The Scottish government is to redirect £100m from a budget underspend last year into a new initiative to help cushion the economy from the impacts of a post-EU referendum downturn.
Nicola Sturgeon, the first minister, said the spending was needed to help stimulate the already weak Scottish economy in the wake of the “deep and widespread uncertainty” caused by the Brexit vote in June.
“The UK government has not yet taken any meaningful action to alleviate uncertainty or to boost confidence, and there are very real concerns that the damage to the economy and to jobs will be severe and long-lasting,” Sturgeon said.
“It is against this background that the Scottish government is announcing early action to boost confidence, stimulate economic activity and support business.”
The initiative, unveiled with a £5m capital project for new medical facilities at the Golden Jubilee hospital in Clydebank, will be known as a capital acceleration programme and will largely be devoted to speeding up existing projects.
Despite the implication that the government was bringing forward future spending or using new money, Sturgeon’s official statement on Wednesday did not make it clear that the funds had come from a £115m underspend last year.
A spokesman also added that the £100m had not yet been allocated or committed. There was no guarantee it would all be spent, and no date yet fixed for updating the Scottish parliament on how and where the money would be used.
“There is a range of factors to be worked through. I can’t say whether this money will be used for new projects or accelerated projects,” he said.
Holyrood was told in June that the Scottish government had underspent last year by £75m in its resource budget for day-to-day spending in colleges, schools, and community and housing, and £40m underspent in its capital budget.
The finance secretary, Derek Mackay, also told MSPs there was a further £40m underspend from financial transactions, which was ringfenced for loans and equity investments in the private sector.
Jackie Baillie, Scottish Labour’s economy spokeswoman, said the £100m seemed like a drop in the ocean against the cost of major infrastructure projects. “This money coming from previous SNP government underspends shows that it could already have been invested in vital projects,” she said.
“It’s welcome that the SNP are taking Labour’s advice on responding to the economic shocks of Brexit, but this is beginning to look like an attempt to grab headlines rather than a meaningful programme of investment.”
Economists at the Fraser of Allander Institute (FAI) warned in late July that the Brexit vote would have a significant impact on Scotland’s already weak economy, which has been underperforming compared to the UK overall since the global crash in oil prices, pushing it towards recession.
The FAI downgraded its GDP forecasts for Scotland for each of the next three years, by 0.5% this year, 1.4% for next year and 1.3% in 2018. Scottish unemployment was likely to rise to 7% next year, it added.
Sturgeon’s announcement follows her visit to Berlin on Tuesday to meet Germany’s Europe minister, Michael Roth, where she again set out her case for a favourable deal for Scotland with the EU in the Brexit talks.
Little emerged about the content of the talks, but both ministers said they were constructive. Roth said his government was anxious to preserve Europe’s cohesion during and after the Brexit process.
In a statement issued through the Scottish government, Roth said: “This has been a very pleasant and constructive conversation between two dedicated pro-Europeans and has demonstrated once again that a degree of Europe’s strength lies in its diversity. I hope that the UK finds a way forward that will benefit Europe as a whole in the end.”
David Mundell, the Scottish secretary, was in Glasgow on Wednesday to meet business and community leaders to press the UK government’s competing case for a collective cross-government approach to Brexit.
Business groups and the Scottish TUC welcomed Sturgeon’s announcement, although the Scottish Retail Consortium said it came as ministers were putting up business rates on top of a £62m rates hike for larger shops.
Grahame Smith, the general secretary of the Scottish TUC, said he strongly the new strategy strongly. “The Scottish economy, already weak due to the downturn in the oil and gas sector, risks falling into technical recession as a result of Brexit-induced uncertainty. In this context, it is important that the Scottish government accelerates capital projects where feasible in order to support employment.”
