08/11/2011 Newsnight Scotland


08/11/2011

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will be pushing that through the Tonight on Newsnight Scotland, the

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latest study of the Scottish economy suggests it is doing even

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worse than we thought it was. Is it time for a change of policy in

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Can industry pay the way to a wealthier future? The latest Fraser

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of Allander report bricks were pretty gloomy reading for

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politicians. Recovery here is slower than the UK. Is as much the

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same thing about employment. Many of the arguments used by the

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coalition government in London to The Fraser of Allander report

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clearly goes into forecasting where others fear to tread. It did so

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again today. Scotland's economy growth has gone down to 0.4 %. Next

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year, it is being downgraded again. That puts Scotland a long way

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behind independent forecasts for So what is going on? There is the

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big picture. Scotland may seem a long way from Athens and Rome,

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added has a different currency, but we are not protected from

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uncertainty in the euro-zone. quite clear that the UK and

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Scottish economies are weakening. They are also might -- almost

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stagnating. It is sad that this has come to pass. What is driving this

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is the hangover from the credit crunch. Household spending

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continues to be weak, particularly in Scotland. That means obviously,

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the demand for locally produced services particularly as being

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affected. The service sector has hardly recovered a tour in Scotland.

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Let's bring the questions closer to home. Standard Life was shedding

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jobs today, and 507 and 80 staff were facing redundancy at a chain

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of care homes. Aberdeen is dominated by boil and gas, and that

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is strong. Oil prices have been high for some time. Come down to

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the central belt, and it is different. There has been some

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contracture for me bigger banks, but they have been lots of start-up.

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Move across to Glasgow, and you have a much different service and

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manufacturing sector. It is much tougher. Companies have done well

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to tidy up the balance sheet. But where is the growth going to come

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from? It is the poor showing I in the business and financial sector

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that is identified as a particular problem by the Fraser of Allander

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report. It has gone down 11 % since the downturn began. This company is

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doing quite well. It is using its document handling technology

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to/payroll costs. The general everyday small to medium-size

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enterprises tend be holding onto their equipment as long as they can,

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because they are feeling particularly tight. That affects

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our business, because they are not replacing the equipment as often as

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they used to. There's the gap two big questions coming out of the

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forecast. Why is Scollan grown more slowly than the rest of the UK?

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Westminster... What is the best way The problem for Scotland is the

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problem of a small, open economy. Even if you do spend in the economy,

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it is going to leak out. We are dependent upon what is happening in

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the rest of the United Kingdom, and what is happening in Europe. We

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export significant amount. We rely much more on exports, and much more

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on external demand. Whatever the local government can do to

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stimulate growth is why we are so much buffeted in -- by what is

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happening in London, and Brussels and Frankfurt. Where is the extra

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capital spending to come from? The I am joined by MPs in London. John

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Thurso for the Liberal Democrat and Stewart Hosie for the SNP. John

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Thurso, the implication of all this, let -- yet another cut in growth

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forecasts, is it something that really needs to be done? Your

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government says that everything has to go the same way and nothing can

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change. I think the first thing to say is that there is no great

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surprise in this report, and anyone who has been following the Scottish

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economy would have expected something like these numbers to

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appear to reflect what is happening in the wider UK, and as his what is

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happening in the US and other countries in the Western world. The

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question is what should be done about it. We need to hold steady to

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the deficit reduction programme. The report quite rightly pulls --

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points out that while Scotland is suffering more now is because stop

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-- the Scottish government decided not to stop this austerity

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programme -- programme last year. But the report also describes as a

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myth the idea that you can Engineer economic recovery in a situation

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like the one we are in now. I beg to differ. The problem we have now

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is a massive debt legacy. We are not cutting the debt. It is

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increasing every year of this Parliament. We are cutting the rate

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of increase in the dead. That is what we are doing. If we do not do

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that, we end up in a completely unsustainable place that Greece was

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in, and what it really looks like it might be going towards. That is

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clearly not somewhere where the UK wants to be. The best thing you can

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do in a recession it is to keep your interest rates down. Our cost

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of borrowing is low because of the action taken by the government. I

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hope the government are not complacent about that. That is why

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I applaud the decision for quantitative easing. Other like

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Seymour Investment. It is question of pulling it forward. -- I it

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would like to see more investment. If it wasn't for the austerity

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programme that you put into place, Britain would risk finding itself

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in the same position that Italy is in. I think George Osborne

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overstate their at. It is growth we need as much as anything. -- he

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overstate that. I am assuming that is what is meant. The report was

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untrue -- extremely interesting. They identified the global downturn,

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the contagion in the eurozone and the global sovereign markets. It

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also identified specific issues like access to business finance for

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those businesses that want to grow, and that is one of the measures

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that we have found vitally important to get the growth in the

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economy that we need. It also did not say much for some of the claims

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that the Scottish government has been making about how it has been

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managing the crisis. It found that while it is true that the recession

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in Scotland was shallower than the rest of the UK, the recovery is

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slower than in the rest of the UK, and recovery in employment is also

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slower than the rest of the UK. was shallower because of the

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actions of the Scottish government. It is slightly slower because there

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is less capacity, precisely because of it being lower. None of this is

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surprising. The question is, how do be boost the growth, given that it

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cannot be export Les -- export led with the difficulties in the euro-

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zone and the United States. How do we stimulate the demand and create

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the jobs that we need to put vibrancy back into the economy?

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answer to your own question is what? Now three significant

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components. There should be a breeze to capital investment. The

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second is access to business finance but the report identified.

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The third is confident. As far as possible, trying to keep people in

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This point about interest rates on government debt. You heard in the

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report, it significantly rejects the argument you just made. He

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argued that the reason is because one, it reflects an expectation

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that growth in the economy will be very low for a long time and

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secondly, it reflects a flight to safety, people putting money into

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US government debt, British debt, German debt, simply because they

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don't want to invest it and do productive things in the real

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economy. He is entitled to his opinion, but I was reading the Bank

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of England quarterly report not long before I came in and what they

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put forward is very much the case that prudent fiscal management is

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actually a major factor in keeping the cost of government borrowing

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down. The counter fact to that is to look at what has happened in

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Italy, which is a major economy, third or 4th largest economy in

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Europe, which has seen its cost of debt shoot up Ed a period of two,

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three months, simply because it hasn't got a grip on its finances -

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- in a period. Whether we are cutting too far, there is a

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perfectly legitimate argument, but what is absolutely clear is where

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week -- were we to have cut too little, we would now be sitting in

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a position not dissimilar to the Italian economy and that would be a

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very uncomfortable place to be. So I would rather see the Government

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bearing on the side of caution, it is a better place to be for

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building for the future than the chaos that is happening to those

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countries that have been overtaken by the markets. You don't seem to

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be fundamentally challenging the Government. I thought the SNP's

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view was that the whole thing was wrong-headed, that we need fiscal

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expansion in the current situation in order to get growth back into

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the economy, not just a little bit more capital spending and some

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fiddling around with the banks to get them to lend more to small

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businesses. Do. We made about the Government's plan -- of the point

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we made about the plan was that the time to remove the structural debt

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over one Parliament, a fixed time frame, was very foolish, but we are

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where we are with an autumn statement coming up in November and

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I am hoping the Chancellor will see sense, whatever plan he calls it,

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but takes some of the measures I have outlined and some of the

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measures other people have outlined to try and do something to

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stimulate the economy and get the growth we need, even if it is only

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for the UK government to keep to its target, which was bad enough.

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There has been all of this talk about alternative plans, we don't

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care about the name, but this idea of setting up some sort of

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mechanism to lend money to small businesses. Is that really in the

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pipeline? I have no idea what is in the Autumn Statement. I hope it is

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not a plan rubbish, which is what is coming out of Edinburgh. It is

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pretty much what George Osborne has been saying it, isn't it? What I am

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looking for his things the Government are already doing to

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start to take effect -- is things. The regional growth fund,

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Enterprise Zones, a look at the consequential for Scotland that

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come out of that. Look at the extra money that will be available. Will

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it be invested in Scotland or will it just be spent on things we don't

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particularly need? We will have to leave it there, thank you both very

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much indeed. Could science hold the key to

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reviving the national finances? Tomorrow in Edinburgh, the annual

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Science and the Parliament event will bring together scientists and

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politicians to discuss what science can do for the economy - and vice

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versa. And timed to coincide with it, a pointer from the past - it's

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been announced in the past few minutes that the Royal Society of

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Chemistry is to honour the Scottish scientist who became the world's

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first oil baron. Our science correspondent Kenneth Macdonald has

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By the time this film was made in 1937, James Young was already

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history. He distilled hydrocarbons, creating a light oil for lamps,

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heavy oil for lubrication and the modern oil industry. He opened the

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first oil refinery in West Lothian. He was the one who thought of

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getting it from the she'll or oil in the first place, are nothing to

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have these discoveries, -- and nothing to have these discovered,

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and we have a large number of them we can call our own, he has never

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been celebrated. There is as yet no stay tuned to paraffin young. But

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now the Royal Society of chemistry is to commemorate him. Paraffin

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Young is and forgotten in West Lothian, where there is still

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plenty of evidence of the shale oil industry. Scotland does have a

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tendency to dwell on its scientific past. But what does the future

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hold? Paraffin Young attended what is now Strathclyde University,

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where this man holds the chair in chemistry. Before recent materials

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in use of display screens and lasers are among many other

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developments being worked on here. The professor says a multi-

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disciplinary approach will pay dividends for the Scottish economy.

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We need chemists to make materials, we need physicists to understand

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the properties of the systems when they are working in devices, unique

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the electronic engineers to try and optimise them and once you have

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everything in a nutshell and good efficiency and a product that lasts,

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which is a key issue, and you get the price down, you have really got

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a product. If you look at Scotland's cross section across

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academia, and technology, we have all of that and we can exploited.

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There are areas like Fawlty -- photovoltaic that we can expand on,

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and we can end up with a product that will not necessarily be for

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the 5 million plus in Scotland it will be for a whole world, so the

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market is huge. So what else might be on the horizon? I think we can

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safely say that many of the future discoveries that will be important

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in medicine will come from Scottish Science. I think if we look at

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renewable energy, then wave, tide, water, Hydro-Electric, whatever...

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Interestingly, I think we can look at solar energy as well, I think

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all of the renewable energies we can look at from Scotland and I

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would be very surprised if Scotland didn't have a big part to play in

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helping drive forward, if you want the green agenda. A like James

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Young, he was very much embedded in the fossil fuel age -- unlike. We

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are now at a time within science where we are trying to address

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energy issues, which are partly created by the things that James

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Young and his technologies the bid. So we are trying to reduce carbon

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dioxide emissions, we are trying to... Where my research fits in is

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an area which will create more efficient devices, that will use

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far less power and can use green power, green electricity. We are

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also producing devices, Organic sells for example, that can convert

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sunlight into electricity and provide a clean source of energy.

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The questions of how Research like that can sustain an economy and has

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Scotland can support the research will be central to tomorrow's

:18:34.:18:39.

Science and the Parliament event. It is tempting to think as paraffin

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are something distinctly old- fashioned, that your daddy used to

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put in a room heater, but if you want to get the full scale of

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change young's legacy, you only have to look up. -- James Young's

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legacy. The rest of the world calls it kerosene, jet fuel. Sir James

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Young's developments continue to underpin our fossil-fuel economy.

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Will Scotland have a similar stake in a future driven by renewable

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energy? That will be up to our current generation of scientists

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and politicians. A quick buck that tomorrow's front

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pages, starting with The Scotsman. -- a quick look. This is a report

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which says Scotland would have to pay into the bail-out fund if they

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joined the eurozone. The Guardian leads on that it was the Euro that

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got him, Berlusconi fought -- forced out. That is all we have

:19:37.:19:47.
:19:47.:19:51.

time for tonight. I'm back tomorrow. Good evening. I cloudy, damp and

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misty night tonight but temperatures will hold up into the

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mild levels but it does mean a rather dismal start to the morning.

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More rain and drizzle around, baby bride has to was the north of

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Cumbria in the afternoon -- maybe. But most of England will hold on to

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the cloud and drizzle. Across the Midlands and East Anglia and the

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south, at the chance that after the dismal start, things may brighten

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up enough to allow some outbreaks coming through the cloud,

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temperatures around 16. The South West will hold on to cloudy

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conditions throughout, and Wales, and heavier pulses of rain

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throughout the day. Once that he's is during the afternoon, you might

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see some brightness. -- eases. The same in Northern Ireland, but

:20:38.:20:41.

predominantly damp. Damp and cloudy across southern and eastern

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Scotland, but the far north, even though there will be more cloud

:20:45.:20:50.

than today, should be reasonably bright. Thursday, the difference is

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not usually discernible. If anything, the rain across some

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parts of Scotland, Western in that that Wales could be heavier and

:20:57.:21:02.

more persistent. -- Western in that. Either side, there should be some

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sunshine. Brightening up from the West, the eastern fringes of

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