18/07/2012 Newsnight Scotland

Tonight on Newsnight Scotland: As the country slides back into

recession, the First Minister demands more investment from the

British government. But is that just a recipe for making our

economic problems worse? We'll be asking Alex Salmond what

he intends to do with the new guarantee scheme launched by the

Treasury today. And about gay marriage, NATO and what kind of

independence referendum he really wants.

Good evening. Official figures released today show that Scotland's

economy slipped into technical recession at the beginning of the

year. The Scottish government responded by demanding that the

Treasury release money for public investment here. I'll be discussing

that with the First Minister in a moment. But first, here's Jamie

McIvor. Today saw a wave of what could look

like contradictory economic figures of stock first the bad news. The

Scottish economy is back in recession. The double-deck is a

reality. The economy contracted by 0.1% in the first three months of

the year -- the double-dip is a reality. The economy shrank by a

very small amount having done the same at the back end of last year

so technically Scotland is back in recession. Scotland's economy did

not contract as much as the UK economy overall, and unemployment

is still falling. The good news is that people are prepared to trade

lower income has, because wages are still rising much more slowly than

prices, to retain their jobs. The private sector looks as if it is

creating more jobs quicker than the public sector is shedding them.

now more bad news. While it is important not to judge the economy

overall by any one sector alone, many retailers are still struggling.

Figures released today said the growth in the value of sales in

Scotland lacked behind the UK as a whole the 15th month in a row, but

what can the Scottish government do? Is it credible to try to take

credit for the good news and blame Westminster for its part in the

bad? Many of the key levers for controlling the economy life in a

key level. Control of interest rates, tax powers and the most

significant public spending leavers. Today the UK government said it

would underwrite up to �50 billion worth of infrastructure projects to

help the economies. There are private sector projects that at the

moment cannot go ahead because of problems in the banking system and

the economy and we are using the good name the British Government

has earned over the last two years thanks to the coalition government

to guarantee and lent to projects that are there was no not go ahead.

Even with independence, or would the Scottish government have much

more control over the economy? Under the SMP's latest proposals,

Scotland would remain in the sterling zone and interest rates

would be the same as those in the UK, and even with full control over

taxation, how radical might end independent government is to be? In

the modern world, how much can any national government really control

the economy? The chief secretary to the Treasury,

Danny Alexander, was not available for this programme. But earlier

this evening I met the First Minister in Bute House, and I began

by asking him what could he do to generate more money for investment,

in addition to complaining about the UK government and their

austerity measures. I don't accept the premise. We have

had seven new terms from the Chancellor since his Budget. -- 7 a

U-turns. And it is possible. We have conceded the argument of the

importance him investment in capital economy, that was the

announcement today was about, and the figures demonstrate that the

construction sector is dragging back growth in the UK, and Scotland.

We need immediate public investment to get the economy moving. Can't we

have a U-turn at number eight? Let's talk more about the guarantee

scheme. The basic point they will make is that you are calling for

something that would involve billions of pounds worth of extra

money across the UK. They argue that you can't do that, it would

put at risk their credibility, the credibility of the financial

markets. It is all very well for you to call for things like this.

The that is a long argument because �5 billion of capital investment

would be broadly welcomed probably by the financial markets as well as

the CBI because it is a fundamental difference between spending capital

and spending in revenue on the perception of the financial markets.

�5 billion is not even error in the blogging forecast. 5 billion for

the UK, which is over 400 million Scotland, could make a profound

difference to the construction industry immediately at this

particular time and tackle the key question over the UK economy at the

present moment, which is that it is bumping along the bottom at best,

in fact it is going downwards, and there is no obvious sign of the

media generation of growth. Growth is the thing to give stability to

the economy. I am not quite sure 5 billion, and if you did want a

fiscal stimulus, �5 billion in the context of the UK economy might

create a few construction companies but it will not do more than that.

Presumably you would want a full- scale Ed Balls style fiscal study.

If you look at the figures of Scotland, let's say construction

had been the same as the previous quarter. Then the Scottish economy

would have been growing by 0.4%, a perfectly respectable figure. In

the UK, instead of having a 0.4% decline, you would have a zero

position. I don't know if any economic recovery in history,

anywhere, at any time, that hasn't been led by a recovery in

construction sector. And therefore it is of particular importance to

get the shovel ready investment into the construction sector to get

the economy moving. It would pay a very substantial dividends in terms

of economic confidence as well as jobs creation. And they won't do

that why? I would hope now we are into the era of the U-turns, the

political consequences of another U-turn on modest compared to the

economic benefits. It would actually complement the recent

announcement of infrastructure projects in the future if you could

have direct jobs in construction now. This guarantee scheme

announced today, have you contacted be government in London and asked

whether any projects in Scotland might be eligible? The civil

service will be doing exactly that but we assume they will be eligible

because it is a guarantee scheme. The Chief Secretary to the Treasury

did not seem very short... There seems to be suggestions that this

will be controlled by the Treasury and done on a case-by-case basis.

Then it we will submit many projects up the two aspects are

difficult. First of all, big projects take time. It might be a

good thing in a couple of years' time if we can get a big project

mobilised but it cannot help next month. The second problem is there

is not a huge shortage of capital in major companies for major

projects. There is a lack of confidence and inclination to

invest. It is not the availability of capital that is the key.

Companies are looking at the economy... You have to tackle both.

I am not deprecating any scheme for investment in the economy. If it is

going to be positive, let it be positive, but timing is of vital

importance which is why a public investment initiative now would

complement a private sector initiatives in the future. One of

the effects of the Scotland Bill is they were going to bring forward

borrowing powers that the Scottish government can have. What is the

situation with that? We have passed legislation but getting that is a

couple of years off so we do not have access to these borrowing

powers at the moment. I would love the vesting date to be brought

forward. Are you trying to negotiate? Absolutely! We suggest

it should be as early as possible. If we had access to these borrowing

powers, we would use them at the present. They are pretty modest,

even in comparison to what Northern Ireland has at present. Changing

the subject slightly. Quite a lot. Same-sex marriage. You have got

this committee set up. Earlier today UWE reiterated that you

passed it back -- you reiterated. Are you trying to work out details

with the committee but that your Cabinet basically supports same-sex

marriage or can you Cabinet not make up its mind? It is neither of

those two. We are treating it respects the arguments that have

been put to us and looking at them in great detail. The position, my

own personal position as a matter of conscience, has not changed

since last May. It is not just a question of what the First Minister

thinks, it is a question of whether we can find a way forward that

tries not to satisfy... A debate about Fage and conscience, you

cannot do that, but... But you could get least tell me with the

your government is in favour? coming to that. I feel that this

issue, it is really important to conduct the debate in a way that

respects people's views. What we are trying to do as a government is

to answer some of the things that have been put to us in the

consultation, Machrie answer the question about a call for a

referendum at the Cabinet yesterday -- like we answered the question.

We did not dismiss it out of hand. Other arguments have been put to us

and we have always said incidentally that we would find a

way to move forward by the end of this month and to explain what our

position is and to publish a consultation document and if there

is to be legislation, we would also explain how we would approach that.

Apparently there is an e-mail between your government and the

Home Office asking them to amend the equality bill in Westminster so

that it would make it easier for you to pass same-sex marriage

legislation, is that true? I am not familiar with the e-mail but

certainly you would expect for us to look at all the possible

scenarios. The basic point was that one suggestion was that you could

say that you cannot pass a bill on same-sex marriage unless and until

equality legislation in Britain is changed so that you would not be

subject to legal challenge in the European Court. Well, let's allow

us to consider the points that had been made to us, to examine the

various implications of some of these points, and to outline our

position by the end of this month. It is not a question of rushing out

a press statement. It is trying to find a route forward which respects

the views that have been put forward to us and put forward a

fair and balanced position so that whatever the outcome, recognising

you cannot satisfy everyone, everyone is entitled to see its

government treating arguments seriously so the way in which you

do things is seen to be detailed, Crocker, transparent, de tout and

competent so you would expect the Scottish government to be analysing

everything. Do you personally...? De you back this proposal to change

your party's policy on that NATO? Are will be supporting the

You support the resolution? Correct. At what would you say to members of

your eye and party? You are abandoning it just to try to

convince people to vote yes. defining issue for the SNP is

independence. We are opposed to nuclear weapons and we continue to

oppose nuclear weapons. The SNP have a pro NATO policy, and have

had since the 1970s. This has not been a defining issue. The defining

issue for the SNP is the opposition to nuclear weapons. Do you regret

some of the comments you have made about NATO in the past? Times

change and circumstances change. Which aspects and commence do you

wish me to apologise for? The autumn and I was putting forward

was that military action which was a unsanctioned by the United States

was of dubious legality. Interestingly, if you in his --

examine the resolution, a condition of our agreement to stay part of

the alliance is the acceptance that we are entitled as a member to

observe United Nations sanction action only. That is a right that

other NATO members have as well. Take the legal war in Iraq. It was

supported by the United States and a number of other NATO countries,

but opposed by Germany, a key member country of NATO. I do not

see the relevance of that. I do not regret opposing action and

sanctioned by the United Nations. Are you personally in favour of

having two questions on the referendum? The position, which I

have outlined for a number of years, is that I would listen to the

consultation document and the views that people have in society. The

preference of the SNP is what we put forward in our white paper. As

a government, we have got to listen to other voices in society and

there is a substantial section of Scottish opinion which believes in

economic powers, and it is not immediately clear to me why those

people should have their opportunity to vote for at denied.

What I require in terms of the referendum is that people have the

opportunity to vote for Scottish independence, and that will happen.

Are there any circumstances in which she would go ahead with a two

question referendum if the Government in London said known. --

said though? It would be simpler if the Government in London agreed to

what they had initially said. The Secretary of State for Scotland

said that the referendum had to be designed by Scotland, so why not

let has designed a referendum? there any circumstances in which

she would have a two question referendum without the legal

powers? There may be circumstances in which I would say that is it

acceptable to have Westminster oppose the democratic wishes of the

Scottish people. Whether these are the circumstances you specify will

be a matter for the consultation and negotiations with the UK

Government. The anti- independence parties did not go to the Scottish

people last year and said that they wanted a one question referendum.

They want to the Scottish people and said they did not want a

referendum atoll, and they were thrashed! The majority relies --

lies within the Scottish Parliament. The parliamentary rebut it --

majority must be respected. I will not have a Conservative government

in London dictate the terms of Scottish democracy. If I did that,

I would not be fit to be First Minister. Thank you very much.

I am joined now by John McLaren, of the Centre for Public Policy for

Regions. I'm not sure if what he said there puts him on the praise

stimulus side of the equation. puts him on the probe stimulus side,

but perhaps not as prone as he had appeared in the past. He mentioned

the IMF in his press release today, saying that the figures they came

back with this be downloaded -- downgraded the UK's growth.

Actually, the IMF supported the UK's government current position.

They said that if slope growth continued, then we should spend

money on infrastructure. There is a timing issue between what some

bodies like the IMF are saying and what he wants. The bigger picture

is still, is it better to have a short-term fiscal stimulus to

improve medium-term growth, or does that imperil future long-term

growth? If you put Alex Salmond... You have got the coalition

government on one side and Alex Salmond on the other, Ed Balls and

Ed Miliband wanting fiscal stimulus, that is replicated in almost every

country at the moment there is a debate between people who want more

stimulus and others to say it would be dangerous. Why is that

fundamental divide still there? Do we just not know enough to make a

judgment? It is replicated almost - - also amongst economists. You have

some people saying that the current Government's approaches the

Government -- best one. Everyone agrees in the short term as the

private sector rebalance is, the public sector needs to offset the

decline in demand, and that is what has been happening. We have been

doing this long enough now. Is the private sector dealing with it

anyway? And a lot of countries it it has not been. How long do you

keep doing it for? As well as the market confidence issue, the main

economic issue is that some of the work has shown that above a certain

level, if you have that for a number of years, that reduces

future growth quite considerably and for a long time. The UK, the US

and a number of other countries are already in that danger zone, so if

you keep on going to hire, there is a danger, theoretically that things

will be a lot worse. So the argument would be that even though

some sort of job creation programme, pumping money into the economy,

might be a good thing in the short term, it would make... Is the

argument that it would make things worse in the long run chi that in

itself wouldn't make things worse, but if you keep on having those

things on and get seeds getting higher and higher, that has a

correlation with low future growth, and some economists are concerned

about increasing stimulus. It is a fundamental divide. Thank you very

much. A look at the papers for tomorrow.

The Scotsman says that the SNP's alcohol policy is being faced with

a court battle. The Herald's says that cutbacks

send some of childcare costs soaring. Some families are

struggling to cope as fees jump by 20%.