Scotland politics

Treasury not consulted over loan scheme until after announcement

Derek Mackay
Image caption Derek Mackay said he was sure the Treasury would be "supportive" of the loan scheme

The Treasury was not consulted about the Scottish government's plan for a £500m loan guarantee scheme before it was announced at Holyrood, the finance secretary has confirmed.

The UK government will have to approve the scheme as it involves funds that MSPs have no discretion over spending.

Derek Mackay said the plan was included in Nicola Sturgeon's programme for government as a "courtesy" to MSPs.

He said he was "sure" the Treasury would be supportive of the scheme.

He has faced criticism from the Scottish Conservatives, who said it was "clear the policy has been cobbled together without any real consultation".

The £500m Scottish Growth Scheme was announced as part of the first minister's programme for government for the coming parliamentary term.

The primary aim would be for the Scottish government to use its balance sheets to guarantee loans from banks to small businesses. This would not directly involve government money - unless any of the firms receiving loans default on them, in which case the government would need to pay out.

Because these guarantees would sit on the budget under Annually Managed Expenditure, which usually covers matters like pension funds and is not directly controlled by the Scottish government, the Treasury will have to give the green light to the scheme.

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Media captionMs Sturgeon said the move was an "exceptional response to an exceptional economic challenge".

During questioning by the finance committee, Mr Mackay said the Scottish government had wanted to tell MSPs about the scheme before consulting Westminster.

He said: "We had no conversations with them on this specifically before bringing it to parliament. We gave parliament the courtesy of knowing first.

"I have written to the Chief Secretary to the Treasury, and I hope the UK Treasury will be co-operative around this, because it has no financial call upon the UK government, but if delivered could be of great assistance to the business community in Scotland and be managed by the Scottish government."

Tory MSP Murdo Fraser asked if this was a "responsible way to proceed".

Mr Fraser said: "This is clearly the centrepiece of the programme for government in terms of economic support - it was announced with great fanfare, and yet it now appears that you've had no discussions at all with the Treasury as to whether this will have their support.

"Surely you should have had at least a conversation with them in advance to try ad understand whether support would be forthcoming, before announcing it with such fanfare."

'Alleged support'

Mr Mackay replied: "I'm sure that the UK government, with its alleged support for the business community, will want to support the Scottish government to deliver such a scheme. Should we not come to parliament to engage with Scottish parliamentarians on such matters?

"Murdo Fraser is well aware that the UK government often makes decisions that impact on Scotland our budget and our businesses without engaging with the Scottish government first.

"It is a significant intervention, it shows innovative thinking on the part of this government, how we will use the strength of our balance sheet to support Scotland's economy.

"I see no good reason why the UK government wouldn't want to proceed with this and support us on this. In fact I wouldn't be surprised if they copy it."

Image caption Mr Mackay was quizzed during a meeting of Holyrood's finance committee

Mr Fraser responded that the policy had been "cobbled together without any real consultation", calling it an "amateurish approach" to government.

The Treasury confirmed it had received Mr Mackay's letter, saying normal procedure had been followed.

A UK government spokesperson said: "The UK and Scottish governments are in constant contact on a range of issues.

"The UK government continues to support the Scottish economy and the Scottish government's extensive powers allow it to decide how it will support Scottish businesses within the terms of the devolution agreement."

During the meeting, Mr Mackay also defended his decision to delay publication of a draft budget for Scotland until after the Chancellor's Autumn statement.

The finance secretary said caused by the Brexit vote meant it would be better to wait before publishing plans, but committee members raised concerns about how much time this would give them to scrutinise the budget.

Mr Mackay said: "Publishing an inaccurate budget would be the wrong thing to do. The starting position is about to change, and having such intense scrutiny on a budget that would be subject to so much change because of the variables would be the wrong approach."

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