It's Bonds. 'Kilt-edged' bonds: PwC comments on consultation

Following an announcement  by Chief Secretary to the Treasury, Danny Alexander, that consultation will now take place on the issue of bond issuance by the Scottish Government, Paul Brewer, head of government and public sector at PwC in Scotland, commented:

“This is another step, albeit small, towards Scotland having more fiscal responsibility for its own decisions. 

“It provides a welcome boost to capital investment. The power to raise a modest bond issue of around £200m to £300m per annum – the equivalent of a new hospital or several primary schools – will be enough to side-step serious debt..

“While the bonds won't be issued until 2015-16, it will make a profound difference for those projects currently in the early planning stage and likely to be shovel ready in two years time. In that sense alone, the ability to accelerate investment and capital spending will boost confidence and help secure much-needed jobs.

“But borrowing also brings responsibility.  The Bonds won't be guaranteed by the UK Government so, for the first time, the Scottish Government will have lenders who will take a keen interest in its financial strength. 

“This will require a step forward in the clarity and transparency of financial reporting by the Scottish Government as the Rating Agencies, whose views on countries' financial strength we see daily in the press, will now take an interest in Scotland as a borrower.

“The challenge for Scotland will be to convince the Rating Agencies that it justifies the UK's cherished AAA rating. It will have to demonstrate that it has the strength of fiscal management needed to achieve this – if it doesn't, the consequence will be paying more for its   borrowings.”

ends

Contact details: 

Email - Paul Brewer, head of government and public sector, Scotland