THE SNP government is planning to go billions of pounds into debt by using its new borrowing powers “to the max”, the Finance Secretary has revealed.
Derek Mackay told MSPs he intended to make full use of increased borrowing limits contained in last year’s Scotland Act to invest in public building projects.
The Act allows Scottish Ministers to borrow up to £450m a year from April to spend on infrastructure such as schools, roads and hospitals, up to a grand total of £3bn.
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The SNP government will be able to borrow through commercial loans, by issuing bonds, or from the UK Government’s National Loans Fund.
Giving evidence to Holyrood’s Finance Committee on his 2017-18 spending plans, Mr Mackay was asked by SNP MSP Maree Todd if ministers would use the borrowing powers "fully".
He replied: “In terms of our new powers from the Scotland Act, we will use them to the max.
"Our proposal is to set out further spending plans around borrowing and we fully anticipate using them to the cap of £450m. We do intend to use them over the course of the year."
The 2012 Scotland Act empowered Scottish ministers to borrow up to £2.2bn for long-term capital spending, but the 2016 Scotland Act increased this to a total of £3bn.
The draft budget for 2017-18 shows ministers plan to borrow the annual maximum of £450m for capital spending up to 2019-20.
But Mr Mackay’s comments suggest this will be repeated every year up to 2022-23, with a final £300m of capital borrowing in 2023-24 to reach the £3bn limit.
Tory economy spokesman Mr Fraser said it was right that the SNP used its powers to boost the economy, but warned the borrowing would test the SNP’s “financial competency”.
He said: “Too often in the past we have seen huge cost overruns, and millions wasted, on public sector projects. Now that the SNP has a credit card to use, it needs to spend this extra money more carefully than it has in the past.”
Mr Mackay also defended his income tax plans against Tory attacks that the SNP is making Scotland the highest-taxed part of the UK.
While the UK government is raising the threshold for the 40p rate from £43,000 to £45,000, in Scotland it will rise by inflation to £43,430, raising an extra £79m north of the border.
Mr Fraser said the SNP’s tax policy could deter business investment.
However Mr Mackay said Tory alarmism was more of a problem.
He said: "We're not passing on the tax cut for some of the richest in society… but 99% of adults will pay no more tax given their current level of income than in 2016-17.
"The message that Scotland is high tax has really been put out by the Conservatives and I think that is unhelpful when it's the wider package that is important around taxation, and of course quality of life in Scotland as well."
Green Patrick Harvie asked why ministers had not been bolder in setting income tax rates and bands, given their new powers.
Mr Mackay said the government was providing “continuity” at a time of uncertainty, while still generating more income from a different tax position relative to the rest of the UK.
Mr Harvie said later that an inflation-only increase benefited high earners and the government was unable to justify not making “any progressive changes to income-tax rates and bands".