A different path from austerity

12th October 2015

Scottish Government plan would release £150bn more for public services.

The First Minister has set out an alternative option for a UK wide fiscal mandate that would ensure sustainable UK public finances while releasing additional investment in public services and infrastructure compared to the UK Government's planned cuts.

The illustrative figures show that the austerity proposed by the UK Government is not required to secure a current budget balance.

Under an alternative fiscal plan, the UK's current budget could be balanced from 2019-20, with public sector net investment increased to 2 per cent of GDP over the same period.

As an illustration of the scale of unnecessary reductions being pursued by the UK Government, this would allow an additional £150 billion in cumulative investment in public services across the UK between 2016-17 and 2019-20 compared to the UK Government’s current plans - which could see Scotland receive around £12 billion.

In contrast, the fiscal targets set out by the UK Government in its summer budget require a significant reduction in public spending, with cuts of £12 billion to welfare and potential cuts of around £20 billion to public services expected by 2019-20. UK Government reductions in spending go beyond what is necessary to balance the budget.

The work, published by the Scottish Government, shows that UK Government plans, which would see a significant reduction in public spending, with cuts of £12 billion to welfare and potential cuts of around £20 billion to public services expected by 2019-20 are not required.

The Scottish Government example would ensure that public sector debt and borrowing were on a downward path every year from 2016-17 to 2019-20. Net borrowing would continue to fall each year from 4.9 per cent in 2014-15 to 2 per cent in 2019-20 - below the average deficit of 3.6 per cent seen in the UK over the past 40 years.

The First Minister said: "This week, the UK Parliament will vote on the Chancellor’s proposals for what are unnecessary and ideological cuts to public spending.

"The pain of the UK Government’s austerity agenda is already having an impact on some of the poorest and most vulnerable in our society, and is beginning to bite across the country. But the UK Government’s latest fiscal targets mean even more painful austerity is ahead for people across the UK, with further cuts to public services and welfare planned over the next four years.

“As our alternative proposals demonstrate not only are these cuts ideologically driven, they are also unnecessary.

“Our paper published today – which updates our fiscal mandate proposals following the UK Government’s summer budget – outlines an alternative to ensure the debt and deficit are put on a downward path while allowing up to an additional cumulative £150 billion of investment across the UK by 2019-20 – with around £12 billion in Scotland.

“The Scottish Government has consistently demonstrated that the deficit and debt can be brought down without the need for the huge public spending reductions that have been set out.

“As this alternative option shows, not only could we maintain investment in public services and protect the poorest and most vulnerable in society, the UK current budget would be balanced by 2020, with limited borrowing set aside for capital investment to increase the country’s productive capacity.

“There is a different path to austerity available – as our alternative option shows, it is a viable path and it is an opportunity that the UK Government should grasp."