Treasury to issue U.K. debt pledge before Scottish referendum

This article was last updated on April 16, 2022

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The U.K. Treasury will guarantee all U.K. government debt issued up to the date of potential Scottish independence referendum, to remove fears of any debt-sharing dispute between Scotland and the rest of Britain.

The announcement has been made due to the speculated signs of market concern regarding the status of the debt in the case of independence, which if left ambiguous might raise the U.K.’s cost of borrowing.

According to a paper issued by the Treasury, an independent Scottish Government would become responsible for a “fair and proportionate” share of current liabilities.

Before the independence, a fresh contract would be required to establish between governments following extensive negotiations. However, U.K.-issued gilts, or bonds would remain unchanged.

While, the treasury paper says: “Instead, an independent Scotland would need to raise funds in order to reimburse the continuing U.K. for this share.”

British ministers have so far refused publicly to “pre-negotiate” terms of independence for Scotland.

Scotland’s first minister, Alex Salmond has hailed the Treasury’s move and said: “We remain prepared to negotiate taking responsibility for financing a fair share of the debts of the UK provided, of course, Scotland secures a fair share of the assets, including the monetary assets.

“Today’s announcement makes clear that Scotland would be in an extremely strong negotiating position to secure that fair deal.”

The “cast-iron guarantee” that London will look out all debt issued by the U.K. government may settle any market tensions, but it may affect the negotiation talks between London and Edinburgh if Scotland votes for independence.

A referendum is likely to take place in Scotland on 18 September in which Scottish voters will be asked whether they want Scotland to be independent.

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