Scottish government warns Budget ‘will cut growth’

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Scotland faces an even tougher financial outlook in light of the Emergency Budget – threatening a spiral of decline by the UK Government’s cuts going too far, too fast and thus jeopardising recovery, Finance Secretary John Swinney said after today’s announcement….


Scotland faces an even tougher financial outlook in light of the Emergency Budget – threatening a spiral of decline by the UK Government’s cuts going too far, too fast and thus jeopardising recovery, Finance Secretary John Swinney said after today’s announcement.

The Chancellor cut the forecast growth figures published only last week by the Office of Budget Responsibility from 1.3 per cent in 2010 to 1.2 per cent, and from 2.6 per cent to 2.3 per cent in 2011 – a cut equivalent to £7 billion coming out of the economy over these two years – and will result in higher unemployment.

The Finance Secretary welcomed some measures but said the Government now faced a more acute and pressing challenge which the Independent Budget Review, established in March, will help Ministers to address.

Mr Swinney said:

“The previous UK Government left the public finances in a mess. But there is a real risk that, by accelerating deep spending cuts – going too far, too fast – the new UK Government will make things worse. Nurturing Scotland’s recovery is the Scottish Government’s priority, and today’s UK Budget jeopardises that recovery.

“Even compared with forecasts published by the Office of Budget Responsibility only last week, this budget has lowered growth, taking money out of the economy, which could otherwise support jobs and recovery.

“And of course slower growth means smaller government revenues. This irresponsible action runs the real danger of creating a spiral of decline whereby the recent fragile return to growth is choked off before it gets the chance to really take hold.

“The UK’s financial mess is exactly why the Scottish Government has been taking concerted and carefully planned action to deliver greater efficiencies and plan for the future. That is why, for example, we established the Independent Budget Review, which will report by the end of July, and provide vital input on the way ahead. We will engage in an open conversation with the people of Scotland about how we protect the values of our society before setting out our draft Budget later this year.

“We will take advantage of the constructive relationship that now exists with the UK Government to press for alternative measures that protect growth in the economy and so set the course for sustainable public finances. We welcome the unprecedented opportunity to feed directly into the UK spending review process. At all times we will fight Scotland’s corner, and argue for spending reductions from areas we regard as providing poor value or are just plain wrong, such as replacing Trident.

“Overall the package announced today goes too far too fast and risks damaging our economy. However, there are measures we can support, in particular changes to tax allowances which will provide some protection for those on low incomes – although this will be undermined by the increase in VAT. We welcome support for pensioners, and specific measures for businesses including National Insurance exemptions and Corporation Tax reductions. We will also work with the UK Government on public sector pay.

“All of these challenges underline the case for financial responsibility for Scotland, so that we can make our own decisions and use our own powers over taxation, spending and other key economic levers in order to grow the Scottish economy. The way Scotland’s games industry has been let down by the UK Government is just one illustration of this. Financial responsibility will enable us to do what we need to build economic success and a fair society. Growth is the key to moving beyond the difficulties that the Westminster government has delivered to Scotland, and secure a better and sustainable future.”

The Scottish Government is taking action to deliver efficiencies and release cash for frontline services. The 2008-09 outturn report, published in November 2009, confirmed savings of £839 million against the £534 million target. This represents 3.1 per cent of the 2007-08 DEL baseline.

Last September the running cost budget for 2010-11 was reduced by £14 million or five per cent below planned expenditure for the year.

The centrally-held marketing budget was reduced by over £5 million or over 50 per cent. There is now a presumption against external recruitment, strict controls on staff headcount numbers, and robust limits on the use of consultants, managed within strict financial restraints.

Air and rail travel costs have been reduced by 25 per cent in the second half of 2009 compared with the first half, and are continuing to bear down on these costs. Ministers have taken a pay freeze in 2009-10 and 2010-11, while senior civil servants will also have their pay frozen in 2010-11.

The Scottish Government is delivering a 25 per cent reduction in the number of national devolved public bodies (from 199 to 120) by April 2011. The Simplification Programme will deliver estimated savings of £123 million in the period 2008-2013 and around £38 million per annum thereafter.