UK Coalition’s austerity policies a drag on Scottish economy says think tank


   By Martin Kelly

Scotland’s economic recovery should be stronger according to a leading think tank which argues that the UK Government’s austerity policies are holding Scotland’s economy back.

Welcoming what it described as “clearer signs of recovery” the Fraser of Allander Institute (FAI) said despite what it called “recent good survey evidence” the recovery so far is weaker than would be expected 5 years after a recession caused by a banking crisis.

Brian Ashcroft, member of the FAI and Emeritus Professor of Economics at the University of Strathclyde, said:

“The evidence of recovery is to be welcomed.  Business services are now growing strongly and leading the way.”

Citing poor global demand and the policies being pursued by UK Chancellor George Osborne as reasons for what he said was weaker than expected growth, he added:

“The explanation for the welcome, but still anaemic, recovery 5 years since the start of recession is the UK government’s fiscal consolidation programme and weak export performance reflecting both supply-side structural problems in the UK and Scottish economies as well as weak global demand.”

The comments are a blow to Scottish Secretary of State Michael Moore who claimed the Scottish recovery and latest positive job figures were a result of the austerity policies being pursued by the UK Government.

Speaking yesterday, Mr Moore said: “This shows the decisions we are taking to tackle the deficit and build a stronger and fairer economy are working.”

The Lib Dem MP’s claims were dismissed by First Minister Alex Salmond who insisted that investment and not cuts in spending were essential if the Scottish economic recovery was to be maintained.

Mr Salmond said: “The Westminster government’s continued pursuit of austerity is the biggest risk to Scotland’s economic recovery.  Without the tools of independence to do the job properly, Scotland risks having all the progress we have made undone.

“The Chancellor has the opportunity at the Spending Review this month to change his plans, and recognise that the key route to deficit reduction is economic growth and the key to economic growth is investment not austerity.”

Mr Salmond’s arguments were supported by Paul Brewer, senior partner at PricewaterhouseCoopers in Edinburgh, who said:

“The latest commentary emphasises the importance of investment as a major contributor to economic growth, particularly over the last three quarters.

“The pace of investment in energy assets, such as renewable generation and grid development, has picked up while manufacturing continues to claw its way back to its pre-recession peak.  Scottish Government sponsored projects such as the New Forth Bridge Crossing, Edinburgh Trams and the affordable housing programme are also delivering an economic boost during their construction phase.

“Our cities are also increasingly recognising their role as a focal point of investment, helping to drive Scotland’s future growth.  In Aberdeen, for example, the focus is clearly around developing and sustaining the energy supply chain resulting in public-private sector policies that will help deliver a supply of skilled people, greater connectivity and a modern infrastructure.

“As we continue along this path of slow, tentative growth one thing is certain: the most successful cities will be those whose strategies focus on innovation, digital connectivity and transport infrastructure, as well as improving factors such as income levels, the quality of jobs, health and housing.”

Yesterday saw unemployment in Scotland fall for the seventh successive month.  The fall of 6000 was in contrast to south of the border where unemployment rose by 5000.

Those in work in Scotland increased to its highest level for four years, rising by 47,000 to 2,530,000.