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Scottish Government calls for £80bn UK-wide stimulus package

Kate Forbes and Nicola Sturgeon - Image credit: Jane Barlow/PA Wire/PA Images

Scottish Government calls for £80bn UK-wide stimulus package

Finance Secretary Kate Forbes has launched a report setting out a proposal for a UK-wide £80bn stimulus package to regenerate the economy and reduce inequalities following the COVID-19 pandemic.

The package would fund several measures including a temporary reduction in VAT, with the hospitality and tourism sectors given a reduced VAT rate of five per cent, and a two per cent cut in employer National Insurance contributions, to reduce the cost of hiring new staff.

The report – titled ‘Coronavirus (COVID-19): UK Fiscal Path – A New Approach’ – also calls for Scotland’s financial powers to be extended, to allow the country to shape its own response to the pandemic, and for new fiscal rules prioritising economic stimulus over deficit reduction to be adopted in times of crisis.

Other proposals include a job guarantee scheme for young people, extending sector-specific employment and business support schemes, creating a ‘national debt plan’ to help household and business budgets recover, accelerate investment in low-carbon initiatives, energy efficiency and digital infrastructure.

“We are emerging from the biggest economic shock of our lifetimes. It has hit the most vulnerable in our society disproportionately and presents challenges that the Scottish Government does not currently have the powers to meet,” Forbes said.

“The UK Government’s fiscal policies are still key in determining our budget, so today we set out the principles we believe it should follow to ensure we emerge with a fairer, greener economy that values wellbeing alongside growth. 

“This report recommends bold, practical steps which would provide an immediate boost to our economy, protect existing jobs and deliver new ones. It tackles public debt, employment and proposes measures to further support business. Crucially, it avoids any return to austerity. Economic stimulus must be prioritised over deficit reduction until the recovery has fully taken hold.

“Germany has already adopted a similar-size stimulus package, representing four per cent of GDP, and the UK Government needs to be similarly positive, proactive and ambitious. Action is needed now. If the UK Government is not prepared to respond then Scotland must have the additional financial powers required to secure a sustainable economic recovery.

“Without those powers we will be at a severe disadvantage to other nations. It would be like trying to chart our way to recovery with one hand tied behind our back.”

The STUC threw its support behind the proposal, with general secretary Rozanne Foyer calling for a stimulus package “that plots a road map to sustainable recovery”.

She said: “The two biggest determinants of consumer confidence and economic growth over the next period will be people’s concern for their safety and their future jobs prospects.

“Tax cuts would be a complete waste of money resulting in better off consumers ending up with bigger household savings while millions of others would not spend because of fears for their jobs.”

She added that the rush to end lockdown to boost consumer spending in the US “should act as a clear warning to our Chancellor”.

“The extension of the furlough scheme and investment in infrastructure, care and education in conjunction with a jobs guarantee scheme are by far the best ways to forge a sustainable economic recovery.”


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