The Scottish Government has announced its intention to issue its own debt, valued at £1.5 billion, should it be re-elected in the upcoming May elections. This significant financial move follows a positive assessment from major credit rating agencies.
Strong Credit Rating Paves the Way
First Minister John Swinney confirmed the plan after two leading agencies, Moody's and S&P Global, awarded Scotland robust credit scores. Moody's assigned an Aa3 rating, while S&P gave an AA rating, mirroring the scores held by the UK government as a whole.
In its analysis, Moody's highlighted the "well-established devolution framework" and the requirement for a balanced budget as key strengths. The agency also praised the SNP government for having "demonstrated prudent fiscal management."
The 'Kilt' Bond Initiative
The proposed Scottish government bonds have been informally nicknamed 'kilts', a playful nod to the UK's 'gilts'. Swinney stated that the proceeds from these bonds would be strategically used for capital investment in key infrastructure projects.
He emphasised that this initiative is about "using the powers we have to borrow better – not more" and reflects the maturity of Scotland's public finances after more than two decades of devolution.
While the planned £1.5 billion is modest compared to the hundreds of billions issued by the UK Treasury, it establishes a crucial precedent for Scotland to raise its own funds independently. The devolved government has held the right to issue debt since 2015, but operates within strict borrowing limits.
Political Context and Economic Implications
The bond plan is set against a backdrop of continued political debate. The SNP argues that a fresh majority in the Holyrood elections would constitute a mandate for a second independence referendum. A recent Survation poll placed the SNP comfortably ahead on 35%.
However, the ratings agency Moody's issued a note of caution, suggesting that Scottish independence could introduce uncertainty and potentially exert downward pressure on the country's credit status.
This financial strategy marks a significant step for the Scottish government, balancing immediate infrastructure goals with the longer-term conversation about the nation's economic future.
