Scottish Government
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State of the Economy
Finance Secretary John Swinney yesterday called on the Chancellor of the Exchequer to use the forthcoming Budget to invest in economic recovery.
Mr Swinney was speaking following a meeting of UK and devolved government Finance Ministers on the day that new Scottish Government figures revealed the cost to Scotland of the UK’s continuing austerity programme.
The quarterly State of the Economy report published yesterday by the Scottish Government’s Chief Economist, provides further evidence to support calls for investment in capital projects, action to boost lending to business and support for household budgets to get the economy moving again.
The report confirms that:
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Scotland’s recession has been shorter and shallower than that of the UK as a whole
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Employment in Scotland is higher than across the UK
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The main factors restricting growth are low levels of investment, a shortage of lending to small business and reduced levels of consumer spending alongside continued global uncertainty
Mr Swinney said:
"This latest analysis makes an overwhelming case for an injection of extra capital spending right now to support recovery – and for Scotland to have the powers of independence so that we can deliver an alternative economic strategy to boost growth.
“This report shows that while the Eurozone crisis and continued global uncertainty is slowing growth, the real impact on UK growth rates comes from the failure of the UK Government to invest in recovery, to get banks lending to small business and to build consumer confidence with support for household budgets.
"The Chief Economist’s analysis confirms that Scotland's recession was both shorter and shallower than the UK as a whole, and that sectors of our economy such as food and drink, hotels and catering, and business services showing positive growth this year against a difficult economic backdrop. However we continue to face the challenge of tackling unemployment, creating and securing jobs through inward investment and investing in capital projects in the face of Westminster cuts.
“In my discussions today I have set out the need for the UK Government to change course. It is clear that across the devolved governments there is a shared desire for more and stronger action from the UK in place of a damaging austerity programme that is undermining growth and increasing debt instead of cutting it.
“The Scottish Government is doing all we can within current powers to invest in capital projects, moving over £800 million to capital budgets to support new schools, roads and hospitals, supporting businesses through the Scottish Investment Bank, and putting money into families’ pockets by continuing the council tax freeze. It is now time for the UK Government to step up and deliver real action for growth in the coming budget.”
The latest State of The Economy report revises projections on the impact of cuts to Scottish Government spending. The impact of UK Government cuts and revised inflation forecasts means the Scottish Government's spending power would fall in real terms by nearly 18 per cent over a seven year period. This takes into account an extra two years of cuts beyond the current Spending Review period announced by the Chancellor at the Autumn Statement.
Based upon these projections it could now be 2027-28 before Scottish spending returns to its 2009-10 level in real terms, two years later than forecast at the time of the Draft Scottish Budget. The forecast cumulative real terms loss to the Scottish Budget over this period could be £51 billion, a third higher than the £39 billion forecast last autumn.
Mr Swinney continued:
"We now know that without independence and substantial new financial powers coming to Scotland, we face years of cuts from Westminster. The UK Government is funding the cost of failure, and Scotland is paying the price.
"But, of course, it does not have to be like this – because for Scotland there is a real alternative. The independence referendum in Autumn 2014 will be an opportunity to ensure that the key economic decisions are taken in Scotland for Scotland, and that we can boost economic growth and thus government revenues.
"With responsibility for our own finances and our own vast natural resources, including the trillion pound asset base of North Sea oil and gas, we will be able to make choices in our own best interests. With independence, we would control the fiscal levers we need to suit our own economic circumstances, and maximize Scotland's potential to secure new investment and jobs.
"The referendum will be a chance for Scotland to choose a new, better path. In the meantime, we are doing all we can with the powers we currently have to boost the economy and support jobs – and to get the economy moving again. We need the UK Government to follow our 'Plan MacB' approach and increase capital investment, enhance economic security, and ensure that businesses have access to finance to create the conditions necessary for recovery.”
