By Tom Gordon

THE Scottish Government has formally asked Westminster for emergency powers to borrow £500milllion this year to help cope with the coronavirus crisis.

SNP Finance Secretary Kate Forbes last night wrote to Chief Secretary to the Treasury Stephen Barclay ahead of a meeting between Westminster and the devolved administrations tomorrow.

She said the half billion was needed to meet “significant economic and fiscal challenges”.

The request came as the Fraser of Allander Institute warned Scotland faced its deepest recession in living memory, and could take until late 2021 to fully recover.

The thinktank also warned that a second wave fo infections and a return to full lockdown could mean the economy taking until 2024 to return to pre-pandemic levels.

SNP ministers have already received £3.8bn extra since the start of the outbreak under the Barnett funding formula, most to help businesses survive the lockdown.

However Ms Forbes has warned the money will not be enough to meet all the spending required as the country attempts to re-emerge from the pandemic.

She has called for a sweeping review of the Fiscal Framework which has limited Holyrood’s budget since 2016, and was already due to be updated next year.

Capital borrowing for on roads, hospitals and other infrastructure is capped at £450m per year up to a total of £3bn, while rsource borrowing is capped at £600m per year up to a £1.75bn limit.

Another £500m a year can be borrowed for ‘in-year cash management’, to help smooth the budget if tax income and spending commitments are out of sync.

And £300m can be borrowed to help fix budget forecasting errors.

In her letter to Mr Barclay, Ms Forbes said she was seeking “temporary” and “relatively minor flexibilities” given the extraordinary pressure on her budget, despite having identified £600m in savings.

She requested the ability to flip up to £500m of capital underspend into revenue; to borrow up to £500m to support the Covid response this year instead of using the cash management power; and for the loans to be repaid over 10 years instead of the current 3-5 years.

She also requested doubling a useful accounting device to £220m.

She wrote: “The Scottish Budget should not face the risk of a negative impact through the Fiscal Framework if Covid-19 were to impact on the Scottish economy differently to other parts of the UK.

“I am therefore seeking your commitment to explore options to avoid this.

“These flexibilities will make a significant difference to our ability to manage both potential funding volatility and the very real pressures we face in correctly calibrating our response.”

Ms Forbes also asked for a “robust review” into the Fiscal Framework’s long-term operation.

Treasury sources last week said more powers for Holyrood were “not something we are considering”.