Bloomberg News

Scotland Will Get Power to Sell Bonds in Push for More Autonomy

June 14, 2011

June 14 (Bloomberg) -- Scotland will get power to sell its own bonds as part of a 12 billion-pound ($19.7 billion) financial settlement with the U.K. that gives the government in Edinburgh more responsibility for public spending and taxes.

The ability to issue bonds, which will be guaranteed by the Scottish government, is part of the biggest transfer of fiscal power from London since Scotland and England united more than three centuries ago, the Treasury and the Scotland Office said in a joint statement issued in Westminster.

“This will significantly improve the fiscal responsibility and accountability of the Scottish government, which can only be good for the people of Scotland,” Chancellor of the Exchequer George Osborne said in the statement.

The pro-independence Scottish National Party, which won an overall majority in last month’s Scottish parliamentary elections, is seeking additional powers over corporation tax and excise duties and control over broadcasting and the Crown Estate, which administers the monarchy’s assets.

Scottish First Minister Alex Salmond met with U.K. Prime Minister David Cameron in London last week to set out his plans to wrest greater autonomy. Salmond, leader of the SNP, promised to hold a referendum on independence in the second half of the five-year parliamentary term in Edinburgh.

Scotland Bill

The issuing of bonds and the extra spending and tax powers are included in legislation currently being considered by U.K. lawmakers. The proposals in the Scotland Bill resulted from an inquiry into how the devolved Scottish administration could gain additional tax and spending responsibilities.

The announcement on borrowing powers “takes positive steps towards addressing our concerns with the Scotland Bill,” Scottish Finance Secretary John Swinney said in a statement.

The U.K. government also agreed to bring forward some payments to allow work on the second Firth of Forth road crossing to start. The Scottish government will be given greater flexibility to deal with any variations in income tax receipts compared with initial forecasts.

The changes will allow Scotland to borrow as much as 2.2 billion pounds to finance infrastructure projects, with capital borrowing capped at 230 million pounds a year, the Daily Telegraph reported today.

The Scottish government currently has a budget of about 30 billion pounds and is responsible for policies including education, health, transport and law and order.

--Editors: Rodney Jefferson, Eddie Buckle

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net


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