Leader: Scottish Government must rise to Chancellor’s challenges

YESTERDAY’S autumn statement from Chancellor George Osborne revealed the most sombre and dispiriting figures on the economy and on public debt and deficit in living memory.

Three years after the onset of the global banking crisis, and we are deeper in the red than ever, with a miserable outlook for the economy as far ahead as one can see. The government’s critics – prominent among them the SNP administration in Edinburgh – can draw some political satisfaction that their advocacy of “Plan MacB” has come to prevail, though neither in a manner or degree that gives any comfort. The coalition government has opted for a swathe of measures to help stimulate business growth and labour hiring, but in a programme that does not increase the already horrific deficit and borrowing totals.

The administration here has found it rhetorically easy to call for more borrowing powers and for public spending increases running into tens of billions of pounds. Such political rhetoric is easy. The reality, in a world of extremely apprehensive capital markets and a deepening crisis in the eurozone, is that more borrowing – on top of the totals already incurred – would be to take an enormous gamble that the markets would not notice or somehow treat in a sanguine manner, even though our deficit totals are among the highest in the G20.

Given this constraint, Mr Osborne announced an ambitious plan to mobilise more than £20 billion of infrastructure investment by pension funds. And there are proposals to help small business lending and encourage small firm equity investment through tax breaks. These are all positive and necessary steps, and they have been broadly welcomed across the business community. But they also present some formidable challenges to the Scottish Government. It will be expected to pursue further pay restraint policies across a public sector significantly larger as a proportion of the workforce than in the UK as a whole. And a tight grip will continue to be kept on the Scottish Government budget to help a rebalancing of the economy from the public to the private sector. This is long overdue, though it now has to be undertaken in the most difficult circumstances. But without a re-invigoration of private-sector expansion and job creation, we face an even more bleak future than the one forecast by the Office for Budget Responsibility yesterday.

The administration here will be helped in this mission by some £430 million of Barnett consequentials over the next four years. Politically, it will be decried as not enough. But it is still a significant sum that should help the administration move forward on the most pressing infrastructure projects.

There is much for the Scottish Government to do. It should leave in no doubt, given the near-certain increase in unemployment that lies ahead, that enterprise and business growth is treated as a firm and implacable priority.