FINANCE Minister Kate Forbes has warned she will be trying to recover from the economic crisis “with one hand tied behind my back” unless more tax-raising and borrowing powers are handed to Scotland

Ms Forbes told MSPs that if she had full fiscal autonomy, where all tax raised in Scotland is spent by Holyrood, she “would be able to respond fully to some of the needs” of the crisis. 

But Scottish Labour has warned that with an “£8 billion existing budget gap” and £4 billion needed to tackle the Covid-19 crisis, full fiscal autonomy would “lead inevitably either to higher taxes across the board or deep and savage cuts to public services.” 

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Kate Forbes told MSPs that the Scottish Government does not currently hold the powers she would like in order to borrow more funding, as the UK and other governments can. 

The Finance Secretary has called on Westminster to plug a gap of £500 million she claims there is between the extra costs of tackling the pandemic and the money passed on from Westminster – or hand over more powers. 

Ms Forbes said that the Scottish Government being given wider borrowing powers would allow it to “respond to the exceptional circumstances in which we find ourselves in line with the response made by every government around the world”. 

She added: “If we cannot see the borrowing limit extended, then at least give us the right powers for the right reason, in order to manage the uncertainty. 

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“I think if we had full fiscal autonomy, we would be able to respond fully to some of the needs. That’s not what I’m asking for here, but what I’m asking for here is some pretty basic powers and flexibilities around the borrowing issues.” 

She has also called on the UK Government “guaranteeing a baseline level of consequentials” rather than estimates. 

She added: “Because this is a fixed budget, because, by law, I cannot overspend, if this year requires extraordinary spending in order to save lives and save the economy, then I will be hamstrung or at least I'll be doing it with one hand tied behind my back. 

"Whereas the UK Government is able to borrow more to meet the needs, we cannot and therefore if there's a pressing need in one part of the budget it will need to be taken from elsewhere." 

Ms Forbes added that if she is forced to move funding around within the budget, it would "lead to austerity". 

She claimed if the UK Government was not allowed to borrow money to deal with the crisis, they would need to shut down entire departments. 

She said: "The UK Government is not funding its multibillion-pound, critically important interventions through re-prioritisation, because it can't. 

"It would require complete departments to be shut down to fund the level of spend, which is absurd. 

"I don't see why the people of Scotland should suffer and see a return to austerity, just because this Government doesn't have the basic powers to respond." 

READ MORE: Kate Forbes: Expect 'deep cuts' to public services without new powers from Westminster

But Scottish Labour deputy leader and finance spokesperson, Jackie Baillie, warned that “Scotland is facing little short of an economic tsunami, with our economy endangered in a way we have not experienced before”. 

She added: “Kate Forbes has stated that Scotland’s economy may be the hardest hit in the UK by the coronavirus crisis and that it may take longest to recover. 

“With this in mind the £12 billion that Kate Forbes intends to borrow - £8 billion to close the existing budget gap and the £4 billion to tackle Covid-19 - would lead inevitably either to higher taxes across the board or deep and savage cuts to public services. 

 “In the midst of the greatest economic turbulence that we have faced in generations, taking action that would inevitably lead to not only a return to austerity but to austerity on stilts is simply unrealistic and unforgivable.”