A UK-wide £80 billion stimulus package should be created to regenerate the economy and reduce inequalities following the coronavirus (COVID-19) pandemic, a new Scottish Government report proposes.
The package could finance a temporary reduction in VAT and move the tourism and hospitality industries onto a reduced VAT rate of five per cent.
A two pence cut in employers’ National Insurance Contributions to reduce the cost of hiring staff is also recommended in the report, entitled COVID-19: UK Fiscal Path – A New Approach.
Other action it proposes the UK Government should take to kick-start the economy includes:
- introduce a jobs guarantee scheme for young people and extend sector-specific employment and business support schemes
- create a National Debt Plan to help business and household budgets recover from the effects of the pandemic
- adopt new fiscal rules which prioritise economic stimulus over deficit reduction in times of crisis
- accelerate major investment in low‑carbon initiatives, energy efficiency and digital infrastructure
- extend Scotland’s financial powers to allow it to shape its own response to the pandemic
The report was launched today by Finance Secretary Kate Forbes.
Ms Forbes said:
“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.
“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.”
COVID-19: UK Fiscal Path – A New Approach is published online.