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Independence debate heats up: Scotland will be able to issue its own investment bonds

Friday, February 21st 2014 - 07:22 UTC
Full article 29 comments
PM Salmond said it was 'hardly huge news', and argued an independent Scotland would pay lower rates PM Salmond said it was 'hardly huge news', and argued an independent Scotland would pay lower rates

The Scottish government will be given power to issue its own investment bonds, UK ministers have announced. The move will give the Holyrood administration an extra source of financing when it gets new borrowing powers, in 2015. Chief Secretary to the Treasury Danny Alexander called the move “historic”.

 The Scottish government said it was “nothing new”, arguing only independence would give Scotland full control of its economy and finances.

The UK government announcement came ahead of the 18 September independence referendum, which will see voters in Scotland asked the Yes/No question: “Should Scotland be an independent country?”

Under Westminster legislation which devolved new powers to the Scottish Parliament, the Scottish government will be able to borrow up to £2.2bn to build major capital projects, like roads, hospitals and schools, from next year.

Scottish ministers will also be able to set a Scottish income tax rate, as part of a series of reforms put forward by the Calman Commission, which was set up to review the first decade of devolution.

Following a consultation, the UK government said those powers would be further boosted by giving the Holyrood administration direct access to capital funds with the ability to use bonds.

The arrangement will allow ministers to borrow money from an investor over a fixed period of time for a pre-determined interest rate.

Mr Alexander, said: “This is a historic announcement, demonstrating once again how Scotland can grow and prosper within the UK.

”From 2015, Scotland will be able to borrow up to £2.2bn to invest in its hospitals, roads and other capital projects. In addition to having access to the National Loans Fund, our decision today means that the Scottish government can directly issue its own debt.

“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.”

Scottish First Minister Alex Salmond told BBC radio's Good Morning Scotland program: “This does not give us any additional borrowing powers, it is only a different way of doing it. It's hardly huge news.”

Mr Salmond said an independent Scotland would be able to borrow money at a lower rate than the UK's current figure of 2.9%.

He added: “The borrowing rate in other small European countries such as Switzerland is 1.2%, Denmark 1.9% and Finland 2%. The evidence is that if Scotland was independent the rates would be lower”.

Treasury analysis has suggested issuing bonds was likely to be more expensive for Scotland than accessing the National Loans Fund.

Most respondents to the Treasury consultation said they believed bonds issued by the Scottish government would likely translate into a cost of borrowing “significantly above that enjoyed by the UK government”.

The consultation, which sought views from the Scottish government and investors, said Scotland might have to pay between 0.3% and 1.2% more than the British government to borrow from financial markets. Existing funding arrangements charge Scotland about 0.2% extra.

Categories: Politics, International.

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  • Idlehands

    The more we hear about the independence debate the more crazy the idea sounds and the more Scots seem to support it.

    Their view seems to be that they'll be sitting by their own warm fire admiring the family silver rather than venturing out into the cold wild world alone as it appears to everyone else.

    Feb 21st, 2014 - 12:29 pm 0
  • nololly

    All sounds very fishy to me.... I won't be buying any, nor will any sensible Scot. Still, they will probably be better than Argiebonds!

    Feb 21st, 2014 - 02:28 pm 0
  • Conqueror

    Let's be clear about this. Scottish investment bonds will be worth no more than argie bonds. A brief look at argie bonds. Argieland desperately needed money. It offered anything. It issued the bonds under New York state law. It gave up its sovereign immunity. Then it defaulted. It “restructured”. In layman's language, that means it decided to rip off the people who had already loaned it money. By telling them they had to accept between 25 and 35% of what they had loaned, or get NOTHING.

    Scotland will be the same. Scotland has virtually nothing. Salmond is “banking” on gas and oil “reserves”. Problem is that the “reserves” are getting smaller every day. Why does Salmond want to keep the “pound sterling”? Because, if he could get his way, the Bank of England would be “lender of last resort”. And that would mean that the UK would pay Scotland's debts. Except we won't. Watch the movement of businesses. The TSB (bank) is already moving from Scotland to England. And not just physically. The TSB is going to be registered in England. There's a vote of confidence in Salmond's Scotland.....NOT! And the UK will NOT be helping. Because the largest group of people in the REAL UK is the English. And all the available evidence is that the English do NOT like Salmond and his oiks.

    Feb 21st, 2014 - 05:31 pm 0
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