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Lord Mackay of Ardbrecknish moved Amendment No. 275K:

Page 28, line 14, leave out ("increased").

The noble Lord said: Clause 64 allows the Secretary of State to borrow for the parliament up to £500 million. Under subsection (3) we see that,

I am happy to see--

    "Treasury substitute for the amount (or substituted amount)"--

I am never sure what the words in brackets mean but I am not asking about that--

    "specified in subsection (2) such increased amount as may be specified in the order".

I have suggested the deletion of the word "increased" so that it simply reads,

    "such amount as may be specified in the order".

I do that because it is possible that the Secretary of State may decide to cap this amount at a lesser figure than £500 million, especially once the parliament is up and running. I appreciate that this is something the parliament will need to get off the ground before the whole system comes into play. I believe it would be wiser to leave out the word "increased" to allow for decrease or increase. My amendment would allow both possibilities. I do not say that there must not be an increase, but that the Secretary of State has to be able to decrease it as well as to increase it.

The Earl of Balfour: I was very interested in the equivalent Welsh Bill, when I put down an amendment in similar terms and was told that this limit was for emergency purposes and that it would not ever be likely to be decreased. I am therefore intrigued as to the answer we may now receive.

Lord Hardie: This is the one occasion on which I would certainly adopt the position on the Welsh Bill. The ceiling is indeed for emergencies; the £500 million specified is intended to be an upper limit. We would expect the borrowing to be well within that limit for the majority of the time. Clause 64(3) enables that amount to be increased, but only with the agreement of the House of Commons, should it be necessary to meet special unforeseen circumstances.

To put this in context, £500 million represents a small proportion of the parliament's likely budget. I am advised that it represents approximately two weeks' money and is fairly modest in comparison with other similar arrangements. For example, the equivalent figure for the Scottish water authorities is £3 billion.

With that explanation, I would invite the noble Lord to withdraw the amendment.

Lord Mackay of Ardbrecknish: Unless my arithmetic is very askew this evening, I find £500 million

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to be a significant portion of £14 billion. I certainly would not reject an offer of £500 million. It is a considerable sum of money with respect to the parliament.

I will not argue about that, however. I still think it might be better if the position were open so that "decrease" could go as well as "increase"; but I am content with the explanation. I understand why the money may be needed. In the eventuality of something very serious happening in Scotland, a lot of money might be needed in order to deal with an emergency, and this would be one way to do it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 64 agreed to.

Clause 65 [Borrowing by public bodies]:

Lord Mackay of Ardbrecknish moved Amendment No. 275L:

Page 28, line 24, leave out from ("sterling") to end of line 25.

The noble Lord said: My amendment is grouped with an amendment tabled by the noble Lord, Lord Sewel, and it will be interesting to hear what he has to say. My amendment is simply a probe. The subsection says,

    "A body established under any enactment shall not, in pursuance of a power conferred by virtue of an Act of the Scottish Parliament, borrow money in a currency other than sterling except with the consent of the Scottish Ministers given with the approval of the Treasury".

I suppose I will be told that there is a double armlock on this; but I wonder in what circumstances the Government envisage, even with the consent of Scottish Ministers and the approval of the Treasury, that the parliament might be borrowing in a currency other than sterling.

I find it hard to believe that the parliament will be borrowing from abroad. I find it even harder to believe that the parliament will be indulging in a bit of currency speculation. I would not have thought it was the best idea for the Scottish parliament to start borrowing from overseas banks, given the experiences of the Western Isles with BCCI. I wonder why the Government feel it necessary therefore to include this proviso which seems to allow the parliament, in very tightly constrained circumstances, to borrow any money other than sterling?

Baroness Carnegy of Lour: Is it anticipated that it might borrow in euros?

Lord Thomson of Monifieth: May I ask a question which puzzles me about the language of the clause, and indeed some other clauses? It says that a member of the Scottish executive "may borrow money". Is it not only the Scottish Ministers as a collective, the Scottish executive as a whole, that can authorise lending or borrowing money? It rather reads as if an individual Minister could go off and do something rather odd--subject of course, as always, to the consent of the Treasury.

Lord Sewel: Amendment No. 275L would prohibit non-sterling borrowing by public bodies completely.

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That is too inflexible. While we do not expect any great demand for this facility, it is nevertheless necessary to allow such borrowing should it be required.

But, given that non-sterling borrowing can have macro-economic consequences, it is only right and proper for any bodies that wish to take advantage of such borrowing first to obtain the consent of Scottish Ministers, who in turn must seek the approval of the Treasury. As noble Lords will know, macro-economic concerns are reserved matters.

The noble Baroness, Lady Carnegy, has spotted it! It is not beyond the bounds of possibility that in advance of any decision by the United Kingdom to join the single European currency, some public body might want to borrow from a European Union institution, and any such borrowing may be available only in euros. That would be possible with the approval as the Bill is presently framed. That is the gem that is hidden away there. I hope that the noble Lord can accept it.

9.15 p.m.

Lord Lyell: My noble friend and neighbour Lady Carnegy raised the point about euros. I thought the Minister's reply was good and gave flexibility for what a properly run council might wish to do. However, assuming that the euro, or the currency being borrowed, was not at a fixed exchange rate against sterling, if the council did well and perhaps made a profit on exchange, would the payments in euros, deutschmarks or perhaps dollars affect the limit? I presume that there are overall limits. Would there be a question against the limits, which are expressed in sterling?

Lord Sewel: Maybe. It is worth clarifying. I shall write to the noble Lord.

This borrowing is extremely limited. I imagine that with the euro the issue would arise only in the run-up to entry into the euro, when one would have effectively a fixed exchange rate. It is subject to the double armlock indicated by the noble Lord, Lord Mackay of Ardbrecknish, of approval by Scottish Ministers and the Treasury.

It may be helpful if I speak to government Amendment No. 275M. This inserts a new subsection in Clause 65 making it clear that the reference to "enactment" includes the Bill and subordinate legislation made under it. It is a purely technical amendment to ensure consistency in references to "enactments" throughout the Bill.

Lord Mackay of Ardbrecknish: I am grateful to the Minister for that answer. My noble friend Lady Carnegy may have provided him with a better answer than he had originally. But I am still not convinced. If we ever decide to join the euro, there will have to be an Act of Parliament. One of the clauses will state something like, "In every other previous enactment where it says 'sterling' read 'euros'". The provision will not be nearly

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as simple as that because the lawyers will have got at it to make it more complicated. Therefore I do not think it necessary to have this little omission.

Lord Sewel: For clarification, I am envisaging the period immediately prior to joining, where there most likely will be a great deal of trading in and borrowing of euros in this country. On that basis, I agree that there would be a period where there would not be an Act of Parliament stating, "For euros read sterling", but effectively one would have a fixed exchange rate between the two.

Lord Mackay of Ardbrecknish: I suspect that if we were to decide to join the euro within some specified timetable, we would need an Act of Parliament almost immediately to change everything. It would be more than just this legislation which would be influenced in that way.

However, I am not prepared to argue about that. I am grateful to the Minister. I strongly suspect that the approval of the Treasury will never be given to the Scottish parliament to undertake a little currency speculation. If it does, I might obtain the answer as to which receipts must be paid into the Consolidated Fund and promptly paid back to the Treasury.

I am content with Amendment No. 275M. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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