The biggest shift of fiscal powers in the UK’s history was just proposed (via The Guardian). Under new rules introduced in Westminster, Scotland will be able to issue bonds, have some means of control over income tax, and take out loans of up to £2.2 billion.
The Telegraph has nicknamed them “Braveheart bonds.”
These are the latest in a series of concessions that the UK’s Parliament is making to the Scottish Nationalist Party, which last month won a majority of seats in the Scottish elections. It is the first majority government in Scotland since the current Scottish Parliament was created in 1999.
British Chancellor George Osborne said that, “the far-reaching changes we are introducing mean the Scottish people and their elected representatives will be much more responsible not just for decisions on public spending in Scotland but also for the Scottish taxes needed to pay for those decisions.”
There are concerns, however, that giving Scotland the power to issue bonds would increase costs on paying back the UK’s debt.
John McDermott wrote at FT Alphaville that “even though the bonds will be denominated in GBP and ultimately (one would imagine) be backed by all UK taxpayers, this is surely true. A “spread” between UK and Scottish bonds would surely exist, not least to account for the political risk of independence, but it would likely be quite narrow.”
The leader of the Scottish Nationalist Party, Alex Salmond, has vowed to hold a vote on Scottish independence.
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