By Martin Kelly
Wealth levels of an independent Scotland will be comparable with countries that enjoy a Triple-A credit rating, ratings agency Standard & Poor’s has said.
In a newly released report, the company today has confirmed that even without North Sea Oil revenue, a newly independent Scotland would “qualify for our highest economic assessment”.
The conclusion is contained in a new report, entitled ‘Key Considerations For Rating An Independent Scotland’.
In the report the ratings agency says:
“The Scottish economy is rich and relatively diversified, with 2014 per capita GDP estimated to be US$47,369 (based on the Scottish government’s estimates, which include Scotland’s geographic share of North Sea output,…)
It adds: “Scottish wealth levels are comparable to that of the U.K. (‘AAA’), Germany (‘AAA’), Ireland (‘BBB+’), and New Zealand (‘AA-‘).
“Even excluding North Sea output and calculating per capita GDP only by looking at onshore income, Scotland would qualify for our highest economic assessment. Higher GDP per capita, in our view, gives a country a broader potential tax and funding base to draw from, which supports creditworthiness.”
“In brief, we would expect Scotland to benefit from all the attributes of an investment-grade sovereign credit characterised by its wealthy economy (roughly the size of New Zealand’s), high-quality human capital, flexible product and labour markets, and transparent institutions,” said S&P in the report.
“Nevertheless, the newly formed sovereign state would begin life with comparatively high levels of public debt, sensitivity to oil prices, and, depending on the nature of arrangements with the EU or UK, potentially limited monetary flexibility.
“At the same time, Scotland’s external position in terms of liquidity and investment could be subject to volatility should banks leave.
“On the other hand, if this were to happen, it could bring benefits in terms of reducing the size of the Scottish economy’s external balance sheet, normalizing the size of its financial sector, and reducing contingent liabilities for the state.
“In short, the challenge for Scotland to go it alone would be significant, but not unsurpassable.”
The assessment has been welcomed by the Scottish Government which said it kills off “scare stories” from the No campaign.
Commenting, Deputy First Minister Nicola Sturgeon said:
“This is a hugely welcome endorsement of Scotland’s economic strength from an internationally respected and independent agency.
“Standard & Poor’s have concluded that Scotland’s wealth levels ‘are comparable’ to those of AAA-listed nations, and that as an independent country – even without North Sea oil – Scotland will qualify for S&P’s ‘highest economic assessment’.
“That is a glowing assessment of the Scottish economy from an impartial source and completely demolishes the scaremongering of the No campaign.”
The report from one of the world’s most respected agencies is a significant blow to opponents of independence and follows repeated claims from pro-Union politicians that a newly independent Scotland would face higher interest rates than the rest of the UK.
Last month, UK Treasury Minister Danny Alexander claimed that a poor credit rating meant Scots faced a £5200 hike in their mortgage payments if they voted for independence.
The Deputy First Minister added: “The anti-independence campaign was already guilty of massive hypocrisy on this issue following the UK’s downgrading from AAA status by leading credit agencies, but this endorsement puts the scare stories to bed and is a massive endorsement of the Scottish Government’s vision of a prosperous, economically successful independent Scotland.”
Last year the Better Together campaign was left red-faced after it emerged that leaflets boasting about the UK’s triple-A rating were being distributed five weeks after it had been downgraded by credit agency Moody’s.
The leaflets followed comments from Scottish Lib Dem MP Danny Alexander who claimed the cost of borrowing in an independent Scotland would shoot up soon after independence.