Swinney: Osborne is main threat to Scottish economy

Group Political Editor

Monday 11 June 2012

John Swinney will today accuse George Osborne of adopting a wrong-headed approach to tackling the UK's economic problems, after the Chancellor warned the country's recovery is being "killed off" by the deepening eurozone crisis.

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Brian Currie Political Editor

The Finance Secretary will say Mr Osborne's austerity policy, which has seen widespread public-sector cuts, is to blame for the UK's current woes, rather than the wider economic problems of Europe, which resulted in an £80 billion EU bail-out for Spain's banks on Saturday.

Mr Osborne warned yesterday: "We are approaching a moment of truth for the eurozone." However, in a speech in Glasgow, Mr Swinney will urge Mr Osborne to accept much of the responsibility for the lack of economic growth. He will claim the immediate threat to Scotland's recovery from recession is "the UK Government's wrong-headed commitment to austerity.""Rather than seeking cover in the euro crisis, the Chancellor should acknowledge that much of the responsibility for the lack of economic growth lies at his own door," Mr Swinney will say."The Chancellor's approach has placed too much emphasis on austerity – and not enough on promoting growth, an approach which is clearly self-defeating as the most recent UK GDP results show."On Saturday, Spain's weakest banking institutions got £80bn from European finance ministers. The banks have been saddled with billions of euros of bad loans after the collapse of the country's property boom and subsequent recession.The International Monetary Fund said the bail-out was enough to restore credibility to the banks, and US President Barack Obama hailed it as a vital step towards the "financial union" of the eurozone.With the prospect of more trouble after next Sunday's Greek elections, the Chancellor called on the eurozone countries to take decisive action to end the instability.In a newspaper article, Mr Osborne said: "After more than two years of uncertainty, instability and slow growth, decisions taken over the next few months could determine the economic future of the whole European continent for the next decade and beyond."He said British business was "held back because of uncertainty about the future," and added: "Our recovery, already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years, is being killed off by the crisis on our doorstep."I know from talking to British businesses that our country is bursting with entrepreneurial spirit and exciting investment plans that are being held back because of uncertainty about the future."That's why a resolution of the eurozone crisis would do more than anything else to give our economy a boost."He added: "The British Government is clear that it is strongly in Britain's interests for our biggest export market to succeed. The risks for us of a disorderly outcome are huge."In the speech at Glasgow Caledonian University's School for Business and Society, Mr Swinney will add: "The Scottish Government continues to press the case for an approach based on boosting public-sector capital investment, improving access to finance, and encouraging new private investment and enhancing economic security."On my visits across Scotland as Finance Secretary, I see a business community that is working hard to achieve success both domestically and internationally despite the challenging economic and financial backdrop. "That work must be supported by a UK Government equally committed to pursuing an agenda for growth."Mr Osborne also called for greater fiscal integration across the eurozone bloc and said a banking union was a "natural extension" of the single currency.He emphasised that the UK would not be part of any such arrangement and that any further transfer of power from Westminster to Brussels would require a referendum.Labour Shadow Chancellor Ed Balls also blamed Mr Osborne for the state of the economy, saying: "He will fool nobody with these increasingly desperate excuses.""Despite the eurozone crisis, Germany, France and the euro area as a whole have so far avoided recession while Britain's recovery was choked off in the autumn of 2010."CBI Scotland director Iain McMillan said there was no doubting the "exceptional seriousness" of the eurozone crisis and the "collateral damage" it was causing to UK businesses.He added: "Europe must get is house in order and find a long-term solution."Meanwhile, Mr Osborne is expected to announce extra protection this week from bank collapses despite fears the measures will push borrowing costs up for households.He is likely to confirm controversial proposals for depositors to get their money back ahead of bondholders and other creditors. However, big lenders say bondholders will demand higher interest rates to cover their risk, which would push up lending costs.

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Swinney: Osborne is main threat to Scottish economy

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