Scottish Government to issue first bonds after receiving credit rating update, as independence warning given
A credit rating has been given for the Scottish Government
Scotland’s economy stability has been praised by ratings agencies as John Swinney hailed his government preparing to issue its first bonds as a “proud day”.
The Scottish Government has been given the same credit rating as the UK, allowing it to start issuing bonds next year in a bid to attract investment for “key infrastructure” projects.
However, while credit rating company Moody’s praised “prudent fiscal management”, the government was warned its ratings could be cut if Scotland becomes independent.
Moody’s gave the government an Aa3 rating and fellow firm S&P Global rated it as AA.
Finance Secretary Shona Robison described Scotland has been described as a “safe bet” for investors. She said: “It’s creating a gateway on a global stage to encourage investment in Scotland and persuade investors that Scotland is a safe place to invest, and that is good for our economy.”
The government wants to issue bonds, which will allow it to borrow money from investors, who will receive regular interest payments in return. This will raise money for infrastructure projects.
S&P Global said the Scottish economy was “strong” and operating “within a stable and predictable institutional framework that provides strong oversight and well-defined arrangements with the UK central government”.
But, like Moody’s, the agency said their ratings could be cut if Scotland becomes independent.
Ms Robison said: “Two global credit rating agencies have rated Scotland the same as the UK and better than Spain, Italy and Japan, and points to the strength of our economy, the strong institutional framework and the prudent financial management of the Scottish Government.”
The Scottish Government has had the power to issue bonds since 2014. However, it has instead borrowed money from the UK national loan fund, which is seen as a cheaper way to raise money.
Bonds could offer better value for money under certain circumstances and greater flexibility.
The Scottish bonds are being nicknamed “kilts” - a play on the word gilt which refers to the bonds issued by the UK government.
The Scottish Government is allowed to borrow up to £472 million for capital investment over the next year. This would take its capital borrowing to £2,7 billion, close to its legal limit of £3.1bn.
Mr Swinney has said he was targeting the first national bond in 2026/27. He said this would be the first in a £1.5bn bond programme over the life of the next parliament, subject to the outcome of next year’s election, in-year borrowing requirements and market conditions.
“The Scottish Government’s high credit ratings are testament to Scotland’s strong institutions, track record of responsible fiscal management and pro-business environment,” he said.
“We are therefore now on track to commence the bond programme from 20/26/27, with the proceeds used to fund capital investment in key infrastructure.
“This is about using the powers we have to borrow better, not more, and reflects the maturity of Scotland’s public finances after more than 25 years of devolution.
“And, it is the latest step in building the institutions and tools Scotland needs for a prosperous future where our country takes responsibility for its own decisions.”
Mr Swinney said government ministers would “shortly commence engagement”, with banks to move ahead with the plans.
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