Plan that prompts more questions than answers

N UNVEILING an urgent and detailed list of suggestions for an economic “Plan B” for the UK government, Scotland’s SNP administration lacks for nothing in ambition. It is bold in its recommendations and pressing in its advocacy. It calls on Westminster for action in three priority areas – capital investment, access to finance and what it calls “enhanced Consumer Confidence”.

It is particularly strong in setting out the case for big capital investment projects. But this six-page paper is hardly an economic “Plan B” that shows how such a strategy is to be financed. It is more of a political statement by the Holyrood administration enabling it to claim that it has an alternative economic policy, however lacking it may be in identifying the fuel by which it might be launched. The unspoken means, of course, is more borrowing. Little wonder that on this the paper is silent. Readers are left to draw the conclusion that it is only through the complacency or venality of “the London-based government” that its recommendations have not already been seized upon. The reality, however, is that we are steeped in debt; that it is debt interest that is soaking up ever greater amounts of public funds; and that the government is pursuing a deficit reduction strategy which is vital to maintain confidence in our sovereign debt market. It is not the indifference of Westminster that is the problem here, but highly febrile debt markets, apprehensive at any sign that we may be faltering in our commitment to deficit reduction.

As the economy has slowed, opening the prospect of a double dip into recession, there is a powerful argument for re-arranging budgets to devote more cash towards measures to fund capital projects and stimulate business investment. Here the Scottish administration could take immediate practical steps by converting Scottish Water into a public interest company, thus freeing up a capital sum of some £3 billion that could help with other public expenditure programmes and continue to fund some £150 million a year of Scottish Water’s future capital spending. But for doctrinaire reasons it has set its face against this option, pursuing instead a policy which former chairman Sir Ian Byatt describes in his article in The Scotsman today as “more in the spirit of Walter Scott than David Hume”.

The Scottish Government cannot get away with leaving all responsibility at Westminster’s door. There are options that it, too, can study and put into effect to help promote recovery. As it is, the current “Plan A” does allow for some flexibility and scope to put in hand various measures such as targeted VAT cuts and reductions in employment taxes without putting its targets for a cyclically-adjusted fiscal balance in jeopardy. Declamatory “Plan Bs” are no substitute for a willingness to take action here with our own budget to ensure maximum support for employment and business investment.