Image copyright PA MediaFirst Minister Nicola Sturgeon has called on the UK government to invest £80bn to “kick start the economy” after lockdown.
The Scottish government wants to see a stimulus package worth 4% of UK GDP to “deliver an investment-led recovery” in the wake of the coronavirus crisis.
It also wants the value added tax rate (VAT) to be cut to 15% for six months.
Prime Minister Boris Johnson has warned of a fiscal “thunderclap” in the wake of the pandemic.
But he has pledged not to use austerity policies to tackle it and said he would model his approach on that of former US President Franklin D Roosevelt, whose “New Deal” programme of reforms helped the United States recover from the Great Depression in the 1930s.
The lockdown restrictions imposed to tackle the health crisis have caused a sharp economic contraction, with warnings that output in Scotland may not recover until 2023.
The Scottish government has published a paper setting out 10 requests for UK ministers in dealing with the looming recession, including a call to “avoid a return to the austerity of the past” and focus on reducing inequality.
Ms Sturgeon said the proposals were “ambitious but also practical and sustainable”, and would “benefit not just Scotland but the whole of the UK”.
Scottish ministers want to see a fiscal stimulus package worth 4% of UK GDP – or £80bn – as well as “major investment in low-carbon, energy efficiency and digital infrastructure”.
This would include support for consumers and businesses through tax cuts, cash grants to individual households, a public sector investment programme to focus on green technology, and an extension of wage subsidy schemes for the hardest hit sectors.
As part of this Scottish ministers want the standard rate of VAT levied on goods and services to be cut from 20% to 15% for six months post-lockdown, and to 5% for the hospitality sector.
This could cut prices for shoppers, and the paper said this would be “one of the quickest ways to provide an additional spending boost to support the sectors of retail, hospitality, leisure and tourism that have been most impacted by the lockdown”.
They have also called for a “jobs guarantee scheme” for young people, echoing the recommendations of an advisory group which said 16 to 25-year-olds must be offered “secure employment”.
Finance Secretary Kate Forbes said the virus had caused “the biggest economic shock of our lifetimes”, hitting the most vulnerable in society disproportionately.
She said the UK government’s fiscal policies were “still key” in determining Holyrood’s budget, calling for “bold, practical steps which would provide an immediate boost to our economy, protect existing jobs and deliver new ones”.
Ms Forbes also called for Holyrood to be given additional fiscal powers, saying Scotland could be at a “severe disadvantage” without more control over the economic recovery.
The UK government says it has already introduced emergency tax and spending measures worth an estimated £133bn, with its jobs retention “furlough” scheme covering more than a quarter of the workforce.
Mr Johnson has pledged not to use austerity policies to balance the books, instead saying that “this is the moment for a Rooseveltian approach to the UK”.
He is to unveil a spending programme in a speech on Tuesday which Number 10 has dubbed “build, build, build”.
The prime minister told Times Radio: “The country has gone through a profound shock. But in those moments you have the opportunity to change and to do things better.
“We really want to build back better, to do things differently, to invest in infrastructure, transport, broadband – you name it.”