SNP boost capital spending, but at what cost?

Left Foot Forward’s Ed Jacobs reviews the Scottish budget, asking what the true cost of the SNP’ pledge to increase capital spending will be.

As the BBC’s Political Editor, Nick Robinson, was reporting that cabinet ministers were calling on the chancellor to increase capital spending by £5 billion in an effort to boost economic growth, Scotland’s finance secretary, John Swinney, was taking to his feet to present to MSPs a spending review designed to make the best of a bad card dealt by Westminster.

At its heart was a commitment to overseeing a targeted capital investment programme worth around £9 billion over the next three years, with more than £750 million being transferred from resource expenditure into the capital investment programme to support economic recovery.

Addressing the Scottish Parliament, Swinney explained:

“Now we face further financial challenges as the Westminster government has imposed the most swingeing public spending cuts the country has seen since the second world war.

“In 2011-12, we have already been forced to reduce public spending by £1.3 billion compared with last year, with an £800 million cash reduction to our capital budget.

“Under the plans that the UK Government announced in its October 2010 spending review, between 2010-11 and 2014-15 we face real-terms resource budget reductions of 9.2 per cent and a real-terms cut to our capital budget of 36.7 per cent.

“We have argued consistently that the UK government is cutting spending too far and too fast and that its actions run the risk of damaging the fragile recovery in both Scotland and the UK.

“Against that stark backdrop, we are determined to make the very best use of the constrained resources that are available to us and to build on the progress we have made over the past four years. We in Scotland will steer a distinct course.

“We are committed to prioritising capital investment, protecting public sector employment and supporting household incomes as key drivers of economic recovery.”

Yet for all the talk of protecting public sector employment and “supporting household incomes”, public sector unions have reacted with considerable anger at the double whammy of a second year pay freeze for public sector employees and poorer pension terms, leading to threats of a winter of discontent across Scotland.

Unison spokesman Dave Watson said:

“In Scotland it is now almost certain that there will be ballots in the NHS (on strike action].

“Obviously, we are very disappointed with the pay freeze. Although this is the second year, it comes after a year in which the increase in pay was just one per cent. That means workers have seen a double-digit cut in living standards so there will be a lot of unhappiness.”

While PCS Scottish Secretary Lynn Henderson warned:

“Our members expected something different from the SNP government. On the one hand John Swinney says he is against UK attacks on workers pay, but uses the other hand to impose the same second year freeze on staff wages against rising inflation at 5%, 19% fuel increases and the threat of increased pensions contributions.

“[The] extension of the pay freeze by our own government and employer will provoke anger as never seen before.”

Meanwhile, in the face of Scotland’s housing crisis, the finance secretary’s statement saw the housing and regeneration budget cut by 42% over the next three years.

Whilst Scottish Labour sought to attack the budget based on the adverse impact it would have local authorities, Swinney’s budget was a gamble; if the greater investment in capital projects works in jump starting the Scottish economy then it is likely to pile the pressure on Westminster yet further to follow suit and prove a further political boost to Alex Salmond’s administration.

Commenting on the announcements, the Herald concluded:

“Investment in preventative programmes is a bold approach when budgets are being pared but with the prospect of cutting costs by reducing demand for expensive health and care services as well as producing a better outcome for individuals and society, it is the right one.

“Whether these measures will provide sufficient impetus to build the country out of economic gloom remains to be seen. The combination of preventative policies to halt spiralling costs and the focus on using publicly funded infrastructure projects to provide jobs, including training for young people, is proactive, compared with the emphasis on cuts at Westminster.

“If Plan MacB can be sustained in the perilous international economic situation, it offers a surer path to growth than austerity measures alone.”

Ian McWhiter, meanwhile, writing for the same paper, sought to contrast the SNP’s approach with that of the UK government, declaring:

“Economists and politicians are beginning to realise the blinking obvious here that economic growth is the key to shifting the debt burden. But what they haven’t yet discovered is a way to reconcile government spending cuts with growth. Except, curiously, in Scotland. For now. Enjoy.”

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