Scotland politics

Scottish bonds move step closer

Bank notes Image copyright PA

The UK government has confirmed it is beginning the formal process to allow the Scottish government to issue bonds.

The move should allow the Scottish government to fund borrowing through bonds from April of next year.

Legislation will be introduced by the Treasury, which is expected to lead to the Scotland Office laying an amendment order before Christmas.

Chief Secretary to the Treasury Danny Alexander said it was a "big step" towards further devolution.

The move stems from the Scotland Act of 2012, which gave ministers at Holyrood the power to borrow up to a total of £2.2bn from April 2015 for investment.

The Act already permitted borrowing from the National Loans Fund and commercial loans, with bonds set to become a third option for reaching the £2.2bn limit if required.

'Big step'

Bonds effectively allow people to lend money to government in exchange for a return on their investment.

The Treasury will now introduce legislation allowing the Scotland Office to amend the sources of capital borrowing available to Scottish ministers so they will be able to issue bonds.

Mr Alexander said: "This is a big step that shows that the UK government is keeping its devolution promise to Scotland.

"By beginning this process now, we will be able to have legislation in place to ensure that Scotland can issue bonds from April next year.

"Being able to issue bonds will give the Scottish government an additional source of capital funding as part of its new tax and borrowing powers contained in the Scotland Act 2012."

'Arbitrary limits'

He added: "By the time we have fully implemented this Act and the Smith Commission's agreement, the Scottish government's new powers will make it one of the most powerful devolved administrations in the world."

A spokesman for the Scottish government said: "This was promised as part of the Scotland Bill in 2012. In fact the UK government announced in February that it would give Scotland the ability to issue bonds in exercising the capital borrowing powers which will be devolved from next year.

"These orders do not give Scotland new borrowing powers and they do not remove the arbitrary limits imposed by HM Treasury.

"We welcome the Smith Commission proposal that both governments should consider the merits of introducing a prudential borrowing regime and hope that progresses more quickly than the granting of powers to issue bonds."

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