The arrival of the tartan bonds
Scotland handed powers to issue debt as referendum looms
SCOTLAND is to be given the power to issue its own bonds, Danny Alexander will reveal today.
The announcement gives the Scottish government direct access to capital markets and will form part of an existing borrowing agreement it will be allowed to tap into from 2015.
Appearing before a hearing in Scotland today, the chief secretary to the Treasury will call the news a “historic announcement,” pointedly adding that it demonstrates how “Scotland can grow and prosper within the UK.”
Agreed in 2012, the Scotland Act already gives the Scottish government power to borrow up to £2.2bn in the form of loans from the UK government. The announcement today allows ministers to raise money by issuing bonds but does not increase the amount it can raise in total.
The chancellor George Osborne said Scotland has the best of both worlds. “Being able to issue its own bonds gives Scotland new powers and new responsibility, within the security of the UK,” he said. The Treasury consulted widely on whether to issue bonds in 2012, publishing its findings in May 2013. A government source said ministers have been considering when to announce that bonds could be issued for a while.
The timing of the announcement reflects Westminster’s desire to demonstrate that Scotland can take more control over its finances while remaining part of the UK. Osborne recently warned that Scotland would lose the pound if it chose to become independent.
The Scottish government hit back today, accusing Westminster of doing “too little too late.”
“This is nothing new,” a spokesperson said. “Instead of having the powers to borrow that were needed during the recession the UK government is instead responsible for 26 per cent 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.”
James Sproule of the Institute of Directors gave the announcement a lukewarm welcome, telling City A.M: “Any measure which encourages responsible financing should be welcomed. The worst of all possible worlds is when politicians have the power to spend without the responsibility of financing it.” But concerns were raised consistently during the government’s consultation process that any bond issuances would not be cost effective, as Scotland has a weak borrowing record.