Swinney demands £20bn to secure the economy

FINANCE secretary John Swinney has demanded billions of pounds from the UK government for major building projects in Scotland to prevent the “dangers” of the country’s economy being gripped by a new recession.

Mr Swinney revealed that he had written to George Osborne ahead of the Tory Chancellor’s autumn statement asking for an extra £20 billion for capital investment – £2bn of which the SNP minister says should be handed to the Scottish Government.

The finance secretary issued a stark warning that Scotland’s economy could slump back into recession if Mr Osborne did not back the investment package for new schools, transport projects and house building which, he suggested, “any responsible chancellor” would approve.

But the call would further hamper the coalition government’s efforts to tackle the UK’s budget deficit, which currently stands at £122bn.

Mr Swinney has asked the Chancellor for a “targeted, cost effective, programme of new capital investment” to “provide a significant boost” to the economy, in the letter ahead of Mr Osborne’s autumn statement a week tomorrow.

However, Mr Swinney was yesterday accused of having “personally chosen to cut capital spending twice as fast” as the Tory-led government by Scottish Labour’s finance spokesman Richard Baker.

Mr Swinney claimed a multi-billion pound investment fund for Scotland would allow the government at Holyrood to put in place new measures to boost the economy and enhance consumer growth.

He also urged the UK Treasury not to cut benefit incomes next year, to reconsider a decision to end tax relief for the computer games industry and to look at measures to increase access to “affordable finance for businesses”.

Mr Swinney said: “The key proposition must be to support an expansion of capital investment within the country.

“An increased programme of capital investment would substantially increase our ability to deliver growth.

“I think if the Chancellor was to supplement capital programmes over the next three years by the order of about £2bn in Scotland – that would be the type of investment that would make a substantial contribution to boosting capital programmes.”

Mr Swinney went on to say that economic confidence had weakened in recent months and he insisted borrowing more money to fund large-scale projects was necessary in order to prevent a return to recession.

He said: “Clearly there are dangers that might happen. Growth is not at a high level, so therefore with the warnings that we have, I think any responsible chancellor looking at that data will see he needs to invest more to generate growth and avoid further recession.”

A Scottish business leader backed more infrastructure projects to boost the economy, but warned that a hike in borrowing would have a “harmful affect” on the country’s public finances.

Iain McMillan, director of CBI Scotland said: “The CBI has called on the Scottish Government to direct more spending into capital projects to provide employment and build infrastructure that will enhance Scotland’s economic performance.

“However, this must be done within the overall public sector spending envelope and must involve work to lever in private sector investment.

“While we are supportive of John Swinney’s general thrust on capital spending, it needs to be done within the existing spending limits.”

Mr McMillan concluded: “Mr Swinney seems to think that extra borrowing is the solution, but we are concerned about the harmful affect this would have on the public finances and the country’s credit rating.”

Lib Dem Scottish Secretary Michael Moore said that the UK government was “working very hard to make sure that, in these extraordinarily challenging times, in Europe and elsewhere, that we keep the growth going”.

He said: “We understand how tough it is for businesses. That’s why we are engaging with the banks, and why we’re looking to cut their tax bills and keep their interest rates as low as possible.

“All that effort, working together with the Scottish government and others, I’m sure, will be tough, but we will get to the right place.”

Meanwhile, Labour MSP Mr Baker said that the finance secretary’s intervention was “deeply hypocritical due to cuts the government at Holyrood had imposed on building projects”.

Mr Baker said: “He [Mr Swinney] has personally chosen to cut capital spending twice as fast as even George Osborne.”

“The Scottish economy is stagnating and growing even more slowly than the UK as a whole.”

A spokesman from the UK Treasury said: “Last year, for the first time, the government published the National Infrastructure Plan, which set out plans for public and private UK infrastructure investment to be some £200bn over the next five years. We will be publishing an update around the Autumn Statement.”