THE Labour Government should change its fiscal rules to allow borrowing for public sector investment, First Minister John Swinney will say in a speech on Monday.
Speaking ahead of the Budget on October 30, the SNP leader will address an audience of academics, think tanks and representatives of the public, private and third sector in Edinburgh.
He is expected to rail against planned cuts from Chancellor Rachel Reeves in the Budget – who is said to be looking at tax rises and spending cuts totalling £40 billion – instead urging her to boost public investment.
One of the changes, the First Minister is expected to say, should be movement on fiscal rules which would allow investment in public infrastructure. The current rules place a cap on public sector borrowing of 3%.
Labour’s fiscal rules are “essentially the same” as the Tories’ and “pretty daft”, according to Institute for Fiscal Studies director Paul Johnson, who has also argued for more borrowing.
Last week, the “Labour Growth Group” of around 80 MPs urged Reeves to commit to changing fiscal rules in the upcoming Budget to invest in public services.
Swinney is expected to make a similar call in a keynote speech on Monday, saying: “In the advanced economies of the OECD [Organisation for Economic Co-operation and Development], the average amount of public sector investment is nearly 4% of GDP a year.”
The OECD, which was founded in 1961 to “shape policies that foster prosperity and opportunity”, has 38 member states including some of the UK’s closest allies, such as France, the US, Australia, Ireland, Germany and Japan.
“Labour productivity grew by just 0.4% a year in the UK in the 12 years following the financial crisis, half the rate of the 25 richest OECD countries.
“And it means – as the Resolution Foundation has found – almost a decade and a half of lost earnings. It was only in 2023 that real wages were back to where they were before the financial crisis.
“Fifteen years of lost wage growth has cost the average worker £10,700 a year.
“We know what the solutions are. More houses, green jobs, targeted public investment in knowledge, infrastructure and nature.
“I want to see the UK Budget change the fiscal rules around borrowing to allow for greater investment in public infrastructure. But changing the rules is only the first step.”
The First Minister will also urge the UK Government to seek to increase public sector investment to at least 3% of GDP, eventually rising to the OECD average of 3.7%.
“It would mean that governments in all four nations could plan on the basis of stable, predictable funding arrangements to build the infrastructure we all need and which I want to deliver for Scotland,” he will say.
The UK Government has been contacted for comment.
The First Minister is also expected to push Reeves to increase public spending in the Budget, describing the past seven years as a “long, dark economic winter”.
“That is why I believe the United Kingdom faces a make or break moment in this next Budget. It must be seized.”
It comes as the SNP also called on the Labour Government to commission and publish a report on the economic impact Brexit has had on the UK’s finances.
Stephen Gethins, the SNP MP for Arbroath and Broughty Ferry and his party’s international affairs spokesperson, highlighted that the £40bn Reeves is looking to raise with cuts and tax rises is the same as the Centre for European Reform estimated Brexit has cost the Treasury in lost receipts every year.
