Page last updated at 14:14 GMT, Friday, 27 February 2009

Swinney calls for economic power

Scottish Parliament building
John Swinney wants Holyrood to have the power to borrow money

Finance Secretary John Swinney has called for the scrapping of the Barnett formula during evidence to a House of Lords committee.

He argued that Holyrood should have full fiscal autonomy, including the power to borrow money.

However, Labour peer Lord Sewel accused Mr Swinney of playing a "dangerous" game.

The Barnett formula, set up 30 years ago, allocates funding to Scotland based on population levels.

The session in Edinburgh was the first time the committee had taken evidence outside Westminster.

The ad hoc committee on the Barnett Formula was established in 2008 to consider the system for funding devolved administrations.

What currently happens is the Treasury continues to deal with the Scottish Government as it if was a department of Whitehall
John Swinney
Finance secretary

In his evidence, Mr Swinney rejected calls for a needs-based system to replace the current population-based method.

He argued that full financial freedom was the only way forward.

"I don't think the funding arrangements have caught up with the changing constitutional arrangements that have taken place in the United Kingdom," he said.

"I think that what currently happens is the Treasury continues to deal with the Scottish Government as it if was a department of Whitehall."

If you don't get fiscal autonomy you really don't have an argument about changing the existing arrangements
Lord Sewel

The four lords at the session insisted they could not discuss independence.

Lord Sewel said: "This is a dangerous, zero-sum game isn't it? You're actually saying 'I don't want to change the existing situation because I want something called fiscal autonomy'.

"If you don't get fiscal autonomy you really don't have an argument about changing the existing arrangements."

Former Scottish Secretary Lord Forsyth asked Mr Swinney: "Do you see this as a way of testing the system to destruction so you get whatever else it is you want?

"From our point of view as a committee, we look at this and say there's some problems here."

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