2. To ask the Scottish Government what its response is to the recent Bank of Scotland Purchasing Managers’ Index survey.(S4T-00435)

The Scottish Government welcomes those figures, which are a further sign of continued strengthening in Scotland’s economy. The August Purchasing Managers’ Index recorded a record rate of expansion in business activity in Scotland, reporting that private sector output expanded for the 11th consecutive month and at the highest rate in the history of the Purchasing Managers’ Index. The reported growth was driven by both manufacturing and services, with the services sector growing at its fastest rate in 15 years.

There are encouraging figures in the survey, which should be welcomed on all sides of the chamber. However, they come in the context of the Chancellor of the Exchequer boasting that he will press on with his austerity measures, which have taken the United Kingdom through the worst recession in living memory. Tomorrow, the Scottish Government will publish its draft budget for the coming year. Does the cabinet secretary agree that, whatever measures it contains to support economic recovery and employment, Scotland remains hampered by the decisions that are being made for it at Westminster?

I have made no secret of the fact that I disagree fundamentally with the chancellor’s decision, in his management of the economy since 2010, to reduce our capital budget by 33 per cent, albeit that that has been tempered to a reduction of 26 per cent. That was the wrong step to take and it has constrained the Scottish economy’s ability to recover. The fact that we are now seeing strong and sustained levels of business confidence in the economy is very encouraging. I welcome that as an indication of the essential private sector commitment to work with the Government to grow the economy. That will remain at the heart of the Government’s response to the challenges that we face.

Does the cabinet secretary not agree that, contrary to the carping that we have heard from Mr MacKenzie, these encouraging figures show that there is, in fact, no conflict between a policy of austerity and the delivery of economic growth and that we are looking forward to greater economic growth as we go forward?

I welcome Mr Fraser to his new post in the Conservative Party, in which he will deal with enterprise and energy issues, but I fundamentally disagree with him about the impact of austerity on the economy. I readily acknowledge the need to ensure that the public finances are restored to balance, but I do not understand why the chancellor has had to borrow in excess of £250 billion more than he planned to borrow to deal with austerity because his policies failed to deliver the level of growth that he and the Office for Budget Responsibility predicted would be delivered. I would have thought that a better strategy would have been to borrow to invest in the economy in order to generate the tax revenues that would come from keeping people in employment. That would have given us an earlier exit from the recession than we have managed to secure on behalf of the people of Scotland.