Scotland ‘would pay a premium’ to borrow money
The Scottish Government ‘would pay a premium’ (pic: Terry Murden)
A Scottish economist has issued a further reminder to the Holyrood government that it would pay a higher price than Westminster to borrow money on international markets.
This would force the Edinburgh-based administration to impose deeper cuts in public services or steeper tax rises to meet its repayments.
Professor Ronald MacDonald of Glasgow University has said a “newly minted independent Scotland without the long history of credibility that the Bank of England and Treasury have would have to pay a premium on its borrowing over UK rates”.
His comment follows an update from the Scottish Fiscal Commission which has stated that the Scottish Government will receive a minimum of £6.5 billion of additional funding as part of the UK to respond to the coronavirus crisis.
The report states: “This guaranteed level of funding provides the Scottish Government with a degree of certainty as it manages its response to COVID-19 for the remainder of this financial year.”
The SNP government has insisted that it needs independent access to capital markets so that Scotland can meet its own requirements.
But critics say Scotland receives what it needs as part of the UK ‘family’ and that the Westminster Government has borrowed for the UK as a whole, with historically low rates that are available to it.
Jackie Baillie: ‘huge financial support’ (pic: Terry Murden)
The Scottish Government, with no track record of borrowing, would have a weaker credit rating and would be forced to pass on the higher costs in the form of cutbacks and tax rises.
Pamela Nash, chief executive of Scotland in Union, said: “As part of the UK, the Scottish Government has received a multi-billion pound boost to help tackle the coronavirus crisis.
“This pooling and sharing of resources is only possible as part of the UK.
“If Scotland was a separate state it would not be able to borrow at the UK’s low rates, which would in turn require deep public spending cuts and tax rises in the longer-term.
“Scotland is stronger as part of the UK, and it’s time for Nicola Sturgeon to drop her obsession with another divisive independence referendum and focus on improving public services.”
Scottish Labour deputy leader and finance spokesperson Jackie Baillie said: “Today’s report makes clear the huge financial support Scotland receives due to the pooling and sharing of resources across the UK.
“It is clear that a separate Scotland would face turbo-charged austerity based on the SNP’s Growth Commission proposals. We would be unable to navigate such a crisis without deep and savage cuts to public services.
“What we must see now is both governments working together to get Scotland through this crisis, not indulging in the Punch and Judy politics both so often revel in.”