Financial News

  • 20 February 2014, 9:57

Scotland Gets To Raise Cash On Markets

The Scottish government is being given power to issue its own bonds to help it raise money for projects such as flood defences, Westminster has announced.

Chancellor George Osborne called it "an historic moment for Scotland".

HM Treasury said borrowing power would be enacted in 2015-16 and give Scotland the ability to help finance "major transport projects, hospitals, school and flood defences".

Bonds are a form of long-term borrowing, which a government can issue to raise funds - but then must pay interest to the holder of the bond over a fixed-time period.

Scotland is already permitted to borrow up to 2.2bn through the National Loan Fund (NLF) and commercial sources, as part of the Scotland Act 2012.

The modification means Scotland will be able to gain additional sources of finance, however the same upper limit of 2.2bn will remain in force.

The decision was made after the Scottish government said it wanted greater access to capital markets.

Chief Secretary to the Treasury Danny Alexander said: "It will of course be up to the Scottish government to manage their borrowing.

"But this is complemented by the tax powers in the Scotland Act providing the Scottish government with an independent source of revenue to support borrowing costs."

Scotland's government has sought a variety of fiscal changes, and will be able to set income tax rates from next year.

But the Government has reminded Scotland that the current system allows borrowing at a cheap rate that is unlikely to be matched as an independent nation.

Mr Osborne said: "Being able to issue its own bonds gives Scotland new powers and new responsibility, within the security of the UK.

"Alongside the considerable new tax and spending powers we have already given in the Scotland Act, it is further evidence of why being part of the UK gives Scotland the best of both worlds."

But the Scottish government was quick to respond to the Westminster announcement.

Scotland's cabinet secretary for finance, employment and sustainable growth, John Swinney, told Sky News: "Instead of having the powers to borrow that were needed during the recession the UK Government is instead responsible for 26% cuts in capital spending.

"Without the full fiscal powers of independence the ability of any Scottish government to borrow to boost investment in infrastructure will continue to be constrained by arbitrary limits imposed from outside Scotland.

"Under independence, we would take our own decisions on public finances that are best suited to Scottish circumstances and priorities."

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