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Detail of outcome
The government received nineteen responses to the consultation, including from the Scottish Government, a number of potential investors, market participants, representative bodies, academics and organisations associated with other devolved governments. The document summarises these responses. The government will make a decision about whether to grant the Scottish Government the power to issue bonds ahead of capital borrowing powers being introduced in 2015-16.
Under the powers enabled by the Scotland Act 2012, from 2015-16 the Scottish Government will be able to borrow up to an overall limit of £2.2 billion for capital spending by way of loan from either the National Loans Fund (part of the UK Government) or from commercial banks.
By borrowing through the National Loans Fund, Scottish Ministers will have access to what is likely to be the most competitive form of finance available, benefitting from the UK’s low borrowing costs.
In order to ensure that the new system of Scottish borrowing is flexible and sustainable, the Government included a provision in the Scotland Act 2012 which enables it to amend, in future, the way in which Scottish Ministers can borrow to also include bond issuance.
Given the potential costs and risks for both Scotland and the rest of the UK of providing this power, the Government committed to consult on the matter, with any future bond issuance forming part of the total £2.2 billion borrowing limit.
This consultation will gather views and evidence on the potential benefits and disadvantages of bond issuance by Scottish ministers for both Scotland and the rest of the UK, including: value for money for Scottish and UK taxpayers; potential macroeconomic considerations; and an analysis of alternative sources of borrowing.
The Government is interested in feedback from all stakeholders with an interest in fiscal devolution and/or fixed-income markets, including market participants, potential investors, academics, businesses, trade assoiations and members of the public.
The views of those involved in this process will help shape the final policy.
HM Treasury will also consider meeting interested parties to discuss issues raised during this consultation. The timing, format and venue of these meetings will be informed by expressions of interest received.