Credit cut for an independent Scotland

A credit rating downgrade for Scotland if it went independent? Possibly. That's the view of Fitch Ratings. Fitch hasn't published anything officially on their view.

But their opinion was aired at a Treasury Select Committee hearing when Fitch director David Riley confirmed newly independent sovereign nations were unlikely to retain an AAA credit rating.

Credit Scotched?

Fitch's David Riley was being questioned by MPs over Fitch's decision to downgrade country credit ratings, decisions which have had profound impact on investor sentiment, as well as make borrowing considerably more expensive (think Greece, Spain, etc).

A big component of the Scottish economy is how you measure the impact of North Sea Oil - and how much Mr Salmond would likely consider laying claim to. It's probable the UK Treasury would want to challenge whatever figure Salmond offered.

The BBC's Stephanie Flanders did some number crunching at the start of the year. She calculated Scotland accounted for 8.3% of the UK's total output and 8.3% of the UK's non-oil tax revenues - but 9.2% of total UK public spending.

Bigger spender

"Scottish Executive figures for 2009-10," she wrote, "show that spending per capita in Scotland was £11,370, versus £10,320 for the UK." In other words, she said, "spending in Scotland was £1,030 - or 10% higher - per head of population than the UK average."

The numbers argument can run and run. North Sea oil prices are also volatile, and output is predicted to fall long term. But Fitch would be right in two fundamental areas: Scotland would have no credit history if it went it alone, and its governance changes would be huge, massive.

Fair decision from Fitch? The other (unanswered question) is this: if Scotland did go independent, how would a UK-without-Scotland rating look?

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