The Scottish government is being given the power to issue its own bonds, the UK government has announced.The move will give the Scottish government an additional source of financing when borrowing powers are implemented from 2015.
Chancellor George Osborne called it “a historic day for Scotland”.
The Scottish government has argued that independence is needed to give it full control over Scotland’s economy and finances.
Under the Scotland Act 2012, the Scottish government is able to borrow up to £2.2bn for major capital projects such as transport infrastructure, hospitals and schools.
The act’s provisions come into force in 2015 and allow the Scottish government to borrow through the UK’s National Loans Fund and through commercial loans.
The UK government said adding the power to issue bonds would give the Scottish government the ability to directly access capital markets, which it claimed Scottish ministers had requested.
Chief Secretary to the Treasury Danny Alexander said: “This is a historic announcement, demonstrating once again how Scotland can grow and prosper within the UK.
“From 2015, Scotland will be able to borrow up to £2.2bn to invest in its hospitals, roads and other capital projects. In addition to having access to the National Loans Fund, our decision today means that the Scottish government can directly issue its own debt.
“It will of course be up to the Scottish government to manage their borrowing, but this is complemented by the tax powers in the Scotland Act providing the Scottish government with an independent source of revenue to support borrowing costs.”
Bonds enable the borrower to obtain funds from an investor for a fixed period of time for a pre-determined interest rate.
The Scotland Act implemented many of the recommendations of the Calman Commission on Scottish Devolution. In addition to borrowing powers, the Scottish government will be able to set a Scottish income tax rate from 2015.
Mr Osborne said: “Being able to issue its own bonds gives Scotland new powers and new responsibility, within the security of the UK.
“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.”