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SCOTTISH GOVERNMENT FOURTH ANNUAL REPORT ON THE IMPLEMENTATION AND OPERATION OF PART 3 (FINANCIAL PROVISIONS) OF THE SCOTLAND ACT 2012

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Chapter 2 - Borrowing Powers

18. The Scotland Act 2012 allows Scottish Ministers to undertake borrowing to fund capital expenditure subject to a statutory aggregate cap of £2.2 billion. HM Treasury has set out administrative rules, which limits borrowing in any one year to 10 per cent of the capital budget (Capital Departmental Expenditure Limit or CDEL). This gives a maximum borrowing limit of £306 million in 2015-16 and of £316 million in 2016-17. The Scottish Government continues to maximise investment within the capital limits imposed by HM Treasury.

19. The Office of National Statistics classified the Aberdeen Western Peripheral Route to the public sector in July 2015. As a result of the classification decision the Scottish Government is managing the budgetary impact of this and four other stand-alone projects in the Non Profit Distributing programme within capital budget limits. The Scottish Government has agreed with HM Treasury exceptional arrangements in respect of these projects to allow the £283m of spending within these projects, which would otherwise be a direct charge against Capital DEL budgets for 2015-16, to be recorded against the Scotland Act 2012 borrowing limit for the year. This is for budgeting purposes only. No actual drawdown of borrowing from the National Loans Fund (NLF) or other sources is required for this amount in 2015-16. A decision on any drawdown of the balance of £23m in borrowing available will be taken depending on the overall budget management position for the year.

20. Scottish Ministers will continue to evaluate the potential methods of borrowing available to them including borrowing from the NLF, commercial loans and issuing bonds and will in due course take a decision on which method or combination of methods to use.

Revenue Borrowing

21. The Scotland Act also enables the Scottish Government to borrow for certain revenue purposes up to an aggregate maximum of £500 million. This maximum allows for an administrative limit in any one year of £200 million, and that individual loans would be required to be repaid within 4 years. These borrowing powers have not been used in 2015-16 and the position for 2016-17 will be regularly reviewed.

22. Use of revenue borrowing would not, because of its nature, be planned in advance of the need arising.