Investment, not austerity, is the key to recovery

THIS week we launched our latest report, calling for an “Invest for Growth” strategy to replace the current failed austerity measures, which have lost the Scottish economy £24 billion in GDP since 2007.

The next UK government will be urged to increase public spending. Picture: PA

Our recommended approach would echo the economic measures that ended the Depression of the 1930s and ensure the economic recovery, based on fragile foundations, is sustainable.

The current general election campaign has, however, been largely focused on unseemly horse-trading, dedicated to a failed economic strategy to reduce the public sector deficit and debt through cutting public spending, rather than through measures that stimulate economic growth. And through these measures, income inequality has widened dramatically over recent years, holding back sustainable economic growth.

Sign up to our Opinion newsletter

Sign up to our Opinion newsletter

Almost all advanced economies suffered recession following the financial crisis of 2008 and the UK took until 2014 to recover to 2007 levels, a recession longer than the Depression.

In addition, investment in the likes of infrastructure and research and development sees the UK lie well behind other advanced economies – 32nd out of 35 countries.

We are urging the next UK government to increase public spending and borrowing modestly as part of a programme of delivering over £13bn of additional public and private investment annually into the Scottish economy, matching that of other advanced economies.

This additional investment, identified in a National Investment Programme, will include investment in infrastructure, such as transport, broadband and energy networks; research and development, and a greater focus on promoting key export sectors.

This will stimulate economic growth and create employment, reducing the need for draconian public spending cuts while also cutting the deficit and debt. It will also ensure the sustainability of the recovery, currently based on high levels of consumer spending.

We desperately need to undertake a radical overhaul of the current failed austerity experiment, focusing instead on delivering economic growth through greater investment in our economy.

• Dan Macdonald is founder of N-56, an independent business organisation