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Scotland given ‘historic' powers to issue bonds

The government has granted Scotland the power to issue its own bonds in what the chancellor has described to be a ‘historic move’.

 
Scotland given ‘historic' powers to issue bonds

The government has granted Scotland the power to issue its own bonds in what the chancellor has described to be a ‘historic move’.

The Treasury has said the Scottish will be permitted to issue up to £2.2 billion in debt to fund investments in various infrastructure projects.  

The idea was first mooted in an amendment to the Scotland Bill in June 2011 and today’s announcement - which is ahead of schedule - comes as the nation prepares for September’s referendum on independence.

However, the Treasury warned the cost of issuing Scottish bonds would be ‘significantly’ higher than the UK because of the higher ‘credit risk’ north of the border.  

Danny Alexander, chief secretary to the Treasury, said: ‘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.’

Chancellor George Osborne added: ‘[It is a] 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.’

2 comments so far. Why not have your say?

Clive B

Feb 19, 2014 at 11:23

It'll be interesting to see what yield the Scots have to offer relative to Gilts

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Ladysaver

Feb 19, 2014 at 19:26

Yield will be surely be higher. But if they issue bonds before the referendum, risk will be higher, especially political risk. The referendum means everything's in the air. Who exactly is underwriting these bonds? Is it ultimately the UK Govt? If not technically, would it be the UK Govt in a full-horror scenario? The UK Govt didn't underwrite Iceland's banks, but bailed out their UK savers rather than face the horror. I've seen lots of corporate bonds, for example, where ratings agencies give the OK because there's a larger company behind the issuer, whom the ratings agency cannot conceive would allow a default, even if the larger company isn't the issuer. If the UK is currently an 'invisible shield' on Scottish bonds', but Snake-Oil Salmond gets his way, it will have been like buying Govt. bonds in Zimbabwe. I wouldn't touch them.

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