News Column

SNP will borrow billions to end austerity, says Swinney ; SNP borrowing plan to buy end to austerity

June 16, 2014

Magnus Gardham; Magnus Gardham Political Editor

AN independent Scotland would borrow billions of pounds in the initial years after leaving the UK in a bid to kickstart the economy, under plans outlined for the first time by John Swinney.

The Finance Secretary has set out proposals to borrow heavily in the first three financial years - 2016/17 to 2018/19 - after the planned formal split with the UK if Scots vote Yes in the referendum.

In an interview for The Herald's latest Scotland Decides referendum supplement this week, Mr Swinney said he wanted to turn his back on Chancellor George Osborne's austerity drive, which will limit rises in public spending to one per cent per year.

Instead he favoured borrowing to increase public spending by three per cent each year in the three years immediately following independence.

Mr Swinney argued the move would help redress the UK Government's refusal to borrow more in 2010 - a stance he criticised at the time - and would "encourage growth and dynamism within the economy".

The proposed spending increase would need extra borrowing of pound(s)2.4 billion in 2018/19 alone.

The Scottish Government revealed its "preference" for a three per cent a year spending rise in its Outlook for Scotland's Public Finance and Opportunities for Independence report last month.It did not spell out where the extra cash would come from.

But Mr Swinney said: "We could have saved a great deal of hardship, a great deal of difficulty for the Scottish economy, if we had borrowed in 2010 to encourage recovery.

"Economic performance might be better now, and I can't deny it's better than it has been, but it was shocking in 2011 and 2012 and shockingly worse than was predicted by the Office for Budget Responsibility. There are choices to be made. My point about austerity is that the Labour Party, the Liberals, the Conservatives are all signed up to a UK austerity agenda. What an independent Scotland would have to do, or would have the choice to do, is do things differently and to make some of those choices I would like to have seen in 2010 to encourage growth and dynamism."

He added that the plan to raise public expenditure by three per cent a year, compared to the one per cent predicted for the UK, showed "a willingness to invest in the economy".

Mr Swinney dismissed concerns, from the UK Government, academics and banks, that an independent Scotland would be given an inferior credit rating and face higher interest rates than the UK to borrow money.

Citing the Scottish budget, he said: "We've demonstrated we can live within our means, so we've got a financial track record and we particularly have a track record in the toughest of times and that counts for a lot with the ratings agencies."

The Scottish Government believes tax revenues can by raised by pound(s)5bn by 2030. Ministers say the economy can be boosted by raising productivity and employment and encouraging more migrants to work in Scotland.

On Friday First Minister Alex Salmond unveiled plans to increase manufacturing by nearly one third by 2030, as part of the overall strategy.

Last month's report on public finances indicated extra spending of pound(s)2.4bn in 2018/19.

The Scottish Government declined to say how much extra cash would have to be found in either 2016/17 or 2017/18, but a spokeswoman confirmed the spending would be funded through borrowing.

Even with extra borrowing, Scotland's deficit would go on falling, she said: "The Scottish Government has made clear that we oppose Westminster's austerity measures and believe the best way to reduce the deficit in the long term is to invest in public spending, to grow the economy and reduce the deficit in a sustainable way, ensuring there is less need to borrow in the future by boosting revenues in the long term."

She added: "Investing in public spending can bring real benefits to the economy and our public finance projections include a 3 per cent increase in public spending funded by additional borrowing in order to ensure public spending keeps pace with inflation - in contrast to UK Government plans for a 1 per cent increase which would be a real-terms cut. Even with a 3 per cent increase in spending growth, Scotland's deficit is forecast to fall to 2.2 per cent of GDP in 2018-19, significantly below the current level of 8.3 per cent."


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Source: Herald, The (Scotland)


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