Spending cuts at centre of dispute
Business leaders divided over economic growth strategy
The call by N-56, a loose alliance of company bosses led by the property developer Dan Macdonald, wants an end to spending cuts and a huge investment in the country’s transport, broadband and energy networks.
However, it coincides with a letter to the Daily Telegraph today in which 5,000 small business owners have called for David Cameron and George Osborne to “finish what they have started” and say that a change of strategy now would be “far too risky”.
The CBI has also demanded the government stick to reducing the deficit in the public finances in order to cut the country’s borrowing requirements.
But differing views are emerging about the best way to grow the economy. N-56, which says it is independent but also wants more devolution, is demanding the public and private sectors work together to deliver a £13 billion spending programme in Scotland – £150bn for the UK – on key infrastructure.
In a new report it claims the coalition’s austerity policy has cost the Scottish economy £24bn in output and wants it replaced with an “Invest for Growth” strategy similar to that which ended the Great Depression of the 1930s.
N-56 claims this will stimulate the economy and create employment, reducing the need for “draconian” public spending cuts while also cutting the public sector deficit and debt.
The group has expressed disappointment that the General Election campaign has been “largely focused on unseemly horse-trading” around reducing the deficit through spending cuts. Instead, it says, it should be delivering measures to stimulate economic growth.
In a report published today it blames a lack of investment in the economy, together with public spending cuts, for Britain’s failure to match the economic performance of other advanced economies. It says that, on average, these have been 15% higher.
“While almost all advanced economies suffered recession following the financial crisis of 2008 the UK was one of the longest lasting and took until 2014 for the economy to recover to 2007 levels of output, meaning that this recession lasted longer than the Great Depression,” says the report.
“In addition, investment in the likes of infrastructure and research & development sees the UK lie well behind other advanced economies – 32 out of 35 countries. While total investment in the UK was 15% of GDP in 2014, a typical advanced economy enjoys more than 20%. This “investment gap” amounts to over £150bn per year for the UK, £13bn for Scotland.”
The Invest for Growth Strategy outlined in the report focuses on 4 key areas:
· Infrastructure: particularly where public sector investment would be expected to stimulate private sector investment;
· Innovation: particularly in the green economy, where Scotland in particular and the UK has areas of expertise and there are opportunities to build comparative advantages for the future;
· Growing exports: by focusing on increasing productivity in exporters and potential exporters; and
· Addressing inequality: at source rather than by redistribution, to ensure that all the economic resources that are available are.
N-56 has also called and for greater collaboration between government, businesses and others in devising and delivering the Invest for Growth strategy, which would include the National Investment Programme. This would echo the example set by the likes of Denmark, Singapore and Germany, as well as Chicago at a city-level.
It has also called for a greater devolution of economic powers to Scotland and development of fuller economic strategies in the face of London’s increasing dominance of the UK, as well as to other regions and nations of the UK.
Mr Macdonald, founder of N-56, said: “It is clear that the UK Government’s current strategy of cutting public spending to the bone in order to tackle the deficit and the debt has not worked, even by its own targets. We desperately need to undertake a radical overhaul of this failed austerity experiment, loosening the purse strings and focusing instead on delivering economic growth through greater investment in the economy.
“Our National Investment Programme, which will form a key part of our Invest for Growth economic strategy, will cherry-pick those opportunities which will generate economic growth and provide a maximum return.”
Graeme Blackett of economic consultancy BiGGAR Economics, which compiled the report, said: “Great collaboration between the government, public and private sectors is vital if we are to deliver this Invest for Growth strategy, echoing the example set in the likes of Denmark, Singapore and Germany, as well as Chicago at a city-level.
“Unfortunately most governments just look to a four or five year political cycle, rather than beyond this when looking to develop strategies that will deliver maximum returns. We need a culture change that looks to long-term gains rather than just often misguided short-term fixes.”