He said the government would begin issuing bonds to attract investment – but he was unable to say precisely just what the extra spending would go towards.
The announcement came after two global credit ratings agencies put Scotland on a par with the UK, with Moody’s awarding a AA, while S&P Global gave a Aa3.
John Swinney said: “This is a very proud day for Scotland, because we’ve achieved the best possible credit ratings we could within the United Kingdom from two of the world’s leading credit rating agencies. That’s a reflection of the economic strength of Scotland, the strength of our financial management, and the strength of the financial institutions within Scotland, and it gives us a really strong foundation for the issuing of a bond up to a value of £1.5 billion in the next parliamentary term, over a number of years, which can underpin investment in the capital programme of Scotland.”
Raising £1.5bn could see spending of around £300m every year, but the money would not be in addition to the capital borrowing the Scottish Government is able to achieve currently, which stands at £472m annually,
Instead the bond issuance – which would allow investors to buy Scottish Government debt – would provide “another option” for the country to attract investment. Until now the Scottish Government has only borrowed money from the UK National Loans Fund, which is the UK government’s main account for managing its borrowing and lending.
Bonds are loans to the government from investors, which are promised to be paid back at the end of an agreed time, during which the government makes regular payments to the investor.
In the UK, a government bond is called a gilt – hence the nickname for the Scottish version, as “kilts”.
John Swinney said housing and the drive to net zero could benefit from the bonds, but would not be specific about programmes which would be financed.
“The Government will set out in the investment programme in January exactly the projects that we’re taking forward over the course of the next few years,” he said.
“But obviously we need to have the funds to underpin that programme and what the announcement overnight from the credit rating agencies demonstrates is that Scotland has every potential to attract investment on international financial markets and that we can use those resources to support our capital programme.”
Specific plans for the issuance of bonds, the First Minister said, will be subject to market conditions at the time.
Former First Minister Humza Yousaf in 2023 commissioned initial work with the goal of issuing bonds before the end of the current Scottish Parliament session. That came after advisers in the Scottish Government’s investor panel recommended making bonds available to the market as a means of raising Scotland’s profile and attracting investment.
Angus Macpherson, chairman of financial advisory firm Noble and Co and former co-chair of the investor panel, said he was “greatly encouraged by the progress the Scottish Government is making in achieving a credit rating to raise Scotland’s profile in the international capital markets”.
Mr Macpherson added: This is a positive step forward and demonstrates they are serious about becoming a more investor friendly destination.”
However, both credit rating agency reports also included independence as a possible factor which could see Scotland’s credit rating downgraded.
The Moody’s report said: “Although not our baseline scenario, Scottish independence could exert downward pressure on the rating by introducing heightened uncertainty about the institutional framework and potentially raising financial stability risks.”
Scottish Conservative finance spokesman Craig Hoy said: “Scotland’s good rating is a direct result of us being part of the UK, and the financial security that brings.
“Despite the desperate attempts by the SNP to spin it otherwise, the ratings agencies highlight the economic stability we enjoy from being part of the Union.
“Both S&P and Moody’s say that the ratings would be downgraded if there were any moves towards breaking up the UK.
“We know that John Swinney will never stop pushing his independence obsession, but the ratings agencies recognise how damaging that would be for our economy.”