THE UK Government should hand more powers to Edinburgh to help tackle the fallout from coronavirus, the group established to advise on Scotland’s post-pandemic economic recovery has said.
Ministers are due to review the Fiscal Framework next year, but in a report published yesterday, the Advisory Group on Economic Recovery has called for this timetable to be “accelerated” to allow the Scottish Government to borrow more.
The group, chaired by former Tesco Bank boss Benny Higgins, established in April by the First Minister, and tasked with coming up with a series of proposals to stimulate Scotland’s economy after the outbreak, said there needed to be a fundamental look at the scope of devolved fiscal powers. Currently the annual limit on capital borrowing is capped at £450 million.
The report said: “It would benefit both the UK and devolved governments to design a model for investment in the economic recovery period, which enabled an appropriate flexibility to allow different priorities to be pursued.
“There is also a strong case for the Scottish Government to have greater autonomy to use targeted fiscal measures to stimulate demand or incentivise behavioural change in the recovery period.”
Other recommendations include proposals for a job guarantee scheme for 16-25 years olds.
It said offering at least two years of “secure employment” would help avoid the “material risk of long-term scarring” that typically happens to young people caught up in a recession.
It also said ministers should consider taking a stake in businesses left struggling because of coronavirus.
READ MORE: These are the key points of yesterday’s report into economic recovery
Yesterday Nicola Sturgeon said she agreed with the “basic principles” of the “serious and substantive” report, adding that more flexibility in the fiscal framework would enable ministers to “support investment for recovery.”
Launching the proposals at the Scottish Government’s daily coronavirus briefing, Higgins said the Scottish economy’s recovery would likely cost at least £6 billion.
He said: “If Germany needs 4% of its economic output to stimulate the economy, then you’d think that we’d need at least that.
“That’s £6bn, and the current limit through the fiscal framework is £450m so there’s a long way to go from where we are to where we need to be.”
The banker said the Scottish Government must be prepared to “have a repayment of debt approach that takes a very long time”.
He added: “We’ve got to adopt that approach but it makes it all the more important that we focus our energy on the systemically important parts of Scotland that will form the basis of a stronger, better Scotland in future.”
On ownership stakes, the report called on the Scottish Government to “build its professional capability to manage ownership stakes in private businesses, which are likely to arise out of the crisis”.
On the job scheme, the paper said the programme could be a partnership between the private sector, local authorities and the Scottish Government, and offer two years of work paid at the real living wage.
It said the scheme could give those employed access to apprenticeships and training.
READ MORE: Mixed response to Benny Higgins report to aid Scottish economy
Further recommendations include prioritising a green recovery, strengthening the relationship between business and investing in digital infrastructure.
It also called for the creation of a “National Arts Force, composed of freelance and gig economy workers across the sector, to work in schools, care homes and communities”.
Higgins told the briefing: “Our ambition must now be to build a robust, resilient wellbeing economy, an economy that can demonstrate strong economic growth, create jobs and does so with a focus on the climate emergency and focus in our society.
“One that is ready for the inevitable next crisis, not the last one.”
The First Minister said that as the pandemic comes under more control, she had a responsibility to “focus on how our economy recovers”.
MSPs are due to debate the group’s recommendations in Holyrood later today.
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