IT’S always the economy, stupid. Elections are ultimately about the state of the economy. Which explains why the Tories are anxious to talk about everything except their economic record or the likelihood that things are going to get much worse after a hard Brexit deal with Europe. Fortunately the SNP has now come out fighting on its plans for ending austerity and boosting growth.

The despicable events in Manchester overshadowed a lot of bad economic news for Theresa May last week. The value of the pound on foreign exchange markets — which had risen a bit at the start of the month, as the Tories seemed to be doing well in the polls — suddenly fell back like a stone on news that Labour was gaining momentum. By Friday, sterling had lost a lot of its gains as the markets priced in the possibility of a hung parliament. More immediately, the lower pound adds to inflationary pressures and cuts household real incomes. That means less consumer spending power and slower growth.

Proof that the UK economy is slowing was quick to arrive. Last week’s fresh batch of official data showed first quarter growth was a miserly 0.2 per cent, compared with 0.7 per cent growth in the final three months of 2016. Worse, UK performance is lagging behind Europe. Spain had 0.8 per cent growth in the first quarter — four times the UK’s — while the Eurozone average was a healthy 0.5 per cent. So much for all that old guff from the Tories about Britain outperforming everyone else.

The news brought sour comments from the markets. Steven Barrow, currency guru at Standard Bank, was deadpan: “The UK economy seems to be slipping while most others are improving.” He added that another five-point fall in the pound was very possible in the next couple of months.

In fact, the markets are getting very jittery about the pound. Brexit negotiations are due to begin formally in mid-June, just after the General Election. These talks are likely to prove tough from the very outset, with EU negotiators demanding the UK honours its existing financial obligations under the current budget round, and Theresa May (if she wins) refusing. Instant deadlock in the negotiations will send sterling plunging against the euro. That will send import prices rocketing throughout the UK supply chain with Europe.

Commentators in the servile Tory press tried to write off this bad news. They argue the lower pound will boost exports and signal to a slight rise in business investment. They also point out that house construction in the UK is on the up. However, the number of houses completed in the UK in the first quarter is still running at a fifth of the new-build homes needed each year, according to government estimates. Meanwhile, there is no convincing evidence the UK is experiencing a major export boost from a lower pound. Between the last quarter of 2016 and the first quarter of this year, the UK trade deficit (goods and services) widened by £5.7 billion to £10.5bn. What good are prices if you don’t make the products foreigners want to buy?

So what can we do about this depressing situation? For starters, the next round of Tory austerity will only make matters worse. With the full introduction of Universal Credit in 2018, households in the lower fifth of incomes will suffer a shock real cut in benefits, as the welfare cap kicks in. Amazingly, the Labour manifesto says nothing about reversing these planned Tory cuts. Well, a potential Labour government needs the cash to continue building the Trident replacement, don’t they?

Fortunately, the SNP has a more realistic plan than either the Tories or Labour. Start by separating the Westminster budget into two bits: (1) current spending on wages and consumables, and (2) capital investment in infrastructure. Despite all the Tory rhetoric about bringing the deficit under control, the UK is still borrowing to fund current spending, never mind capital investment. Which is why, after the election, Chancellor Hammond wants to hammer working family credits and the state pension, in order to “balance the books”.

What Hammond means by “balancing the books” is to run a surplus on the whole budget, both current and capital spending. Translation: he intends to take out of the economy more than he is putting back in — which is taking austerity to massive new heights.

BUT there’s a common sense alternative being put forward by the SNP. Instead of borrowing nothing at all (the Tory notion) or too much (the Labour plan) we will peg annual borrowing to the rate of economic growth in the economy. As the economy expands, it generates more tax income for the Treasury. Rather than using the entirety of this windfall to pay off existing debts, the SNP proposes to use some of it to grow the economy and reverse austerity, which puts spending power into people’s pockets. This frees up some £118bn in the existing Treasury plans for use to sustain public services and reduce austerity. Some £10bn of this would come to Scotland via the Barnett Formula, effectively reversing the real cuts to the Scottish Government’s budget since 2010.

This SNP plan still provides enough cash to balance current public spending (on wages and consumables) with tax income received by the Treasury. In other words, the UK would not borrow to fund current public consumption, as Gordon Brown and subsequent Tory chancellors have done. That will calm the financial markets and keep pressure off interest rates — good for your mortgage. But what about capital borrowing for infrastructure investment? This is vital to build schools, hospitals and bridges, adding to productivity. The golden rule should be to link the scale of new capital borrowing to the rate of return yielded by the investments — sensible investment pays for itself over time.

Of course, past Labour and Tory governments have announced such golden rules only to cheat on them for opportunistic reasons. So the SNP is proposing some traffic lights. The SNP would urge a new fiscal rule that (in non-crisis periods) the total UK national debt should fall as a percentage of GDP. I’d suggest giving the Office for Budget Responsibility the legal adjudication over that.

You might ask — Tory Murdo Fraser has — why is the SNP putting forward a plan for the UK economy? The very fact that Murdo thinks it abnormal for the SNP to discuss UK fiscal policy rather exposes his colonial mentality: “Scotland must stay in the Union but keep out of running it.” No thanks, Murdo.

Here’s the nub of the matter: Corbyn’s anti-austerity wing of the Labour Party has closed ground on wobbly Theresa May. The electoral arithmetic is still on a Tory victory, but there remains the possibility we could see a hung parliament on the morning of June 9. In Scotland, post the local elections, opportunist and anti-Corbyn Scottish Labour has disgraced itself by forming tacit local alliances with the Tories. The SNP is serving notice on the real Corbynites: we will brook no retreat on ending Tory austerity measures. A solid wedge of SNP MPs in the coming Westminster parliament will see to that.