Salmond sets his sights on borrowing £5.6billion

Alex Salmond has demanded that the Scottish Government be handed the power to borrow up to £5.6 billion – more than double that set out in a planned shake-up of the devolution settlement.

But the First Minister insisted this would not lead to Scotland racking up a debt mountain and falling into a Greek-style crisis.

The UK annual spending deficit reached 143bn last year, but he said Scotland could not be blamed for the "incompetence" of the UK Treasury.

"There's no government, no administration in the world that I know of – certainly not of the size of the Scottish Government – that doesn't have the ability to borrow," Mr Salmond said.

"I don't think we should be penalised in Scotland for the extravagance and incompetence of successive United Kingdom chancellors."

The Scottish Parliament is to be given 2.7bn of borrowing powers in total under the Scotland Bill, with recent changes to the legislation allowing an advance of 100-200 million to be borrowed in the next two years.

It will also be given the powers to issue bonds.

Mr Salmond raised the prospect of bonds in Scottish Water being issued, provided there was no knock-on impact on the Scottish block grant.

The Scottish Government's enhanced borrowing proposals for capital investment would allowed up to an annual limit of 2 per cent of resources, with total stock of capital borrowing capped at the equivalent of 20 per cent.