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Salmond urges Osborne to follow Holyrood’s lead as Scottish unemployment figures fall

First minister portrays decision to accelerate capital spending in Scotland as ‘plan B’ suitable for whole of UK

Scotland’s first minister, Alex Salmond, has urged chancellor George Osborne to reverse his deep spending cuts after new employment figures showed that different Scottish policies on job creation were having a “powerful” effect.

Salmond was buoyant after the latest quarterly statistics showed that Scotland was the only part of the UK to see a fall in unemployment and a net rise in the numbers finding work, appearing to confirm a year-long trend.

Scottish employment increased by 23,000 between May and July, while the unemployment figure fell by 3,000, leading to a total level for those in work of 71.6%. Across the UK, the jobless total increased by 80,000 while overall employment fell by 69,000, leaving 70.5% of the population in work.

Salmond said the “very strong figures” were evidence that the Scottish government’s strategy of accelerating capital investment last year, improving access to finance for small and medium companies, and a operating a no-compulsory-redundancy policy in the public sector had succeeded.

The Scottish government’s analysis showed that job creation in the private sector was running at twice the rate of job losses in the public sector over the year. Through contraction with spending cuts, jobs in public services fell by 25,000 through voluntary redundancy and natural wastage, while they had grown by 55,000 in the private sector.

Over the last year, total employment rose by 36,000 in Scotland, compared to an aggregate increase across the UK of just 24,000.

However, those figures mask a steep rise in youth unemployment, which stood at 45,000 in Scotland in July after a 10% increase year-on-year.

This strategy was now being threatened by the UK government’s determination to continue slashing public spending and capital investment, Salmond said.

“I don’t want to see this significant jobs recovery in Scotland blown off course by policies being pursued or not pursued by the UK chancellor; there’s an obvious danger of that,” he said. “I would submit that each of these three planks of the Scottish economic strategy are absolutely necessary for a ‘plan B’ for the UK economy.”

Salmond said his government’s broader economic policies were also increasing confidence. Its freeze on council tax since 2007, abolition of prescription charges and introduction of 0% interest rates for small firms had all helped bolster the recovery. The Scottish government has also pressed ahead with infrastructure spending such as extensions to the M74 and M80 motorways and new hospitals.

But his claims were challenged by UK ministers, who believe Salmond’s analysis is far too simplistic. Michael Moore, the UK government’s Scottish secretary, said the Tory-led coalition’s macroeconomic policies to boost growth, such as cutting corporation tax and increasing tax relief for new businesses, were proving effective in their own right.

This was endorsed by Christine Lagarde, the managing director of the International Monetary Fund, last week, Moore said, before admitting that long-term and youth unemployment were still significant and needed additional measures.

“Our plan has brought stability and confidence to the economy, and abandoning this plan could undermine the recovery and further job creation,” Moore said. “But we also know that to cut unemployment needs more than a return to growth: we need to understand and tackle the root causes of youth and long-term unemployment too.”

Salmond conceded that his decision to bring forward capital spending last year from this year’s Treasury grant to Scotland, allowing him to accelerate investment, would hit future spending. But he said the overall 40% cut in capital spending by the Treasury would significantly damage the recovery.

He also acknowledged that the UK government’s decision to accelerate new borrowing powers for Scotland, giving it advance access to £230m this year, were also helpful. That will allow a new Forth road bridge to be built.

Increasing capital borrowing was “absolutely essential”, but he chided the UK government for not allowing it more quickly. Although the Scottish government would soon get the power to borrow £2.2bn, that is less than the £3bn given to the Northern Ireland government.

Salmond said the Scottish government would now be increasing spending on major infrastructure projects – partly via its own version of the private finance initiative, which uses a non-profit distribution model – by building a new rail link from the Borders to Edinburgh, a new bypass around Aberdeen and new school buildings, and making additional investment in housebuilding.

“There is some evidence that a distinctive approach yields substantial dividends in getting people into jobs and employment in Scotland,” Salmond said.

Grahame Smith, general secretary of the Scottish Trades Union Congress (STUC), said that while the “small fall” in overall unemployment was welcome, there had still been increases in the overall claimant count, youth unemployment, long-term joblessness and unemployment amongst women.

The STUC estimated that nearly 470,000 people were still unable to get the full-time jobs they needed to make ends meet, he said.

“With growth minimal, real wages falling, consumer confidence collapsing and the full effect of spending cuts just beginning to hit the economy, the STUC sees no prospect of sustainable improvement in the Scottish labour market. It is noteworthy that, at UK level, the private sector is creating one job for every 2.7 lost in the public sector”. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds