Plan B can rescue Scots from jaws of recession, says SNP

Growing international uncertainty, fuelled by the recent downgrade of the US economy and turmoil in the eurozone, has contributed to faltering growth with Bank of England predictions on a cycle of downward revisions.

The core policy of the coalition government has been to drive down the UK’s budget deficit of around £150 billion and swingeing cuts have marked its first year in office. But with no sign of imminent stronger growth and unemployment on the rise again, pressure is mounting on the Chancellor.

The Scottish Government has long called for a different approach with a greater emphasis on spending to stimulate growth.

A spokesman for First Minister Alex Salmond said: “There is an urgent necessity for the UK government to set out a credible plan for growth.

“It was widely reported that in December that Cabinet Secretary Sir Gus O’Donnell urged the Treasury to prepare contingency plans, including fresh capital spending on infrastructure, in case growth falters.

“It is clear that the UK recovery is indeed weakening, with most indicators pointing to a more uncertain outlook. Just last week, the Bank of England revised down their UK growth forecasts for this year to 1.4 per cent, from 1.8 per cent in May, and to around 2 per cent for 2012, from 2.5 per cent.

“The UK government must respond with a ‘Plan B’ – or show ‘flexibility’ as the Chancellor has stated he would do – to protect the recovery.”

Although the UK remains outside the eurozone, the region remains a key trading partner and growing uncertainty over the Italian debt burden, allied with recent German growth of just 0.1 per cent have heightened fears the UK could slide back into recession.

The three strands of the Scottish Government’s approach involve more government spending in capital projects such as roads and schools, a firmer approach towards getting the banks lending, and doing more to improve confidence through measures such as securing employment and providing workers with a “social wage”.

But one academic was sceptical about the prospect of the UK government adopting the SNP’s approach.

Brian Scroggie, an economics lecturer at the Robert Gordon University’s Business School in Aberdeen, said: “How the British government does this without jeopardising their whole strategy is beyond me. If they follow what the First Minister is saying and go ahead, increase capital investment in the public sector, this is just going to make their borrowing worse.

“You can tinker around with it, but to make it worthwhile – if you’re going to expand capital investment in the public sector – it’s going to have to be huge, which will immediately run up against the restriction on your borrowing.

“As for access to finance, how do you tell banks to lend more? What sort of levers do you have to tell them to do this? You don’t have any.”

Although taxpayers own substantial chunks of Lloyds Banking Group and Royal Bank of Scotland, Mr Scroggie insisted that for ministers to directly interfere in their day-to-day running would mean sacking the bank’s directors and putting their “own people” in place.

He said: “All you can do is draw attention to it. Other than that what else can you do? As for restoring consumer confidence, if you knew how to do that you would be a magician.”

The Labour Party has been supportive of the idea of a Plan B to boost growth, but the party’s Scottish finance spokesman, Richard Baker, said the Nationalist administration is not doing enough to address Scotland’s economic woes.

He said: “There is no doubt that George Osborne needs a Plan B, but Alex Salmond needs to stop passing the buck. Here in Scotland we need a specific Scottish plan to kick-start growth and create jobs.

“The fact is that Scots are stuck between a Tory economic policy actively causing unemployment and an SNP approach which isn’t doing enough to stop it. The current strategy is hurting and it isn’t working.

“We are facing a crisis in youth unemployment. The SNP need to get on and use the powers they have got to stimulate the economy and create jobs by adopting Labour’s five-point plan to tackle youth unemployment.”

Ministers in Scotland point to the accelerated public spending on capital projects they sanctioned at the height of the recession north of the Border, which saw construction sector jobs jump by 19,000, or 11.6 per cent.

They also say that the policy of no compulsory redundancies for the staff it employs directly, as well as measures such as the council tax freeze, will help boost consumer confidence.