UK's thumbs-up to Tartan bonds

Scotland will be able to issue its own bonds even if it votes to stay part of the UK, says the government. Hollyrood isn't impressed.

by Emma Haslett
Last Updated: 19 Feb 2014

Further indication that the UK government is doing everything it can go persuade Scots to vote 'no' in September's independence referendum? This morning chief secretary to the Treasury Danny Alexander announced, with much pomp and circumstance, that Scotland will be able to issue its own bonds. Shame the Scots see it as an old policy...

Yep - as a Scottish government spokesperson irritably pointed out this morning, this is 'nothing new': under the Scotland Act 2012 (which confusingly doesn't come into force until 2015), Scotland can borrow up to £2.2bn through the UK's National Loans Fund and commercial banks. This announcement doesn't change the amount it can borrow - it just allows it to do it in a different way. 

Alright, so to the more pessimistic among us it's a little like giving a teenager a credit card. But actually in the US, municipal bonds are big business. Which is why states like California and cities like Detroit have, ahem, been able to go bust....

Nevertheless, ministers seemed tremendously proud of themselves. 

'This is a historic announcement, demonstrating once again how Scotland can grow and prosper within the UK,' beamed Alexander. George Osborne added: '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.'

The Scottish government, meanwhile, was less impressed: 'Instead of having the powers to borrow that were needed during the recession the UK government is instead responsible for 26% cuts in capital spending,' said a spokesman.

'This is simply too little too late. Without the full fiscal powers of independence the ability of any Scottish government to borrow to boost investment in infrastructure will continue to be constrained by arbitrary limits imposed from outside Scotland.' 

Not constrained enough for some analysts' tastes. There are concerns that unless the UK government is strict about this, when the chips are down it'll still end up putting its hand in its pocket. The government must adopt the same detached parenting style as its US counterpart, they say: if Scotland over-borrows, it must deal with the consequences. Think Gina Ford, rather than helicopter parenting... 

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