08/11/2011 Newsnight Scotland


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


latest study of the Scottish economy suggests it is doing even


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


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


of Allander report bricks were pretty gloomy reading for


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


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


coalition government in London to The Fraser of Allander report


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


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


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


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


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


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


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


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


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


is the hangover from the credit crunch. Household spending


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


the demand for locally produced services particularly as being


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


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


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


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


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


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


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


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


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


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


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


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


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


doing quite well. It is using its document handling technology


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


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


because they are feeling particularly tight. That affects


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


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


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


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


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


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


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


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


on external demand. Whatever the local government can do to


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


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


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


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


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


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


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


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


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


economy would have expected something like these numbers to


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


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


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


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


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


-- the Scottish government decided not to stop this austerity


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


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


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


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


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


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


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


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


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


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


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


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


I applaud the decision for quantitative easing. Other like


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


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


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


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


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


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


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


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


also identified specific issues like access to business finance for


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


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


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


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


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


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


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


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


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


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


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


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


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


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


answer to your own question is what? Now three significant


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


second is access to business finance but the report identified.


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


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


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


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


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


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


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


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


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


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


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


actually a major factor in keeping the cost of government borrowing


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


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


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


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


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


perfectly legitimate argument, but what is absolutely clear is where


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


measures other people have outlined to try and do something to


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


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


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


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


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


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


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


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


looking for his things the Government are already doing to


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


Enterprise Zones, a look at the consequential for Scotland that


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


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


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


much indeed. Could science hold the key to


reviving the national finances? Tomorrow in Edinburgh, the annual


Science and the Parliament event will bring together scientists and


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


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


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


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


first oil baron. Our science correspondent Kenneth Macdonald has


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


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


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


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


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


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


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


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


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


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


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


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


hold? Paraffin Young attended what is now Strathclyde University,


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


in use of display screens and lasers are among many other


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


disciplinary approach will pay dividends for the Scottish economy.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


sunlight into electricity and provide a clean source of energy.


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


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


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


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


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


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


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


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


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


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


and politicians. A quick buck that tomorrow's front


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


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


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


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


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


misty night tonight but temperatures will hold up into the


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


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


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


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


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


up enough to allow some outbreaks coming through the cloud,


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


conditions throughout, and Wales, and heavier pulses of rain


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


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


predominantly damp. Damp and cloudy across southern and eastern


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


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


not usually discernible. If anything, the rain across some


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


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


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


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