Leaders: A question of credit no-one can answer for certain
What effect would independence have on credit rating? Picture: Jane Barlow
Between now and the independence referendum in late 2014, argument will rage over what life in an independent Scotland would be like. A recurring topic in this argument will be the state of Scotland’s public finances. This issue has sprung to the fore in the wake of statements from the world’s leading credit-rating agencies that an independent Scotland could not count on inheriting the UK’s top-drawer triple-A rating status on its sovereign debt.
A recurring topic in this argument will be the state of Scotland’s public finances. This issue has sprung to the fore in the wake of statements from the world’s leading credit-rating agencies that an independent Scotland could not count on inheriting the UK’s top-drawer triple-A rating status on its sovereign debt.
This matters, because a credit rating has a powerful influence on the interest rate sovereign borrowers (or more accurately their taxpayers) have to pay in debt interest charges. The UK’s outstanding public-sector debt has just crossed £1 trillion for the first time and is set to rise still further.
The eurozone, gripped by a colossal debt crisis, has seen interest rates on sovereign debt soar to unsustainable levels and credit ratings slashed.
The unionist parties have seized on the remarks of the agencies as an indication that an independent Scotland would need to pay more for its sovereign debt and that, on this measure, we would be “worse off”. The SNP counters that with an independent Scotland’s share of North Sea oil revenues combined with pro-business tax policies, the debts of an independent Scotland would be more than ably covered with oil revenues and higher tax revenue from the economy overall – the proceeds of growth.
Not only would an independent Scotland be able to lay claim to a triple-A rating, but that, stripped of those oil revenues, the credit rating of the rest of the UK would be in jeopardy and likely to fall. Scotland would thus be better off.
However, for all practical purposes, the argument over Scotland’s credit rating score at this time is deeply hypothetical and unanswerable. No-one can predict with any certainty what the exact basis of division will be on the UK’s pile of net debt – population share or per capita GDP. We do not know how the UK government stakes in Royal Bank of Scotland and Lloyds Banking Group will be divvied up. And we certainly do not know what the oil price will be so many years hence.
That does not make the question invalid, but it is one impossible to answer with any assurance at this stage.
What is certainly likely is that ratings agencies would be reluctant to accord top credit status to an independent country without a track record of debt servicing and evidence of how it would cope in adversity. And establishing such a track record must of necessity take time.
In asserting that the Bank of England would continue to be lender of last resort to an independent Scotland, First Minister Alex Salmond hopes he has kicked this issue into touch. However, such an arrangement, which has met with no endorsement from the Bank or the Treasury, has still to be agreed and its terms set out, not least to ensure the current rating assessment is not placed in any jeopardy.
Lesson in leadership needed
A SURVEY of staff at the new schools inspectorate Education Scotland, tasked with improving the country’s education system, finds low morale, with almost two-thirds of respondents unhappy with the management and a disconcerting number expressing a wish to leave.
These are trying times for all organisations, private and public, as budgets are tight, pay severely constrained and household finances under pressure – and with no evident improvement in sight. Scottish education has been more exposed than most to organisational upheavals and shake-ups in management, systems, measurement and mission.
Education Scotland, created last year though the merger of Learning and Teaching Scotland and HM Inspectorate of Education, was almost destined to suffer a class of methodologies and values on top of problems over pecking order. Superimposed on all this is a concern that the new body is the expression of a political ambition by education minister to strengthen his grip over schools governance. Add to this mix the new Curriculum for Excellence and it is not difficult to see how reorganisation fatigue has set in and morale is under pressure.
That said, this is hardly the Afghanistan front line. Staff at ES have a task to do and a mission to undertake their work with all the skill and professionalism at their command. Bringing this to the fore in a period of unsettling change requires leadership: goals well set out and a clear system of delegation and appraisal. But morale is also a function of staff behaviour, with a clear focus – and pride taken – on delivering end result: schools improvement.
Tricky balancing act on green energy
Scottish Government plans to reduce subsidy support for renewable energy schemes were bound to meet with protest and disenchantment, all the more pronounced given the relentless exhortation in recent years to expand renewable energy generation whether through wind farms or hydro schemes.
But renewable energy policy was always going to be a tricky balancing act between three powerful groups: the government with its aggressive renewables targets; developers with an eye to profitable exploitation of generous subsidies; and the energy consumer, where eye-watering increases in energy bills have stretched their wallets to the limit.
Now there is a protest from community groups who fear that their local, small-scale projects could be forced out of business. The contradiction here, of course, is that so long as the savings on renewable power generation can be seen as a worthwhile payback on the initial investment, there need not be a problem.
What makes exemption of community schemes difficult is they are often presented as part of larger projects by private wind-farm developers – keen to maximise access to available subsidies under a guise of “green” altruism. The “community” also includes fuel poverty campaigners.
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Comments
There are 23 comments to this article
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samcoldstream
Tuesday, February 14, 2012 at 09:24 AMIn the past few hours, Moody's Credit Rating Agency in the US has warned that the United Kingdom's triple A credit rating is now under threat! The country's triple A rating has now been placed on a negative watch! There is now a one in three chance that the UK will lose its top credit rating.(Source: The Guardian Business Blog)
JPJ2
Tuesday, February 14, 2012 at 12:34 AM"an independent Scotland could not count on inheriting the UK’s top-drawer triple-A rating status on its sovereign debt." I see that this UK triple A rating is now in doubt MacPravda-another union dividend eh??
tested
Monday, February 13, 2012 at 10:38 AMEven politicians could work out what is a real community wind project and what is commercial subsidy farming. The average electricity consumption of a community cannot be that hard to calculate and therefore the level of installed capacity to meet that overall requirement obtained. Of course windmills being windmills wont actually be able to meet the community's 247 requirements that is why it would have to be based on averages but still a relatively easy calculation to make.
Ryan Dior
Saturday, February 11, 2012 at 06:20 PMI say, get rid of this over active time bomb, Yes you have it, him, Mr Salmon, I wonder if he will have a skit at the our hard working jewish friend's?, I can't think why not can you? or can he "that is the qestion", and why no mention of the unlregulated terrists we have satuerating out country, let's all work together as a nation and let greed be a thing of the past. Vote for me as leader as IF!!!!, I will sort the men from the boy's and kick political correctness, most ridicous health and saferty isues into Space and beond. ( Do excuss the spelling ) work togerther, as a Team, and through out self centered, power seekiers and over paid, cap footballers pay for starters, and give the rest to the game's loyal suporters in the way of cheap tickets for all, cutting the ticket towt out, am sure there is enough wealth in the world for all, to bring in a comfortable wage, and others who work and take more responceablity that bit more, that way, nobody would mind, as poverty would become a word banished to the back of the dictionary. I had better finish here otherwise I will be tempted on the next train weather and leaves on the line permitting, down to the Big Smoke, to demand a seat around the cabanet table Ryan Dior WriterActor
Ryan Dior
Saturday, February 11, 2012 at 05:48 PMI wonder how Salmon Find's the time to always report Comments, most, very acurate, to the moderator as Usuitable, or does he have some thing of an interest in the paper???? Ryan Dior WriterActor
Ryan Dior
Saturday, February 11, 2012 at 05:43 PMAnother Mouth,fat liped spurt from Salmon and his quite Racist thought's that hovers around his Arthromered insulated intervascular electrons within his very clowded cowerdly Brain, who has indirectly insulted our fellow keltic friends over the Irish sea,who incedently designed and built our inferstucter, the roads, motorways, gas mains, ect, and are our emedete Nabour's, not to mention the german skit, why doesant he put all that waight he is carrying around with him behind a posative outlook on our currant state of affares, and work with the goverment in maintaining a stable british ecnomy, and maybe take some advice from the people, when they say that Scotland will not last independant with just our oil income, get real fella, take your power yerning Ideas, and your body for a good work out, hagis and chip's anyone, now Mr Salmon wait your turn!!!
Cannon Law
Thursday, February 9, 2012 at 10:07 AM#16 Actually mogotron it was the spanish govt its self as I have the press release that was issued.
mogatrons
Tuesday, February 7, 2012 at 11:43 PMKraggash : "With the spanish govt threatening to veto Scotland's membership of the EU nothing is clear cut." - may I suggest you scrutinise your sources more closely and cross reference them with more 'reliable' non partisan media..................................... The Spanish government issued no such threat. The source for that piece of fiction was infact an anonynous source at the UK government (probably George Osbourne), who quickly withdrew the allegation in embarrassment after the Spanish Foreign minister released a press statement catagorically denying that Spain had any such intentions, nor would it ever consider doing so.
Dr. James Wilkie
Tuesday, February 7, 2012 at 06:29 PMInterestingly, a few months ago the Speaker of the Albanian Parliament told me that, since introducing a flat tax system a few years back, Albanian tax income quadrupled in a couple of years. I surmise that that may have something to do with the country's economic upswing from a very low base.
Niddrieman
Tuesday, February 7, 2012 at 12:26 PMWith the spanish govt threatening to veto Scotland's membership of the EU nothing is clear cut. Irrespective of what the rules for accession say the political turmoil would mean Scotland cannot assume it gains automatic membership, so that channel of public financial support cannot be counted on. There is a great irony that the SNP is asserting that our share of North Sea oil revenue would be more than enough to support our public finances whilst we are committed to generating all our energy should come from renewables by 2020. Sounds a bit like the SNP are trying to sell tabacco products to everyone else whilst knowing it will kill them!
samcoldstream
Tuesday, February 7, 2012 at 11:01 AMWith the exception of the major economic powers, the following countries have a triple AAA credit rating: Denmark, Netherlands, Norway, Finland, Sweden, Switzerland, Liechtenstein, and Luxembourg. Albania, which used to be held up as a derogatory model for a likely independent Scotland a B PLUS credit rating and its economy is classified as STABLE. Albania is currently awaiting assessment for a double BB PLUS credit rating. Emerging economies Brazil, China and India are NOT triple AAA rated economies. Four fifths of the world's economies do not have a triple AAA rating. (Source: CIA World Factbook)
Hearthammer
Tuesday, February 7, 2012 at 09:32 AM#11, you wish!
unimpressedone
Tuesday, February 7, 2012 at 09:17 AMIf Salmond's riffraff get to preside over an 'independent' country there'll be free tuition fees no more, free prescriptions no more, free personal health care no more, renewables subsidies no more.......
Hugo of Garven
Tuesday, February 7, 2012 at 09:02 AMI welcomed the headline and the associated editorial as being a sensible contribution to the Independence debate. I found it reasonably balanced. I wonder if this comment will be removed by moderator.
SlyFifer
Tuesday, February 7, 2012 at 07:45 AMComment removed by moderator
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