Leader: Swinney needs to be radical to boost Scottish economy

The economic storm clouds are gathering once again, with the International Monetary Fund (IMF) warning that the global economy has entered a “dangerous new phase” which could result in the United States and some eurozone countries moving back into recession, while the UK’s gross domestic product is predicted to grow 1.1 per cent in 2011, down from the 1.5 per cent forecast in June.

For an organisation which has always sought to be realistic but not alarmist, such language from the IMF is chilling, suggesting that far from the massive global economic downturn which was precipitated by the banking collapse coming to an end, there is a distinct possibility that the world is about to endure a second and equally damaging recession.

Such predictions have serious consequences for both the Conservative/Liberal Democrat UK government and the Nationalist Holyrood administration which will today unveil the results of its spending review, outlining where it will be forced to cut spending north of the Border, although it will, of course, firmly lay the blame for its predicament at the door of Westminster.

For the UK government, the latest IMF warning calls into question the insistence by Chancellor George Osborne and Lib Dem Treasury chief secretary Danny Alexander that there can be no “Plan B” of the type both the SNP in Scotland and the Labour opposition at Westminster are demanding. Sticking to your plan is admirable, but when the facts change or the situation worsens there is no shame in adapting your thinking.

To this end Mr Osborne could encourage the Bank of England to embark on another wave of Quantitative Easing (QE), if such a programme could guarantee that spending went not to the financial institutions to bolster their balance sheets but to consumers to spend or to infrastructure projects which could help kick-start the economy while creating jobs.

In this respect the call by the SNP for a “Mac Plan B” has some validity, and today John Swinney will have to take similarly brave decisions to try to bolster the Scottish economy, which so far has been preforming marginally better than that south of the Border.

Here in Scotland there is a case for investment in projects like the Forth crossing, or perhaps going further by embarking on projects such as more dualing of the A9, or, say it very quietly, the completion of Edinburgh’s original tram network plan.

Whilst it appears Mr Swinney is likely to take money from councils to achieve some of this, forcing them to borrow, his approach can be justified if, and it is a big if, the finance secretary is prepared to take genuinely radical decisions in other areas by rearranging resources in favour of capital spending.

We will know by the end of today whether he has risen to this huge challenge.