'Scotland is STUCK' Fears SNP budget will destroy 'weak' Scottish economy
Respected think-tank the Fraser of Allander Institute (FAI) raised fears that the country faces continued sluggish rates of growth until 2020. It said Scotland's economy is growing at only one-third the rate of the whole of the UK’s - and warned even with tax hikes to pay for a string of spending pledges the axe is likely to fall in other areas. The report, published ahead of Finance Secretary Derek Mackay’s 2018-19 draft Budget on Thursday, also predicted employment would continue to grow but highlighted slipping productivity. Experts said “it is vital that the Budget sets out a clear vision for how the government will help take advantage of the significant economic opportunities we know that will exist in the future”. FAI director Graeme Roy said: “The Scottish economy remains stuck in a cycle of weak growth.
GETTY 'Scotland is STUCK' Fears SNP budget will destroy Scottish 'weak' economy
The Scottish economy remains stuck in a cycle of weak growth Graeme Roy
“Brexit uncertainty is clearly not helping, but in such times it is important that policymakers focus on the areas where government policy can help support the drivers of long-term growth, such as entrepreneurship, innovation, skills and connectivity. “Whilst much of the political reaction will centre on the government’s proposals for taxation, the Budget provides a vital opportunity for Scottish ministers to set out their plans to grow the economy and boost productivity.” Scotland’s economy grew by just 0.5 per cent over the past year, one-third the rate in the UK as a whole. The FAI downgraded its forecasts, predicting economic growth of 1.2 per cent next year and 1.4 per cent in both 2019 and 2020. There was some comfort in jobs growth, with predictions of an employment rise from 2,462,900 (0.9 per cent) next year to 2,488,850 (1.1 per cent) in 2019 and 2,526,500 (1.5 per cent) in 2020.
PA Mr Mackay will release the 2018-19 draft budget on Thursday
Unemployment was forecast at 120,350 (4.5 per cent) in 2018, 114,650 (4.2 per cent) in 2019, and 116,300 (4.2 per cent) in 2020. But productivity is down by around 4 per cent since 2015 and growth has been negative for seven consecutive quarters, the FAI said. The researchers said that block grant from Westminster for day-to-day spending would fall by £200 million in real terms next year. But the £1.1billion of so-called financial transactions from Chancellor Philip Hammond’s Autumn Statement “provides an opportunity to be innovative”. Mr Mackay and Nicola Sturgeon have already set out four options for income tax rises which would see an overhaul of the current system with a number of new rates and bands created.
GETTY Ms Sturgeon hopes to raise up to £290million to fund a range of Left-wing pledges
They hope to raise up to £290million to fund a range of Left-wing pledges including lifting the one per cent pay cap on the public sector. The FAI said it was likely the Scottish Fiscal Commission (SFC) would downgrade its estimates for the amount raised from devolved taxes. Even one of the “bolder” options on income tax that adds a penny to all tax rates would only be enough to offset the fall in day-to-day spending, economists said. Professor Roy added: “With major manifesto commitments to pay for in health, education, childcare and policing - not to mention a more generous pay settlement for public sector workers than those in England - ‘non-protected’ areas will be in line for an extremely tough settlement.” Meanwhile, Scottish Tory finance spokesman Murdo Fraser urged Ms Sturgeon to reveal the views of her own Council of Economic Advisers on any tax hikes following a business backlash.
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