The government is granting the Scottish government the power to issue its own bonds, Chief Secretary to the Treasury, Danny Alexander has today announced.
This will broaden the sources of financing available to the Scottish government for capital investment such as major transport projects, hospitals, schools and flood defences, when borrowing powers are implemented in 2015-16.
Under the Scotland Act 2012 the Scottish government is already able to borrow up to a total of £2.2 billion for capital investment via the National Loans Fund (NLF) and commercial loans. The announcement today provides Scotland with an additional source of borrowing alongside those already granted, but within the same limits. It follows a consultation in 2012 and fulfils a key desire of the Scottish government to be able to directly access the capital markets.
This is the first time that a devolved administration has been able to borrow in this way, and clearly shows the government’s commitment to devolution, and to maximising the benefits of the union.
Access to the NLF already allows the Scottish government to benefit directly from the UK’s low costs of borrowing. Issuing its own debt is unlikely to be as cheap, though it provides the Scottish Government with an alternative source of finance.
The Chief Secretary to the Treasury, Danny Alexander said:
This is an historic announcement, demonstrating once again how Scotland can grow and prosper within the UK. From 2015, Scotland will be able to borrow up to £2.2 billion 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.
The Chancellor of the Exchequer, George Osborne said:
This is an historic moment for Scotland, a country where the economy is growing with the government’s long term economic plan. 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.
Photo courtesy of Bernt Rostad on Flickr, used under Creative Commons.