Swinney: Economy 'running on empty'
The UK Government's "austerity approach" is harming rather than helping the economy, according to the Finance Secretary.
John Swinney is due to give a keynote speech on the state of Scotland's economy to the David Hume Institute in Edinburgh on Thursday.
Mr Swinney will argue Chancellor George Osborne's strategy has placed "too much emphasis on austerity, and not enough on promoting growth".
He will argue that all the blame for last week's GDP figures - which revealed the UK economy shrank more than expected at the end of last year - cannot be attributed to the eurozone crisis.
Mr Swinney said: "I have argued on a number of occasions that while I recognise the clear need to address the legacy of debt inherited from the previous UK Government, this can only be achieved if there is sufficient growth in the economy. This is not what we are seeing. Continuing uncertainty in the eurozone is playing its part in the disappointing growth figures. However, not all the blame can be laid at the door of the eurozone.
"Much of the responsibility for the lack of economic growth must therefore be laid at the door of 11 Downing Street. In particular, the balance of the Chancellor's plans placed too much emphasis on austerity - and not enough on promoting growth."
He said: "George Osborne claimed that his actions had put 'fuel into the tank of the British economy'. The reality however, has been very different.
"As many economists, such as Professors Paul Krugman and Joseph Stiglitz have argued, removing public sector demand so rapidly, and before private sector demand was sufficiently strong to step in, has not put fuel into the tank of the British economy - but has instead forced it to run on empty. As a result, it is all the more tragic as ultimately the Chancellor's actions have proven to be self-defeating.
"It is one thing to cut public expenditure to rebalance the economy but quite another when your cuts are so deep that they threaten growth and hamper the rebalancing of the economy and public finances."
Mr Swinney said the Office for Budget Responsibility was now forecasting that £158 billion more would be borrowed by the UK Government over the next five years than initially planned in June 2010, with spending cuts "pencilled in for 2015/16 and 2016/17". And he added: "If this comes to pass, it means Scotland would face public spending cuts for seven consecutive years."
Copyright (c) Press Association Ltd. 2012, All Rights Reserved.
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Wednesday 22 February 2012
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