Letter: Different take on Scotland's budget

There are a number of serious problems with this analysis which leads to a misleading picture of Scotland's relative fiscal position.

Firstly, the IEA analysis assumes Scotland would be assigned a share of UK debt in proportion to its share of UK public spending. However, this fundamentally ignores the revenue contribution made by Scotland to the UK Exchequer.

In 2008-09, the most recent year for which data is available, Scotland accounted for 10.4 per cent of UK tax revenue - higher than both its share of the UK population and public spending.

The IEA also bases its analysis on the level of UK public sector gross debt. However, the headline measure of public debt used by the Office for National Statistics, HM Treasury and the Office for Budgetary Responsibility is public sector net debt.

Net debt measures public sector debt after netting off the value of liquid assets. This is the measure of public sector indebtedness which underpins the UK government's fiscal mandate as it provides a fuller picture of the sustainability of a government's fiscal position.

As an illustrative example, if Scotland were assigned a per capita share of UK public sector net debt in 2010/11, this would be worth 76bn, almost a third less than the IEA estimate. Moreover, Scotland's ratio of net debt to GDP would have been approximately 54 per cent of GDP - lower than the equivalent ratio for the UK as a whole (60 per cent). On an internationally comparable basis, Scotland's ratio of debt-to-GDP would also be lower than the EU and G7 averages.

Finally, the key point is the bankability of a country. Scotland's oil and gas resources represent a trillion pound asset base - worth more than 10 times Scotland's share of a UK debt built up by successive Westminster governments. At UK level, this huge asset is no more than the equivalent of the national debt.

Under this administration, the Scottish Government has run a balanced budget every single year - and the idea that Westminster's economic incompetence in racking up record debt is an argument against Scottish independence is clearly bogus.

John Swinney

Cabinet secretary for finance, employment and sustainable growth

Holyrood

Edinburgh

Peter Jones (Perspective, 14 June) makes an important point about borrowing.

It is not the amount or the percentage of GDP that matters but the view of your economy and level of debt that lenders see as sustainable.

Gordon Brown, aided by Ed Balls and Ed Miliband, formulated his golden rule, but in fact it was irrelevant in a market economy.

For Scotland, our view on borrowing should be more realistic. Unlike the period 2001-2010 presided over, ironically, by Scottish-born prime ministers and chancellors, when borrowing was used to fund revenue, we should only use it for capital investment. And it should only be capital projects with clearly definable long-term returns.

In addition, and it depends on the level of debt inherited at independence, total debt should be sustainable not just as a low level of GDP but also the repayment of that debt should be sustainable even if there is a recession, without materially affecting national living standards.

The Brown-Balls-E Miliband economic plan should be a warning to any Scottish Government.

While borrowing could be useful in building a modern, sustainable Scottish infrastructure, it should remain a low-level economic tool. Many countries exist with very low or even non-existent debt levels. Every pound that has to be repaid in interest is a pound lost to the community.

Bruce D Skivington

Strath

Gairloch, Wester Ross

Peter Jones (Perspective, 14 June), is arguing that an independent Scotland would inherit a substantial proportion of the UK's national debt because the Scottish economy (including Scotland's share of North Sea oil) accounts for 11 per cent of the UK economy.

Scotland has 8.4 per cent of the UK population, so if Scotland accounted for 11?per cent of the UK economy, that means that the GDP per capita (economic output per head) of an independent Scotland would be 31 per cent higher than that of the UK.

According to the International Monetary Fund's world economic output database, the UK is the 22nd richest country in the world, measured by GDP per capita. On the same basis, an independent Scotland would be the ninth richest country in the world, just ahead of the United States and just behind Sweden. Is the argument that Scotland is too rich to be independent?

Graeme Blackett

Candymill Road

Biggar, Lanarkshire

Tuesday's edition contained coverage of proposed new borrowing powers for Scotland led by the headline, "Scotland's credit rating at risk - expert" featuring a number of comments made by me.

As you know, but just for clarification, Scotland currently has no sovereign credit rating and, therefore, it cannot be at risk. Further, I should also point out that I made no contention, as reported in the article, that any future credit rating of Scotland would be jeopardised by "constitutional wrangling" (your phrase) .

My point was merely that the credit rating agencies may be unsure how to credit-analyse future constitutional developments, and could view it as a political risk.Even then, this would not necessarily be deemed detrimental or insurmountable.It should be noted that there are various factors which could be a positive influencers on a future Scottish credit rating, such as the GERS (Government Expenditure and Revenue Scotland) analysis which demonstrates that Scotland generates a budget surplus (as opposed the UK running a deficit) and the fact that Scotland has a disproportionately large share of the UK's natural resources. As such, the determination of a future Scottish credit rating is more nuanced than your article suggests, and is a not an area given to over-simplication.

John Maciver

McGrigors

Earl Grey Street

Edinburgh