest levels available to increase borrowing for the Scottish Parliament. Is that something that he would encourage, or would he be concerned about such a recommendation?
John Cooper
I thank the hon. Gentleman for a very important question. The GDP deflator is incredibly complex, as are all these matters. We talk about cross-Government working here, and I think there is a genuine attempt by this Government, as there was by the previous Government, to maximise the money available. The system is complex in how to measure inflation—there are many choices to be made. We are here with the GDP deflator, and that is as simple as that. We are not going to debate that today.
It is an oft-repeated canard in Scotland that the so-called Scottish Executive cannot borrow. This myth is a conspiracy theory as fake as the “Capricorn One” fanciful notion of faked moon landings, but it is sometimes perpetrated not only by internet trolls but by elected Members. This matters because it is corrosive to public trust in politics and inimical to the settled will of the Scottish people so clearly expressed in their rejection of separation in the 2014 independence referendum.
It would be welcome for the Secretary of State to indicate what steps this Government might take to puncture this no-borrowing fallacy, because for us to sit here silently, simply ticking off increased powers as part of a devolve-and-forget agenda, is dangerous. It gives succour to those who would break up the United Kingdom—something that would affect every one of our constituents in every part of Britain.
Peter Fortune
On devolution, we have to appreciate that the increase in the borrowing limit is underwritten by the whole of the UK economy. I wonder if my hon. Friend knows of any equivalent flexibilities that English local authorities, which are also under huge financial pressures, could use.
John Cooper
This is a difficult question. Something like £1.25 of public money is spent in Scotland compared to £1 in England. There is tension there within that settlement. That money reflects the difficulties that Scotland faces. Delivering public services in Scotland is difficult because of geography and also because of demographics, so that settlement is designed to reflect that. On the matter of English councils, I am afraid I would defer to him on that. I am no expert in that field, I am afraid.
We would all be poorer were Britain to be shattered by people who could not, to use a fine old west of Scotland idiom, run a menodge.
Susan Murray (Mid Dunbartonshire) (LD)
It is a pleasure to serve under your chairship, Ms Vaz. It is good to hear that cross-Government working under the Scotland Act is creating this statutory instrument to increase the amount that the Scottish Government can borrow in line with the fiscal framework. We therefore support the statutory instrument to maintain the real value of borrowing, to the benefit of the Scottish people living in Scotland.
Mr Alexander
I thank hon. Members for their important contributions. The Opposition spokesman, the hon. Member for Dumfries and Galloway, raised important issues. I assure the hon. Member for Argyll, Bute and South Lochaber that I wrote down his points very carefully—although alas, not with a Montblanc pen. On borrowing, this debate goes on the public record, and I can assure the hon. Gentleman therefore that our observations in relation to public borrowing will be a matter of record itself. My hon. Friend the Member for Ellesmere Port and Bromborough managed, I have to say, a rather good joke about the GDP deflator, which is no mean achievement and merits further consideration. The hon. Member for Mid Dunbartonshire spoke with characteristic wit, wisdom and brevity.
This draft order demonstrates the continued commitment by the UK Government to work with the Scottish Government to deliver for the people of Scotland and maintain the functioning of the financial settlement for Scotland. I therefore commend it to the House.
Question put and agreed to.