The Ernest and Young Item Club report makes clear that across Scotland making cuts now, will severely hamper the ability of the Scottish economy to recover from the recession.
The weekend saw Nick Clegg and David Cameron playing a good cop, bad cop routine on future spending cuts. As the prime minister used an interview with the Sunday Times to warn of “years of pain ahead”, his Lib Dem deputy, Nick Clegg, struck a less fearsome tone in the Observer, pledging that the Government would not implement the savage cuts of the Thatcher era.
With such words being used, in Scotland the reality of the spending cuts to come are becoming all too clear. In its report on economic prospects for Scotland, the Ernest and Young Item Club have warned Scotland will face 30,000 job losses in the public sector over the next four years as the cuts begin to bite.
Amongst the report’s other key findings are:
• Scotland’s economy will begin to pick up from next year, although it will continue to lag behind the rest of the UK;
• GDP across Scotland will grow by just 0.8 per cent this year, disappointing figures explained by Scotland’s “poorly performing export market”;
• By next year, GDP should rise to 2.3 per cent then to 2.9 per cent in 2012;
• Despite a doubling of world trade over the last 15 years, Scotland has seen a 30 per cent reduction in its exports over the past decade;
• Manufacturing activity will increase in Scotland by 5 per cent in 2011.; and
• Scottish unemployment will peak this year at roughly 225,000, before falling next year.
The news that 30,000 jobs are now under threat mirror a string of bad headlines as Scotland looks to what the talk of cuts will actually mean:
• Last week, the General Teaching Council for Scotland reported that of the 3,013 teachers who qualified in 2009, just 30 per cent had found work by April this year;
• Health secretary Nicola Sturgeon has announced that almost 4,000 jobs will have to go in the NHS across Scotland this year; and
• Justice secretary Kenny MacAskill has warned police forces across Scotland to prepare for budget cuts.
In publishing the report, Dougie Adams, senior economist to the Ernst and Young Scottish ITEM Club made clear that the Government policy of cutting spending now is likely to put Scotland’s recovery at risk. He said:
“Although there is scope for productivity and efficiency improvements to be made to Scotland’s public sector, which may help to mitigate some of the impact of future spending cuts, a decline or slow down in public sector output will significantly hamper Scotland’s economic performance over the next few years.”
Finance secretary John Swinney responded by reiterating his calls for Scotland to have full fiscal autonomy to protect the public sector, whilst the Scottish Conservative Party’s finance spokesman, Derek Brownlee, simply declared:
“It is impossible to think that there won’t be public sector job losses.”
For Labour, shadow finance secretary Andy Kerr said:
“Reports of this nature are very concerning. The SNP’s fiscal irresponsibility is adding to the jobs threat in Scotland.”
Meanwhile, for the unions, Dave Watson, Scottish organiser for Union warned:
“For every £1 a public sector worker earns, they spend nearly 70p locally. The Scottish economy does rely on public sector workers and job losses on this scale would be devastating.”
The Ernest and Young Item Club report makes clear that across Scotland – dependent as it is on the public sector – making cuts now, as advocated by the new Coalition Government in London, will severely hamper the ability of the Scottish economy to recover from the recession, prompting the question of how this tallies with the prime minister’s calls for a “respect” agenda between Holyrood and Whitehall.
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