Will Chancellor fund Swinney's Christmas list?

Monday 26 November 2012

Not so long ago one union leader branded the Finance Secretary as "George Osborne in a kilt".

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That followed John Swinney's decision to follow the Coalition Government's lead by imposing a below-inflation wage increase on the civil servants and NHS staff whose pay he controls.

Yesterday, Mr Swinney was sounding more like a tartan version of Labour's Ed Balls as he criticised the Chancellor for cutting spending too far and too fast and demanded an immediate £800 million stimulus package to kickstart the Scottish economy.

The Finance Secretary has a little list. It includes projects he says are "spade ready", including road building and the Clyde Gateway office and industrial development, as well as health, port, court and college building and maintenance. The price tag is about £800m. That would be Scotland's share of a £10 billion UK stimulus package. As a rule of thumb, every £100m of capital spending is estimated to generate abut 1400 jobs in the Scottish economy, so if Mr Osborne were to turn Santa for his Autumn Statement on December 5, Scotland could benefit to the tune of about 11,000 jobs. With Scottish unemployment rising and now higher than the UK average, action is desperately needed, especially if the Ministry of Defence moves to protect the future of the BAE Systems yard in Portsmouth, leaving the two Clyde yards vulnerable. Between them Govan and Scotstoun employ about 4000. As Mr Swinney observes, a stimulus package would reverse a cut of about one-third in the Scottish construction and maintenance budget imposed by the Coalition "in a failed attempt to reduce public sector borrowing". It was estimated last week that Mr Osborne is on course to miss his borrowing target by £13bn this year. If the independent Office for Budget Responsibility concludes that the Chancellor is unlikely to hit its 2016 debt target, he has a stark choice between further spending cuts or swallowing his pride and letting his target slip. His argument against this has always been that it would frighten the markets and put up interest rates but, given the shortage of demand in the economy, that may be a safer option than big new cuts (or tax rises). It is unlikely that Scottish Labour leader Johann Lamont's wishlist differs substantially from that of Mr Swinney. That is a reminder of how close Labour and the SNP appear to be ideologically. It suggests that in a post-independence world there would be some major political realignment, with social liberals among the SNP moving towards Labour while low tax, small government economic liberals moved to the right. In the short term Mr Swinney is right. Scotland would be better served by Santa than the Grinch.

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Local government

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Will Chancellor fund Swinney's Christmas list?

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