The Scottish budget must prioritise economic growth

Rachel Reeves’s Budget, announced on Wednesday this week, signalled a significant fiscal policy change. In it was a major shift in strategic direction on public investment, and a big early push on spending, especially on health and education.

Two points are worth noting regarding government spending compared to this year’s spring Budget plans under the previous Conservative government. First, the Chancellor listened to the advice of many economists who urged her to modify the fiscal rules to avoid a bias against public investment in the previous debt regulation. Certainly her change in the debt (investment) rule to focus on a broader measure of debt is similar to what International Monetary Fund economists have suggested for advanced economies to address the dual challenge of rebooting economic growth and the transition to net zero. Public investment is now planned to rise in real terms by 6.6 per cent in 2024-25 and 10 per cent in 2025-26. Conversely, under the Conservative government’s spring Budget plans, capital spending was due to fall in real terms next year.