Publication - FOI/EIR release

Correspondence regarding the impact of capital borrowing on GDP forecasts: FOI release

Published: 13 Nov 2018

Information request and response under the Freedom of Information (Scotland) Act 2002.

Published:
13 Nov 2018
Correspondence regarding the impact of capital borrowing on GDP forecasts: FOI release
FOI reference: FOI/18/02974
Date received: 24 August 2018
Date responded: 12 November 2018
 
Information requested
 

Correspondence between the Scottish Government and the Scottish Fiscal Commission regarding the impact of the level of capital borrowing on GDP forecasts. 

I would ask that the information includes:

  1. Correspondence between the Scottish Government and the Scottish Fiscal Commission regarding the impact of the level of capital borrowing on GDP forecasts.
  2. Correspondence particularly relating to the impact of a reduction in capital borrowing levels from the recent policy of borrowing the maximum amount on GDP forecasts.
  3. Information and correspondence relating to the topic of whether Scottish Government intentions to borrow the maximum amount would affect the GDP forecast for Scotland in the coming years, and whether a reduction in these plans would alter the SFC’s forecasts.
  4. Correspondence between the office of Derek Mackay and the Scottish Fiscal Commission regarding the ‘plans’ for capital borrowing in 2018-19 and 2019-20 (as listed as ‘maximum’ in the SFC’s recent forecast).

Response

The table below summarises the information released:

Item number

Date

Description

1

27/04/2018

Extract of Scottish Fiscal Commission’s information request template, with Scottish Government responses

2

16/05/2018

Extract of Scottish Fiscal Commission draft report for fact checking

These items are provided below.

While our aim is to provide information whenever possible, in this instance we are unable to provide some of the information you have requested because an exemption under section 30(b) (ii) (free and frank exchange of views) of FOISA applies to that information. The reasons why that exemption applies is that release would have harmful effect on effective conduct of public affairs between the Scottish Government and the Scottish Fiscal Commission, and would have an effect on the content of future information shared between the bodies on this subject.

Item 1 – Extract of Scottish Fiscal Commission’s information request template, with Scottish Government responses shown in tables and boxes.

Borrowing 

Capital borrowing

Please provide details of the Scottish Government’s capital borrowing and repayment plans. We have included the figures we have previously received so please either confirm these are correct or edit as needed. Please also provide as much information as possible to fill in the table for longer term borrowing plans. In particular there is a discrepancy between the capital borrowing repayment for 2017/18 that we reported in December (rounded to £21m) and the figure reported in the February 2018 spring budget revision (£24m). Please confirm the correct figure and the reason for the discrepancy. Values should be in £ million.

 

2015-16

2016-17

2017-18

2018-19

2019-20

2020-21

2021-22

2022-23

2023-24

Borrowing

283

333

450

450

450

-

-

-

-

Repayment on 2015-16 borrowing

-

9

9

9

9

9

9

9

9

Repayment on 2016-17 borrowing

-

-

11

11

11

11

11

11

11

Repayment on 2017-18 borrowing

-

-

-

7

14

15

15

15

15

Repayment on 2018-19 borrowing

-

-

-

-

7

14

15

15

15

Repayment on 2019-20 borrowing

-

-

-

-

-

7

14

15

15

Repayment on 2020-21 borrowing

 

 

 

 

 

 

 

 

 

Repayment on 2021-22 borrowing

 

 

 

 

 

 

 

 

 

Repayment on 2022-23 borrowing

 

 

 

 

 

 

 

 

 

Total Repayments

0

9

21

27

41

56

64

65

65

 

 

 

 

 

 

 

 

 

 

Repayment period for borrowing (years)

30

30

25

25

25

-

-

-

-

 
The Scottish Government can increase capital expenditure through borrowing up to £450 million per annum up to a maximum total of £3 billion under the provisions of the Scotland Act 2016. Borrowing powers have been used in full each year to date to support the Scottish capital infrastructure and promote economic growth in Scotland.
 
The 2018-19 Scottish Government budget makes full use of the £450 million capital borrowing powers available, however, final decisions on the specific borrowing arrangements for 2018-19 will be taken over the course of the year, reflecting an on-going assessment of programme requirements and value for money assessment of the options available. Final decisions on future borrowing levels will be taken as part of the 2019-20 and subsequent budget processes. 
 
At the moment, the Scottish Government expects to make full use of its borrowing powers in 2019-20, but will take final decisions on whether to borrow and how much to borrow in 2019-20 as part of the budget in December 2019.  Decisions on borrowing beyond 2019-20 will be considered as part of the 2019 Spending Review process.  the repayment figures above only include repayment of the principal and not the interest.  If interest figures are required these can be provided.
 
It is worth noting that the borrowing undertaken in 2015-16 and 2016-17 is notional borrowing and while budget provision needs to be made for this (and the borrowing counts towards the overall £3bn cap), no actual cash impact exists on the Scottish Budget.
 
The figure of £24 million in the Spring Budget Revision is the available budget not the actual repayment.
 
Item 2 - Extract of Scottish Fiscal Commission draft report for fact checking.
 
2.135 The MTFS capital spending figures include the support of capital borrowing available under the provisions of the Scotland Act 2016. The Scottish Government has provided confirmed borrowing plans up to 2019-20, while decisions on whether and how much to borrow beyond this point will be taken in future budgets. For the economy forecasts we adopted the same judgements on borrowing plans from 2020-21 onward as discussed in Chapter X, assuming maximum possible borrowing over the five-year forecast period. We therefore expect that the Scottish Government will continue to borrow the annual limit of £450m in every year up to 2022-23 (taking our assumed repayment schedule into account) and to borrow a further £144m in 2023-24 to reach the overall £3 billion cap. The reduction in capital borrowing in 2023-24 is partly reflected in a GDP growth rate of 0.9% in 2023-24, revised down from 1.0% in our previous forecast.
 
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