Billions in rail debt for independent Scotland

An independent Scotland would be landed with billions of pounds worth of debt from the renationalisation of Network Rail, The Sunday Post can reveal.

The track operator is currently a private company but will tomorrow be reclassified as a public sector body under EU rules which mean its £34 billion debts will go back on to the UK national balance sheet.

This means an independent Scotland would have to negotiate a cut of this debt and account for it on its opening balance sheet.

If the debt was split by Scotland’s population share then it would be just under £3bn.

The more debt that countries have on their national balance sheets, the more costly it can be for them to borrow money.

James Kelly MSP, Labour’s spokesman for infrastructure, said: “This is another example of why it makes absolutely no sense to take on all the risks of independence.

“Today, we can share the burden of paying down Network Rail’s debt across the whole of the UK rather than it falling on Scottish shoulders alone.”

A new EU accountancy edict has forced the UK Government to reclassify Network Rail, which owns and operates Britain’s railway infrastructure, as a public body.

This will mean the £34bn it owes will be added to the UK’s whopping £1.3 trillion worth of public debt.

The White Paper, published last November, makes clear an independent Scotland would continue to meet its rail financing obligations, including the servicing of regulatory debt for Scotland.

But it does not address the change in status of Network Rail.

Having more debt on the national balance sheet of an independent Scotland could be problematic as finance experts have already warned lending interest rates will be higher than what the UK currently pays as the country will not have a track record of credit history.

If Scotland’s share of the Network Rail debt was worked out by its share of the network rather than population then the cost would be even higher as Scotland has 15 % of the UK’s train route miles.

Peter Smaill, a financial risk analyst, submitted a freedom of information request to Network Rail to ask if any discussions had taken place with the Scottish Government about the issue and was told there had been no talks.

He said: “The obligation is in effect a debt and has not been, to date, accounted for. It will be several billions in view of the historic expense of the Scottish network, if an equitable basis is negotiated.

“No-one has reflected the impact of the borrowing now being on Scotland’s putative balance sheet.

“If you consider this with other more serious sums, such as the public sector pensions liabilities, then it should really make people sit up and think.”

Although currently a private company, Network Rail enjoys the backing of the UK Government which will pick up its debts unconditionally if the track operator was unable to pay them.

A Scottish Government spokeswoman said: “An independent Scotland would continue to meet its rail financing obligations, including the servicing of Network Rail debt for Scotland.

“The UK Treasury confirmed in January this year that it will remain liable for all debt under all constitutional circumstances. The Scottish Government’s position is that Scotland should agree to finance a fair share of that debt on the basis that a fair share of both assets and liabilities go hand in hand.”