The First Minister of Wales has joined the leaders of Scotland and Northern Ireland to call for more capital investment cash from the UK Government.
Ahead of the Chancellor George Osborne’s autumn statement later today, the Welsh Government is joining counterparts in Scotland and Northern Ireland to warn the UK Government that “unprecedented cuts to public sector capital investment pose a significant risk to the growth prospects of the nations of the UK”.
The three devolved administrations are urging Chancellor to call a halt to the cuts to capital budgets and unlock an “immediate and targeted boost” to public sector capital programmes through additional investment as a way to boost economic growth.
First Minister Carwyn Jones said: “The time has come for the UK Government to face the fact that our economy is bumping along with very little or no growth. This is impacting on jobs and combined with the cuts to our budgets, hitting our communities hard.
“We urgently need more funding for public sector capital projects as they are a clear way of boosting our economy.
“We have repeatedly pressed the UK Government for more support for capital investment and have been preparing projects in Wales that will benefit from such funding.
“That is why we are joining Scotland and Northern Ireland to call on the Chancellor to provide the stimulus we so desperately need.
“Yesterday the Welsh Government announced two new innovative finance schemes that will result in half a billion pounds of additional infrastructure investment. Despite the cuts being imposed on us, we remain determined to invest in infrastructure across Wales.”
Joint statement from the devolved administrations (Published in full and without amendments)
The Scottish Government, Northern Ireland Executive and Welsh Government have consistently argued that the UK Government’s unprecedented cuts to public sector capital investment pose a significant risk to the growth prospects of the nations of the UK.
Capital DEL budgets are being cut by HM Treasury by around a third in each of the Devolved Administrations over the Spending Review Period, while at the UK level public sector net investment is scheduled to fall from 2.6 per cent of GDP in 2010-11 to 1.1 per cent in 2016-17.
The Devolved Administrations have sought to mitigate the worst impacts of these reductions by boosting capital investment through a variety of innovative measures. However, such actions cannot fully offset the scale of the cuts or their impact on communities across Scotland, Northern Ireland and Wales.
While we welcome the recent rise in UK GDP witnessed during the summer months, it is clear that much of this uplift was due to temporary factors and a sustained recovery has yet to gain momentum. For example, the Bank of England predicts a slowdown – or indeed a further fall – in output in the final quarter of the year, and forecasts for next year have been repeatedly revised down.
While the Devolved Administrations have argued against the scale of the cuts to capital investment since they were first outlined in 2010, of particular concern has been the UK Government’s unwillingness to respond to the sharply weakening economic outlook with a clear policy response.
At the time of the Coalition’s first Budget in June 2010, the Office for Budget Responsibility (OBR) forecast that the UK economy would grow by 2.8 per cent in 2012. The IMF now forecasts a contraction of 0.4 per cent for 2012 as a whole, with the OECD predicting a decline of 0.1 per cent. A lack of growth not only increases the risk of structural damage to the economy, but it also makes efforts to restore the public finances to balance more challenging.
While initiatives to encourage private sector investment, such as guarantees of loan finance for national infrastructure projects and the funding for lending scheme are welcome, the full impact of these new schemes remains uncertain, and it is likely to be some considerable time before they have an impact on the real economy.
In contrast, an immediate and targeted boost to public sector capital investment will support jobs immediately and help provide the infrastructure necessary for long term economic growth.
The Autumn Statement provides the Chancellor with an ideal opportunity to choose to respond to current economic challenges and give an immediate and substantial stimulus to capital investment. We believe that such an investment in growth, with appropriate consequentials for the Devolved Administrations, will support the recovery and help bolster economic confidence.