By Bob Duncan
Capital investment is essential to boost the economy, say the SNP, as UK growth rate projections are again cut by the Bank of England.
The SNP has reiterated calls for the UK government to invest in capital spending after the publication yesterday of the labour market statistics and as the Bank of England cut its UK growth forecast, warning the UK is stuck in a “low-growth” environment.
The Bank of England has cut its growth forecast for next year to about 1% from nearer 2%, and said recovery will be “slow and protracted”.
It now thinks that the economy will not get back to pre-crisis levels until 2015, two years later than it previously predicted.
According to the BBC’s economics editor Stephanie Flanders: “The Bank hasn’t just lowered its growth forecasts for the next year or so – it has more or less given up hope of being pleasantly surprised.”
The Bank warned that the near-term squeeze on consumer spending is set to continue and there is a “good chance” inflation will reach 5% in the coming months, driven by rises in utility bills.
The Bank has previously predicted that inflation might fall towards the government’s 2% target in the first half of next year.
But it now expects inflation to stay higher for longer. “We face the rather unappealing combination of a subdued recovery, with inflation remaining above target for a while,” Sir Mervyn said.
The statistics released yesterday, also showed that unemployment in Scotland had risen by 4000 over the past 3 months, while they had fallen in the UK as a whole. First Minister Alex Salmond said that the UK employment boost was due to the London Olympics which had seen 100,000 short term jobs created and should not be used by Chancellor George Osborne as an excuse to avoid taking action.
On BBC Scotland’s Newsdrive programme, Stephen Boyd of the STUC was asked what can government do to address the problem of worsening unemployment in Scotland.
He said: “This remains overwhelmingly a UK issue. Austerity is impacting severely on the Scottish economy and we have seen – through benefit cuts alone – £2 billion extracted from the economy before 2015.”
He added: “We need the UK government to invest; we need the UK government to enable the Scottish government to invest. At this moment in time, with the levers available to it, there’s very little the Scottish government can do to alleviate what is fundamentally a crisis of demand.”
Maureen Watt, convener of the Scottish Parliament’s Infrastructure and Investment Committee, said George Osborne was doing “real harm” to Scotland’s economy as a result of his inability to face reality on capital investment.
The SNP MSP for Aberdeen South and North Kincardine said:
“George Osborne cannot go on ignoring the signs – these statistics show how vital it is to invest in capital spending.
“When you have the Bank of England cutting its UK growth forecast for the next year and saying the UK could be stuck in a ‘low-growth’ environment, it is simply unacceptable for the Chancellor not to act.
“He is doing real harm to our economy as a result of his inability to face the reality on capital investment – that it is needed now more than ever.
“We know that an extra £5billion in capital investment would allow us to provide an additional stimulus of more than £400million to support employment in Scotland right now.
“Why is he reluctant to do what is necessary to help our economies? He must take meaningful action in his Autumn Statement to do what is needed to bring jobs and growth to the UK.
“The SNP Government is doing all it can with the limited powers it has through measures such as further investment in construction, skills and an additional £40 million for affordable housing and funding for more new school buildings.
“We also announced £485million additional investment since last year’s Spending Review and £2.5billion of infrastructure investment set out last year.
“But if the Chancellor continues down this road of ignoring these calls – including almost half the economists who originally endorsed his deficit-reduction strategy who now want an alternative – then this work by the SNP will continue to be derailed.
“That is why we need the full economic levers of an independent nation – to allow us to take the right steps for Scotland’s economy, no longer shackled to a damaging UK Tory government.”