Treasury: Yes vote will leave Scots with £440 debt

The Treasury warns that Mr Swinney's sums don't add up. Picture: TSPL
The Treasury warns that Mr Swinney's sums don't add up. Picture: TSPL
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SNP plans to borrow billions to rescue Scotland from austerity after a Yes vote have been attacked by the Treasury which has warned it will represent an additional £440 of debt for every Scot.

The calculation prepared by Whitehall civil servants is based on Finance Secretary John Swinney’s plans to increase public spending by 3 per cent – but does not take into account any additional interest charged to a Scottish exchequer by the international markets.

The figures obtained by The Scotsman come just days after Liberal Democrat Chief Secretary to the Treasury Danny Alexander wrote to Mr Swinney, warning him that his proposals would leave Scotland with one of the “highest deficits in the developed world”.

Chancellor George Osborne’s austerity drive has limited UK public spending increases to 1 per cent per year.

A recent Scottish Government paper said its proposals for a 3 per cent rise would require an independent Scotland to borrow £2.4 billion in 2018-19.

It says even with the 3 per cent increase, Scotland’s deficit would fall to 2.2 per cent of GDP in 2018-19, significantly below the current level of 8.3 per cent.

The country would become independent on 24 March, 2016 if there is a Yes vote in the referendum on 18 September, under the SNP’s timetable.

Scots would have around a quarter higher debt per head than they currently do, according to the Treasury calculations.

The Scottish Government argues the deficit will be £1,020 per head in 2016-17 with the country the 14th richest in the world and in better shape than the remainder of the UK.

Savings identified in the SNP’s white paper include £600 million from reducing spending on defence and security and no longer contributing to the cost of running the Westminster parliament.

But the release of the new Treasury figures follows concerns raised over the strength of an independent Scotland’s economy.

Banker magazine calculated Scotland would be more exposed to a financial services crash than Iceland was at the height of its crisis, when its banks collapsed, dragging down the entire economy.

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According to Banker, Scotland would have a 10:1 ratio of exposure, based on financial institutions such as Standard Life, the Royal Bank of Scotland and the Bank of Scotland part of Lloyds remaining north of the Border.

There have also been mixed messages over Scotland’s potential credit rating based on its debt level. Moody’s says the new Scotland would be two places below the rest of the UK – but Standard & Poor’s says it could achieve the highest AAA rating.

The SNP has dismissed the estimates as part of bids at “scaremongering” by the No camp.

A Scottish Government spokesman pointed to a letter written by First Minister Alex Salmond to Mr Alexander, challenging him over austerity plans.

Mr Salmond wrote: “People across Scotland, quite rightly, want facts from both sides in the referendum debate – this is your chance to be clear about the consequences of a No vote and the impact it will have on Scotland’s public finances, our public services and our economic recovery.

“Now is the opportunity for you to come clean about your plans for continued austerity.”

He also noted: “The fiscal projections published by the Scottish Government demonstrate that Scotland’s public finances will be in a sustainable position following independence.

“Scotland’s balance sheet is forecast to match the UK’s upon independence in 2016-17, and public sector debt will be falling as a share of GDP.

“Scotland will therefore start life as an independent country in a very strong fiscal position and will have the opportunity to adopt a different approach to the years of austerity promised by the UK government.”

The SNP last month said the extra money would be raised through borrowing.

A recent Scottish Government paper on public finances said its proposals for a 3 per cent rise would require an independent Scotland to borrow £2.4bn in 2018-19.

John Swinney has said the government’s proposals showed a “willingness to invest in the economy” and to “encourage growth and dynamism”.