SNP raids enterprise budget to fill building fund hole

THE Scottish Government is to raid the country’s enterprise agencies for hundreds of millions of pounds to fill a funding gap in its plan to kick-start building projects to boost the economy.

About £280 million is to be taken from Scottish Enterprise and Highlands and Islands Enterprise – which launch and grow businesses – by April 2015, according to an official document seen by Scotland on Sunday.

The plan to move the cash from the agencies’ resource budgets to the government’s “capital” budget for building projects – Alex Salmond’s much-vaunted Plan MacB – has led to fears of job losses.

Business leaders and opposition politicians expressed grave concern about the move yesterday, questioning why the SNP’s plans to deal with the financial crisis involves cuts to organisations responsible for creating jobs and economic growth.

Iain McMillan, the director of CBI Scotland, said: “I would hope that the SNP is not robbing Peter to pay Paul. Enterprise agencies are very important for supporting small businesses and for growing the economy.”

The Government raid was revealed in a letter to an MSP from the Scottish Parliament’s Information Centre (SPiCE).

The letter, responding to an inquiry from the Conservative MSP Gavin Brown, examined the SNP’s pledge to transfer £750m from “resource” budgets, the bulk of which is spent on salaries, to “capital” budgets for construction projects.

The huge financial switch was the centrepiece of Finance Secretary John Swinney’s recent Spending Review covering 2012/13 and 2014/15 and the SNP’s “Plan MacB” for recovery.

Swinney argued that boosting the capital budget would stimulate the economy by pushing more money into major construction projects, which would create jobs. Until now, however, there has been uncertainty around precisely which resource budgets would be plundered to give the capital budget the huge boost required.

The SPiCE letter confirmed that £320m would be found from the health resource budget, another £50m would come from the Warm Homes/Future Transport Funds, while up to another £100m would come from The Scottish Futures Fund, a body set up to finance broadband, pre-school education and low carbon vehicles.

The letter then revealed that the remaining £280m would come from Scottish Enterprise and Highlands and Islands Enterprise (HIE) resource budget.

The document goes on to note that a transfer of “at least” £280m from resource to capital budget would represent more than 29 per cent of the enterprise agencies’ budget of £978m for the Spending Review period.

Brown, the Tories’ economy spokesman, said the cash raid would almost inevitably lead to job losses, despite the SNP Government’s pledge for no compulsory redundancies in the public sector.

Scottish Enterprise currently employs 1,075 people, while, according to its most recent annual report, HIE employs another 426.

Brown said: “I don’t see how you can take one-third off a budget without cutting jobs.”

Swinney’s budget, which was unveiled last month, has already put the SNP on a collision course with business.

Retailers are angered by plans for a new public health levy, nicknamed the ‘Tesco tax’, on stores selling alcohol and tobacco, which will see a supplement introduced on premises with a rateable value of more than £300,000.

There was more concern when the Centre for Public Policy for Regions at Glasgow University calculated that business rates would increase by £849m by 2015.

A Scottish Government spokesman said: “Despite a 36 per cent real terms cut to our capital budget by the UK Government, we will switch around £800m resource spending to the capital investment programme, use the NPD (non-profit distributing) model for a £2.5bn pipeline of projects and other innovative financing mechanisms to support economic recovery and boost employment.

“As a result, Scottish Government-supported capital investment will be 25 per cent higher in 2014-15 than in 2011-12, a practical step to boost the economy.”