Chamber
Meeting of the Parliament 07 December 2011
07 Dec 2011 · S4 · Meeting of the Parliament
Item of business
Autumn Budget Statement and the Scottish Economy
I am grateful for the opportunity to open the debate on the autumn budget statement and the wider Scottish economy. It is now more than three years since the financial crisis began, sparking the deepest recession since the great depression. From the first signs of slowdown, the Scottish Government has put all its efforts into safeguarding the Scottish economy and promoting economic recovery. We will continue to take all the action that we can to achieve that goal, but we acknowledge the strong economic headwinds from the sovereign debt crisis in the euro zone, which is a key trading partner, and the inevitable implications that that will have for the economic conditions in which we operate and work to try to deliver economic recovery.
In addition to the data that is emerging from the euro zone, the Organisation for Economic Co-operation and Development is forecasting very weak growth across all advanced economies, which will have wider implications for the trading relationships that we undertake as a country. The Chancellor of the Exchequer’s autumn statement and the revised economic forecast from the Office for Budget Responsibility confirmed the fragile state of the United Kingdom and the global economy, and the extent to which the outlook has deteriorated since the chancellor first set out his deficit reduction and growth plans just 18 months ago.
The OBR has sharply revised down its forecast for UK economic growth and now expects UK unemployment to continue rising well into next year. Because of the failure to secure growth, the OBR now forecasts that the UK Government will borrow £158 billion more over the next five years than was planned last June, and that further public expenditure cuts will be required in both 2015-16 and 2016-17 to meet the chancellor’s fiscal mandate.
One of this Administration’s fundamental points is that if we undertake borrowing, we must establish the correct balance between borrowing to sustain the public finances, and borrowing to encourage growth within our economy. The prospects for public expenditure that the chancellor has set out for 2015 and 2016 mean that Scotland will have faced public expenditure cuts for seven consecutive years, an outcome that the Institute for Fiscal Studies describes as historically unprecedented.
There are a number of reasons for the deterioration in the economic outlook. Continued uncertainty in the euro zone, the persistent impact of the financial crisis and rising commodity prices have all played their part; however, not all the blame can be laid at the door of the euro zone. Indeed, the OECD expects that France, Germany and the Netherlands will all grow faster than the UK this year despite their greater exposure to events in Europe. Some of the responsibility for the lack of economic growth must, therefore, be laid at the door of 11 Downing Street. I recognise that there is a need to deliver sustainable public finances and to set out a credible consolidation plan; however, the balance of the chancellor’s plans places too much emphasis on austerity and not enough emphasis on the promotion of economic growth in our society.
In addition to the data that is emerging from the euro zone, the Organisation for Economic Co-operation and Development is forecasting very weak growth across all advanced economies, which will have wider implications for the trading relationships that we undertake as a country. The Chancellor of the Exchequer’s autumn statement and the revised economic forecast from the Office for Budget Responsibility confirmed the fragile state of the United Kingdom and the global economy, and the extent to which the outlook has deteriorated since the chancellor first set out his deficit reduction and growth plans just 18 months ago.
The OBR has sharply revised down its forecast for UK economic growth and now expects UK unemployment to continue rising well into next year. Because of the failure to secure growth, the OBR now forecasts that the UK Government will borrow £158 billion more over the next five years than was planned last June, and that further public expenditure cuts will be required in both 2015-16 and 2016-17 to meet the chancellor’s fiscal mandate.
One of this Administration’s fundamental points is that if we undertake borrowing, we must establish the correct balance between borrowing to sustain the public finances, and borrowing to encourage growth within our economy. The prospects for public expenditure that the chancellor has set out for 2015 and 2016 mean that Scotland will have faced public expenditure cuts for seven consecutive years, an outcome that the Institute for Fiscal Studies describes as historically unprecedented.
There are a number of reasons for the deterioration in the economic outlook. Continued uncertainty in the euro zone, the persistent impact of the financial crisis and rising commodity prices have all played their part; however, not all the blame can be laid at the door of the euro zone. Indeed, the OECD expects that France, Germany and the Netherlands will all grow faster than the UK this year despite their greater exposure to events in Europe. Some of the responsibility for the lack of economic growth must, therefore, be laid at the door of 11 Downing Street. I recognise that there is a need to deliver sustainable public finances and to set out a credible consolidation plan; however, the balance of the chancellor’s plans places too much emphasis on austerity and not enough emphasis on the promotion of economic growth in our society.
In the same item of business
The Deputy Presiding Officer (John Scott)
Con
The next item of business is a debate on motion S4M-01501, in the name of John Swinney, on the United Kingdom Government’s autumn budget statement and the Sc...
The Cabinet Secretary for Finance, Employment and Sustainable Growth (John Swinney)
SNP
I am grateful for the opportunity to open the debate on the autumn budget statement and the wider Scottish economy. It is now more than three years since the...
Mary Scanlon (Highlands and Islands) (Con)
Con
In comparing the United Kingdom with France and Germany, does the cabinet secretary accept that the coalition Government inherited the highest level of debt ...
John Swinney
SNP
I know that Mary Scanlon assiduously follows my speeches in the Parliament. She will not have noticed me in any way shirking from apportioning responsibility...
Richard Baker (North East Scotland) (Lab)
Lab
The cabinet secretary has rightly referred to the revision downwards of growth forecasts. What impact will that have on the Scottish Government’s spending re...
John Swinney
SNP
Mr Baker asks a fair question. I point him to the evidence that I shared with the Economy, Energy and Tourism Committee some weeks ago. In the year of greate...
Gavin Brown (Lothian) (Con)
Con
I apologise for missing the start of the cabinet secretary’s speech.In the switch from revenue to capital quite a large sum—about £150 million—will go into t...
John Swinney
SNP
No. The budget proposals rely on a shift from the revenue columns to the capital columns—that is a straightforward transaction in the budget document.
Gavin Brown
Con
The Forth crossing is not in the revenue budget.
John Swinney
SNP
I point out to Mr Brown that the UK Government has of course reduced our capital budget by 36 per cent, which has been moderated to 32 per cent. In the overa...
Willie Rennie (Mid Scotland and Fife) (LD)
LD
The infrastructure plan is a 20-year plan. The increased funding is provided within the first three years. What has been accelerated as a result of the incre...
John Swinney
SNP
Mr Rennie expects me to take a look at those questions, and we will come back to the Parliament, as we will on the other consequentials, to set out how our p...
Neil Findlay (Lothian) (Lab)
Lab
Will the minister give way?
John Swinney
SNP
I would give way to Mr Findlay if—
The Deputy Presiding Officer
Con
Cabinet secretary, you are in your last minute.
John Swinney
SNP
I apologise to Mr Findlay. I will happily deal with his points during the debate.The autumn statement provided some additional capital consequentials for the...
Richard Baker (North East Scotland) (Lab)
Lab
This is a welcome opportunity to debate the autumn statement and its implications for Scotland. It comes at a critical point for our economy and for the worl...
Jackson Carlaw (West Scotland) (Con)
Con
Is it not a consequence of the coalition Government’s strategy that we have the lowest interest rates in the world? Would not a consequence of the Labour Par...
Richard Baker
Lab
I presume that Mr Carlaw would not have acted to bail out the banks. The UK Government has left us the lowest rates of growth in the world, and it has choked...
Gavin Brown
Con
Will the member acknowledge what the Institute for Fiscal Studies has stated? It said that if Labour’s plans had been implemented, they would“now of course h...
Richard Baker
Lab
No, because the figures that I have show that the UK Government plans £37 billion more borrowing in future years than the amount in Labour’s plans that were ...
Gavin Brown
Con
Will the member give way?
Richard Baker
Lab
I have already given way to Mr Brown. I will try to take an intervention from him later.We understand that there will be limited consequentials in the new pl...
John Swinney
SNP
Will Mr Baker take this opportunity to confirm his understanding of the spending review, which involves a rising trend of capital expenditure in Scotland des...
Richard Baker
Lab
My understanding, from what the cabinet secretary said earlier, is that there will be consequentials later in the spending review cycle involving increased s...
Gavin Brown (Lothian) (Con)
Con
It is worth reflecting on some of the analysis and feedback from economists since last week’s autumn statement. The Economist put it simply, stating that“the...
Stuart McMillan (West Scotland) (SNP)
SNP
Does Gavin Brown agree that it is strange that it takes the OBR 18 months to realise that the strategic deficit is worse than planned? What has it been doing...
Gavin Brown
Con
I find it surprising that the member wishes to criticise the OBR, which has received praise for its work from across the political and economic spectrum and ...
Richard Baker
Lab
What is the cost to our economy from the fact that our growth rates are higher than only those of Greece and Portugal, out of the whole euro zone?
Gavin Brown
Con
The growth rates are very disappointing, but if one looks at the OBR report in full—not just the press release that accompanied it—one sees that, although th...