The First Minister of Scotland, John Swinney, is advocating for a change in the fiscal rules of the UK government to allow borrowing for public sector investment. In a speech scheduled before the upcoming Budget on October 30, Swinney will address various stakeholders in Edinburgh, including academics, think tanks, and representatives from different sectors.
Swinney is critical of the planned cuts proposed by Chancellor Rachel Reeves, which are expected to amount to £40 billion through tax increases and spending reductions. He believes that instead of these austerity measures, there should be a focus on boosting public investment, particularly in public infrastructure.
The current fiscal rules cap public sector borrowing at 3%, a restriction that Swinney considers limiting for investment in essential areas. He points out that the rules are similar to those of the Tories and are deemed “daft” by experts like Paul Johnson from the Institute for Fiscal Studies, who advocates for more borrowing.
A group of around 80 Labour MPs known as the “Labour Growth Group” has also urged Reeves to reconsider the fiscal rules to prioritize investment in public services. Swinney echoes this sentiment by highlighting that advanced economies in the OECD invest nearly 4% of GDP in public sector projects annually, significantly more than the UK.
He emphasizes the importance of public investment in driving economic growth and improving public services, citing statistics that show the UK’s lag in productivity compared to other OECD countries. Swinney calls for a change in fiscal rules to allow for greater investment in areas like housing, green jobs, and infrastructure.
Additionally, Swinney urges the UK government to increase public sector investment to at least 3% of GDP, eventually reaching the OECD average of 3.7%. He believes that stable and predictable funding arrangements are crucial for building the necessary infrastructure across all nations.
In light of the economic challenges posed by Brexit, Swinney also calls on the Labour Government to assess and disclose the impact of Brexit on the UK’s finances. He points out that the £40 billion targeted for cuts and tax hikes in the upcoming Budget is equivalent to the estimated annual losses due to Brexit, as calculated by the Centre for European Reform.
Overall, Swinney’s advocacy for revising fiscal rules and prioritizing public investment reflects a broader push for economic recovery and growth in the UK. By emphasizing the need for strategic investments in key areas, he aims to steer the country towards a path of sustainable development and prosperity.
