UK’s credit rating at risk – not Scotland’s

Your report (5 January) on the threat to Scotland’s credit rating post-independence can hardly have come as a surprise to the senior civil servants drafting the Referendum Prospectus. However, for international bond investors, the risks relate more readily to the investments they currently hold, UK gilts, which must surely come under a somewhat uncomfortable microscope in the period before and after the referendum.

How will the financing and funding of the Westminster government’s debt be impacted by the break-up of the United Kingdom with the resultant carve-up of assets and liabilities? For financial markets, it’s too early to tell.

At the same time, the crisis in Europe presents a huge opportunity for a newly emerging nation, such as an independent Scotland to show the way forward as being newly energised and with aspirations to be economically dynamic.

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Many of the problems currently facing Western nations are the results of legacy issues which if not urgently tackled, will hinder growth perhaps for decades to come. Newly independent nations have the potential to throw off those shackles and reshape their institutions for the generations ahead, not the conditions experienced when they were created in the post war-era.

These opportunities are clearly not lost on the Scottish Government, where the First Minister has been developing our profile in the key areas of the Middle East and China and these are exactly the areas of the world which will provide much of the external funding for an independent Scotland. At the same time, domestic institutions such as pension funds and insurance funds would still continue to require an exposure to Scottish government bonds after independence to effectively manage their own asset/liability mix.

In the period ahead of the referendum, global economic uncertainty is likely to remain, with low growth being the best one can hope for in the years ahead. As your report yesterday showed, remaining joined to the rest of the UK in economic union is unlikely to be the key campaigning message for the unionist campaign. Indeed, it may prove to be a golden opportunity for the Nationalists to show just how different the Scottish economy could be with independence.

DOUGLAS A THOMSON

Blacket Place

Edinburgh

I READ with some bemusement the comments by fund manager Jim Leaviss that his “guess” is that an independent Scotland would “struggle to sustain” a triple-A credit rating, partly because of its size.

It is interesting to note that of the ten European Economic Area countries that enjoy a triple-A rating, including the UK, half are of a similar or smaller size than Scotland – Denmark, Norway, Sweden, Finland and Luxembourg. It is, therefore, hardly “rare” for small countries to enjoy such a status.

Mr Leaviss then goes on to state that an independent Scotland’s ratio of debt to GDP would be 56 per cent. This is less than the UK at 63 per cent. And on the issue of budget deficit, an independent Scotland, at 9 per cent of GDP, would have the same rate as the UK. With oil revenues included for Scotland, the deficit would drop to 5 per cent.

With new figures indicating Scotland is the most prosperous part of the UK outside London and south-east England in terms of per-capita output, it is clear that Scotland is in a far stronger economic position than the UK as a whole.

It is not independence, but our continued membership of the UK and the mismanagement of the UK economy that will see our current triple-A status being threatened.

ALEX ORR

Leamington Terrace

Edinburgh