13 October 2006
Claims that the private sector in Scotland is being squeezed by a rapidly growing public sector do not appear to be justified, a study has found.
The report, by consultancy Experian for the Scottish Parliament's finance committee, highlights the 'clear and widening gap' between Scotland and the rest of the UK in public expenditure as a share of gross domestic product.
In 2003/04, Scotland's ratio was just over 50%, compared with a UK figure of 40.5%.
The Experian report points out that Scotland's public sector has been a contentious issue for several years. Around one quarter of the country's workforce is employed in the public sector, one of the highest rates in the Western world.
Scottish Executive real spending has risen at an annual rate of around 4% while Scottish growth has languished at less than 2% a year, the report states. 'In an accounting sense, the Scottish contribution of spending to economic growth since 1999 has been significant at about 60%.'
The study found that high public spending can benefit the private sector. Investment in infrastructure, health care and education is essential in promoting private sector economic activity, it states.
The Scottish Executive budget had seen 'strong growth in these areas over the past decade and this is expected to continue under current plans'.
The report adds: 'Crowding out of private expenditure is always a concern as this will reduce the impact of government spending. But there is no basis to assume that Scotland faces worse challenges than elsewhere.'
PFoct2006
