The First Minister is calling on the UK Chancellor to make unlocking capital investment a Budget priority.
Ahead of the UK Chancellor’s autumn statement later today, the Scottish Government is joining counterparts in Wales and Northern Ireland to warn the UK government that “unprecedented cuts to public sector capital investment pose a significant risk to the growth prospects of the nations of the UK”.
The three devolved administrations are urging the UK Chancellor to call a halt to the cuts to capital budgets and unlock an “immediate and targeted boost” to public sector capital programmes through additional investment as a way to boost economic growth.
Mr Salmond said:
“Scotland – together with our friends in Northern Ireland and Wales – is suffering the impact of unprecedented cuts to our capital budget by the UK government.
“With the powers we have, we are doing all we can to mitigate the worst impact of these cuts and we are succeeding to a point. However, it is impossible fully to offset the scale of these capital investment cuts or the effect they are having on communities across Scotland.
“Unlocking additional funds for investment in public sector capital projects through the use of the UK government’s borrowing powers would provide an immediate and targeted stimulus across the three devolved nations.
“Increasing capital investment by simply cutting departmental budgets will not achieve the increase in demand in the economy that is so urgently needed – this investment must be additional.
“This afternoon’s Autumn Statement provides the UK Chancellor with an ideal opportunity to invest on growth, support the economic recovery and help bolster economic confidence.”
The full text of the joint statement from Alex Salmond, First Minister of Scotland, Carwyn Jones, First Minister of Wales, Peter Robinson, First Minister of Northern Ireland, and Martin McGuinness, Deputy First Minister of Northern Ireland:
Joint statement from the devolved administrations
The Scottish Government, Northern Ireland Executive and Welsh Government have consistently argued that the UK Government’s unprecedented cuts to public sector capital investment pose a significant risk to the growth prospects of the nations of the UK.
Capital DEL budgets are being cut by HM Treasury by around a third in each of the Devolved Administrations over the Spending Review Period, while at the UK level public sector net investment is scheduled to fall from 2.6 per cent of GDP in 2010-11 to 1.1 per cent in 2016-17.
The Devolved Administrations have sought to mitigate the worst impacts of these reductions by boosting capital investment through a variety of innovative measures. However, such actions cannot fully offset the scale of the cuts or their impact on communities across Scotland, Northern Ireland and Wales.
While we welcome the recent rise in UK GDP witnessed during the summer months, it is clear that much of this uplift was due to temporary factors and a sustained recovery has yet to gain momentum. For example, the Bank of England predicts a slowdown – or indeed a further fall – in output in the final quarter of the year, and forecasts for next year have been repeatedly revised down.
While the Devolved Administrations have argued against the scale of the cuts to capital investment since they were first outlined in 2010, of particular concern has been the UK Government’s unwillingness to respond to the sharply weakening economic outlook with a clear policy response.
At the time of the Coalition’s first Budget in June 2010, the Office for Budget Responsibility (OBR) forecast that the UK economy would grow by 2.8 per cent in 2012. The IMF now forecasts a contraction of 0.4 per cent for 2012 as a whole, with the OECD predicting a decline of 0.1 per cent. A lack of growth not only increases the risk of structural damage to the economy, but it also makes efforts to restore the public finances to balance more challenging.
While initiatives to encourage private sector investment, such as guarantees of loan finance for national infrastructure projects and the funding for lending scheme are welcome, the full impact of these new schemes remains uncertain, and it is likely to be some considerable time before they have an impact on the real economy.
In contrast, an immediate and targeted boost to public sector capital investment will support jobs immediately and help provide the infrastructure necessary for long term economic growth.
The Autumn Statement provides the Chancellor with an ideal opportunity to choose to respond to current economic challenges and give an immediate and substantial stimulus to capital investment. We believe that such an investment in growth, with appropriate consequentials for the Devolved Administrations, will support the recovery and help bolster economic confidence.