Scottish government gains powers to issue finance bonds, but they’ll cost more

The British government has confirmed that the government in Scotland will have the power to issue their own bonds, but has warned that it may not be an effective method of borrowing.

The move will give the Scottish government a new channel for finance when the borrowing measures are introduced in 2015.

According to the Treasury, Scotland will be able to borrow up to £2.2bn on the international bond market, allowing capital investment in hospitals, roads, schools and flood defences.

However, according to a treasury consultation, money raised through the bonds may be an inefficient mechanism for borrowing. The consultation said that “bonds issued by the Scottish government would likely translate into a cost of borrowing significantly above that enjoyed by the UK government”.

The bonds will not be guaranteed by the British government.

The chancellor, George Osborne, said that the new powers marked a “historic day for Scotland, a country where the economy is growing with the government’s long term economic plan”.

But according to the BBC, the Scottish government has described it as “nothing new”, adding that only independence would give Scotland full control of its finances and economy.  

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