The Scottish Government could be given the power to issue its own bonds, Chief Secretary to the Treasury, Danny Alexander, will tell the Glasgow Chamber of Commerce today.
A consultation on the proposal was launched today. It 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. It will consider value for money for Scottish and UK taxpayers; potential macroeconomic issues; and alternative sources of borrowing.
The Government included a provision in the Scotland Act 2012 which enables it to amend the way in which Scottish ministers can borrow to include bond issuance from 2015-16. The Government committed to consult on whether these powers should be extended to permit bond issuance, as part of a total £2.2 billion borrowing limit.
Danny Alexander, said:
I’m pleased to launch this consultation in Glasgow today looking at both the benefits and disadvantages of Scottish ministers being able to issue their own bonds. This takes forward the commitments we made in the Scotland Act, which represented the greatest transfer of powers from Westminster for three hundred years.
I hope that academics, investors and other market participants will respond to this next step in potential further devolution of powers to Scotland.
Under existing powers, from 2015-16 the Scottish Government is already able to borrow from the UK Government or through a commercial bank loan. Scottish ministers will be able to borrow up to 10 per cent of their capital budget each year to fund additional capital projects, up to the overall £2.2 billion limit.
Notes for Editors
The consultation The Scotland Act 2012: a consultation on bond issuance by the Scottish Government will run until 14 September 2012 and can be found in our consultaton area under The Scotland Act 2012: a consultation on bond issuance by the Scottish Government.
The Calman Commission reported in June 2009 and recommended that Scottish ministers should be given an additional power to borrow to increase capital investment in any one year alongside greater tax raising powers. The Calman Commission recommended that this borrowing should be from the National Loans Fund and that any borrowing should be within the UK’s macro economic framework, therefore the Government should set the overall cap on borrowing.
Under the powers of the Scotland Act 2012, from 2015-16 the Scottish Government is 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. Scottish ministers will be able to borrow up to 10 per cent of the Scottish capital budget each year. Departmental Expenditure Limits (DEL) have not yet been set for 2015-16 onwards and the limits on borrowing will be reviewed at every Spending Review to ensure that they are sustainable.
The Government laid a Written Ministerial Statement on 21 March 2012 which committed to shortly launch a consultation on the Scottish Government issuing their own bonds. The Written Ministerial Statement can be found on the Parliament website (opens in a new window).
The consultation does not seek views on the issues that would be posed by bond issuance in the case of an independent Scotland.