Scots to get their own bond power

Updated: 

Ireland British Irish Council Summit

Scotland will shortly be free to raise debt under it's own name. But it may well come at a price. Though Scotland votes in September on the chance to break its union with England - there is huge anxiety on it being denied the pound, as George Osborne insists - a new concession allows Scotland to issue more than £2bn in bonds. What does it mean?

Tartan bonds

For starters, it may mean a higher interest costs if Scotland does go it alone. That's because the British government will not stand behind the new Braveheart bonds (as they're tagged) as a guarantor. Though the markets would make up their own mind in due course.

But it does mean a measure of financial independence for Holyrood - and more options to raise cash for capital projects, new roads, hospitals though the international bond markets. However the overall £2.2bn limit remains.

Best of both?

"Alongside the considerable new tax and spending powers we have already given in the Scotland Act," George Osborne says," it is further evidence of why being part of the UK gives Scotland the best of both worlds."

However, if Scotland is paying as much as 1.2 percentage points - as has been suggested - extra than the British government then the borrowing won't be as cheap. The rate may fall over time as Scotland's debt becomes a more known quantity (or, on the other hand, rise).

But the new bond independence move was dismissed by a Scottish government spokesperson. "Without the full fiscal powers of independence," one spokesperson told City A.M., "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."

EU club access

Either way, the move is being hailed a a "historic moment for Scotland". Meanwhile EU president Jose Manuel Barroso has told the BBC's Andrew Marr it would be "extremely difficult, if not impossible" for an independent Scotland to expect membership of the European Union.

Holyrood finance minister John Swinney has since claimed no EU member would attempt to veto Scottish membership.