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Meeting of the Parliament 25 January 2012

25 Jan 2012 · S4 · Meeting of the Parliament

Item of business

Budget (Scotland) Bill: Stage 1

Swinney, John SNP Perthshire North Watch on SPTV

The words that I have used in my speech are:

“another real-terms reduction to our total departmental expenditure limit”.

That is what the Government faces. We have to face that reality when we look at such a significant reduction, particularly in capital expenditure—which point I am sure is not lost on Mr Brown, given the significant benefit that capital expenditure can have on boosting the Scottish economy and opportunities for our people.

The Budget (Scotland) Bill addresses a number of key challenges. The first is the need to accelerate economic recovery by creating jobs—particularly for our young people—and by supporting Scottish business, including by capitalising on new opportunities in the low-carbon economy. Secondly, the bill addresses the need to maintain infrastructure investment in the face of the severe cuts to our capital DEL settlement. Thirdly, it takes forward an ambitious programme of public sector reform, together with our delivery partners, to ensure the sustainability and quality of our services and to make a decisive shift in favour of preventative spending. Finally, it seeks to deliver on our commitment to a social wage at a time of intense pressures on household incomes.

Those challenges are brought into sharp focus by the continuing uncertainty in the global economic outlook. Last summer’s escalation of the euro crisis has contributed to recovery stalling across many European economies. Last week, Scottish gross domestic product data for the third quarter of 2011 were released along with our latest labour market statistics. Growth of 0.5 per cent, particularly in the upturn in business services and the continuation of expansion in manufacturing, was encouraging. However, the final quarter of 2011 and the start of 2012 are likely to prove to be challenging, judging from our forward-looking business surveys and the preliminary estimate of GDP in the United Kingdom in the final quarter of 2011, which indicated that the economy shrank by 0.2 per cent, which was worse than the forecast by the Office for Budget Responsibility in November.

The labour market, which made significant improvements from mid-2010 into the first half of 2011, has now started to deteriorate again—as it has for the UK as a whole. That is of utmost concern to us—especially the unacceptably high rates of youth unemployment. Given those conditions and the tight budget settlement, it is essential that we secure maximum value from our public spending and that we identify clear priorities and take difficult decisions where they are needed.

Equally, it is essential that we continue to put pressure on the United Kingdom Government to recognise the reality of the economic circumstances that we face. Last night, I was struck by the observation of Olivier Blanchard, the chief economist of the International Monetary Fund, which was that

“fiscal consolidation must proceed, but at an appropriate pace. Decreasing debt is a marathon, not a sprint. Going too fast will kill growth, and further derail the recovery.”

The United Kingdom Government must reflect on those important words from the IMF as it addresses poorer growth than expected in the fourth quarter of 2011 and a labour market position that gives the Scottish Government a degree of concern. To that end, I have asked the Chief Secretary to the Treasury to convene a meeting of the United Kingdom’s finance ministers to advance some of our concerns. I am pleased to inform the Parliament that he advised me yesterday of his agreement to that proposition and that an arrangement will be made for the discussion to take place as soon as possible.

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Meeting of the Parliament 25 January 2012

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