Scotland 'needs Plan B to protect economy'
8 Jun 2011 06:38 PM
First Minister Alex Salmond has called on the UK Government to address the critical necessity for an alternative, Plan B - or demonstrate flexibility in their current strategy - to protect the economy's recovery.
Following yesterday's meetings of the Joint Ministerial Committee (Plenary) in London, Mr Salmond said there was a growing body of evidence pointing to a slow down in UK economy and thus the need for urgent action to support the recovery.
He pointed out that, while in Scotland the recession was both shorter and shallower compared to the UK as a whole, it is clear that the UK recovery remains fragile.
The FM attended the meeting at Downing Street with Prime Minister David Cameron, Deputy Prime Minister Nick Clegg and leaders and ministers of the devolved administrations, including Finance Secretary John Swinney and Government Strategy Secretary Bruce Crawford.
Afterwards Mr Salmond said:
"The Scottish Government, along with the other devolved administrations, has consistently argued that the Coalition's plans to cut public spending too far and too fast runs the risk of stalling the economic recovery.
"While it is vital that the public finances are returned to a sustainable footing, the best way to achieve this is by promoting economic growth.
"There are three key priorities which would promote economic recovery for little cost to the UK Exchequer and it is imperative that the UK Government takes urgent action in these areas."
The FM is calling for urgent UK action on:
"When private sector demand and investment are fragile, public sector investment is essential in maintaining and boosting economic activity - as we have witnessed when the Scottish Government chose to accelerate public sector investment at the height of the downturn. Over 2010, output in the construction sector in Scotland grew by 11.2 per cent compared to 6.0 per cent across the UK and construction jobs were up 23,000 (13.9 per cent) over the year to Q4 2010 - compared to a fall of 52,000 (2.4 per cent) across the UK.
"This provides a strong foundation on which to build, but the Coalition Government's spending cuts are now cutting deep into capital budgets. The Scottish DEL capital budget has been cut by close to £800 million this year (a real terms cut of 26 per cent) compared with 2010-11 and will fall by 35 per cent in total in real terms by 2014-15.
"A targeted, cost-effective programme of capital investment would help support the economy at this vital stage, and allow for more robust growth to become embedded within the private sector. If additional capital funding was available for 2011-12, this could be invested in housing, transport and renewables projects that could be taken forward quickly with an immediate impact on growth. "
The FM also urged the UK Government to ensure that the agreements reached with the banks, Project Merlin, to secure a commitment to lend £190 billion of new credit to businesses (including £76 billion for SMEs) to actually deliver on targets for lending to business.
Mr Salmond said:
"Despite repeated commitments by the UK Government and major banks, securing affordable finance remains a considerable challenge for many of our companies. This is particularly true for many small and medium sized firms.
"Our recent Access to Finance Survey shows that overall levels of lending to Scottish SMEs were lower in November 2010 than in 2009, with more firms being rejected outright for finance than in previous years. And evidence from the Bank of England shows that overall net lending to UK businesses remains negative, with net lending in April 2011 2.1 per cent down over the year. It is essential that the banks come forward and support the very companies which are the foundation for recovery."
Mr Salmond also urged the UK Government to boost consumer confidence by prioritising growth and job security, saying:
"Job security is vital to maintaining consumer confidence. It is widely accepted that fears about job prospects can act as a significant drag on consumer spending.
"The Scottish Government has implemented a 'no compulsory redundancy' policy for staff groups under its control for 2011-12. The Scottish Government is committed to working with partners across the public sector and the Trade Unions to extend this agreement across the wider public sector.
"The UK Government must follow this lead, and look to support public sector employment across the UK and prioritise employment support."