Scotland Looks at Bond Sale Among Options for Borrowing Powersby
U.K. law allows Edinburgh government to raise money itself
Finance minister will set new Scottish tax rate this week
Scotland is considering selling bonds for the first time as part of a range of options for exercising the country’s new borrowing powers.
The semi-autonomous government in Edinburgh is looking at various ways of raising funds, including loans, based on value for money, according to an official familiar with the plans who asked not to be identified because they are confidential. One attraction of bonds is that a debut sale would allow Scotland to get out into the market, the person said.
Under new measures coming into effect this year and next, Scotland is allowed to borrow as much as 2.2 billion pounds ($3.3 billion) from the National Loan Fund, commercial banks or by issuing debt. The amount is capped at 300 million pounds for the current fiscal year and the pro-independence Scottish National Party government wants to raise the ceiling in future as it presses the U.K. for more financial powers.
Scottish First Minister Nicola Sturgeon, whose opposition to U.K. spending cuts helped propel the SNP to become the third-largest party in Westminster after May’s election, was in London on Monday and met with Prime Minister David Cameron and investors at the London Stock Exchange. She said in an interview with Bloomberg that a bond sale would likely come up in broad discussions at the LSE on investing in Scotland. The Scottish official said that doesn’t mean there are plans on the table to tap the market.
During the campaign before Scotland’s referendum on independence last year, the U.K. government and some banks said that the country’s cost of borrowing would soar should it vote to leave the three-centuries-old union with England. The nationalists said only full autonomy would allow the country to benefit from its resources, including North Sea oil revenue, and dismissed the warnings as scaremongering.
Since Scots voted 55 percent to 45 percent to remain in the U.K., the Scottish government was given more control over its finances.
Scotland will be responsible for a proportion of the income tax people pay starting in April 2016. Sturgeon’s deputy, John Swinney, will present his budget plan on Wednesday including the new Scottish rate for earners. He said this week Scotland faces some “tough choices” after its grant from the U.K. was reduced.
While the oil price has collapsed, it doesn’t undermine the SNP’s push for independence, Sturgeon said.
With the SNP polling strongly before elections to the Scottish Parliament due in May 2016, Sturgeon said the push for independence was still very much alive despite the carnage in the oil and gas industry. Another independence referendum will follow “if and when there’s majority support for it,” she said.