‘Scots Government bonds could raise borrowing cost’

Experts have questioned proposals to allow the Scottish Government to issue bonds to borrow money under the new devolved powers it is receiving by 2015. Picture: Jon Savge

A summary of 19 experts on the international markets published by the Treasury has questioned proposals to allow the Scottish Government to issue bonds to borrow money under the new devolved powers it is receiving by 2015.

But the paper has also been taken by pro-UK parties as evidence that the cost of borrowing for a government of an independent Scotland would increase.

The paper noted that six of the respondents were in favour of Scotland having its own bonds under devolution and three against while 10 gave no opinion.

Those in favour said it would make borrowing for the Scottish Government “more flexible.”

But the paper said: “While respondents indicated that demand would likely accommodate £2.2 billion of bond issuance, the majority believed that bonds issued by the Scottish Government would likely translate into a cost of borrowing significantly above that enjoyed by the UK Government.”

It went on: “The factors most

often cited included the perceived lower credit worthiness of the Scottish Government, owing in particular to its narrower revenue base and lack of a track record in borrowing, as well as the lower liquidity of Scottish Government bonds compared with UK gilts.”

Campaigners arguing for Scotland to stay in the UK took the summary as evidence that the cost of borrowing outside the UK would be even higher.

Scottish Conservative deputy leader Jackson Carlaw said: “What’s clear from the evidence of senior industry players is that, even as part of the UK, the cost of borrowing by the Scottish Government would be ‘significantly above’ that enjoyed by the UK Government.

“This raises serious questions over a separate Scotland’s ability to borrow and its potential credit rating.

“With a narrower revenue base and an unproven fiscal track record, borrowing rates would be higher under independence.

“This would mean higher mortgage rates for homeowners, and higher loan rates for businesses.”

A spokesman for better Together, the umbrella group arguing against independence, said: “This is just the latest example of the potential cost of separation. The SNP wants us to believe that money will rain from the skies and all of our problems will disappear overnight if we vote for them. The reality is that going it alone will cause problems, not solve them.”