:00:01. > :00:11.really have to tackle corruption. Perhaps countries like India do not
:00:11. > :00:16.
:00:16. > :00:19.Tonight on Newsnight Scotland: The American election is out of the way,
:00:19. > :00:22.the eurozone crisis has died back a bit and the British economy is
:00:22. > :00:25.growing. Can we now do the much- delayed Newsnight Scotland special
:00:25. > :00:31.on the green shoots of recovery? We will have a preliminary planning
:00:31. > :00:33.meeting. Good evening. The latest economic
:00:33. > :00:37.forecast for Scotland from the respected Fraser of Allander
:00:37. > :00:40.Institute is essentially gloomy. Growth and unemployment predictions
:00:40. > :00:43.are revised in a negative direction. But among the gloom, it is clear
:00:43. > :00:47.that Scotland's growth over this year and the next two is expected
:00:47. > :00:49.to be a little higher than growth across the whole UK. Inside those
:00:49. > :00:51.figures is a slightly mysterious suggestion that somehow
:00:51. > :00:54.productivity in Scotland has either improved, or at least decreased
:00:54. > :00:56.less, compared to its UK counterpart. And there is no
:00:56. > :00:59.obvious explanation for that. All forecasts, of course, need to be
:00:59. > :01:05.taken with a pinch of salt, as Jamie McIvor reports.
:01:05. > :01:08.They say forecasting the economy is like forecasting the weather. The
:01:08. > :01:15.further you tried to look ahead, the less you can guarantee the
:01:15. > :01:24.forecast. Nor economic predictions can ever be guaranteed to be
:01:24. > :01:28.completely accurate, however well researched. The clouds have been
:01:28. > :01:32.clearing and it is now it a lot sunnier over much of the UK. All
:01:32. > :01:37.lot of good weather down in the south. Not such a good outlet in
:01:37. > :01:41.Scotland... We revise our growth forecast down this year because of
:01:41. > :01:46.the consequences of fiscal consolidation which are dampening
:01:46. > :01:51.the economy down, problems of the eurozone which continue and affect
:01:51. > :01:57.export demand, world demand is still weak generally, Scottish
:01:57. > :02:04.households are not spending and are still burdened by debt, so
:02:04. > :02:08.household spending is weak. That will continue for some time.
:02:08. > :02:16.the outlook is brighter. Growth year's forecast to be stronger than
:02:16. > :02:19.for the UK as a whole. It will be brightening up in Scotland...
:02:19. > :02:23.anticipate that growth will start to be positive again next year, but
:02:23. > :02:28.it is difficult to call because there is a lot of uncertainty in
:02:28. > :02:36.the world. We still believe that despite the positive growth, we're
:02:37. > :02:45.seeing a relatively weak picture, we're still much lower than before
:02:45. > :02:55.the recession. Scotland might outperform the UK next year West to
:02:55. > :02:57.
:02:57. > :03:04.GDP growth. Productivity appears to be higher. The number of Scots in
:03:04. > :03:08.work is also expected to grow again. On the other hand, the institute is
:03:08. > :03:13.predicting a rise in unemployment. Major storms across the Atlantic
:03:13. > :03:18.usually come our way later. With economics, there is an old joke. If
:03:18. > :03:24.America sneezes, the rest of the world catches a cold. President
:03:24. > :03:34.Obama faces challenges in his second term. There is the issue of
:03:34. > :03:36.
:03:36. > :03:45.the fiscal cliff where various deals associated with the recession
:03:45. > :03:49.ended the end of this year. Next year, it is possible that Barack
:03:49. > :03:58.Obama might find it difficult to negotiate a deal with Congress.
:03:58. > :04:05.There could be a significant drop of output which will affect other
:04:05. > :04:10.economies, unless the President and Congress strike a deal very quickly.
:04:10. > :04:15.China is now the second largest economy in the world. New political
:04:15. > :04:19.leaders have been chosen. There is the ongoing problems in the
:04:19. > :04:28.eurozone. Problems still remain. Fiscal austerity is still being
:04:28. > :04:35.demanded. The demand for goods and services is low in Greece and Spain,
:04:35. > :04:40.for example. The German economy is on the brink of recession, which is
:04:40. > :04:46.a major market for Scottish and UK exporters. Whether our economy
:04:46. > :04:50.heads towards sunshine are not over the next couple of years will play
:04:50. > :04:55.a big part in the debate over independence. Especially when you
:04:55. > :05:00.compare Scotland with the rest of the UK. That is one reason high
:05:00. > :05:04.economic forecasts are so important just now, even if they may well be
:05:04. > :05:06.revised as time goes on. I am joined now from Edinburgh by
:05:06. > :05:09.business commentator and blogger Bill Jamieson, and from London by
:05:09. > :05:17.economist and author Will Hutton, who is also Principal of Hertford
:05:17. > :05:22.College, Oxford. Bill Jamieson, I believe you finally have something
:05:22. > :05:29.positive to say about the economy? Unfortunately we could not afford a
:05:29. > :05:34.drum roll. I would not deny anything that Brian Ashcroft has
:05:34. > :05:40.said in that report. Although the anecdotal evidence suggests there
:05:40. > :05:47.has been a slowdown after that 1% rise we saw in the third quarter.
:05:47. > :05:51.However, one interesting thing that Brian Ashcroft and others overlook
:05:51. > :05:55.is the role of enterprise -- enterprise and the role of the
:05:55. > :06:02.entrepreneur in getting us out of downturns. I was struck by two
:06:02. > :06:04.figures. One was from Scottish Government this week and it showed
:06:04. > :06:10.the number of small and medium- sized companies in Scotland had
:06:10. > :06:15.risen quite sharply over the past 12 months. I think the total number
:06:15. > :06:20.of companies in Scotland was now up at the highest it has been since
:06:20. > :06:25.2,000. If you look at the pictured nationwide, it is very interesting
:06:25. > :06:29.to see the figures from Companies House this year. 410,000 new
:06:29. > :06:34.businesses have been started. A fair number of these will fall by
:06:34. > :06:40.the wayside, but it is very interesting that people are not
:06:40. > :06:45.waiting for signs of the macro- economy to turn up before they go
:06:45. > :06:49.out and start creating a business which will create jobs. The small
:06:50. > :06:59.and medium-sized enterprise sector is vital for job creation. We know
:06:59. > :07:03.that from previous recessions. Firstly, economies are a bit like
:07:03. > :07:11.corks. If you press them below the surface of the water, they will
:07:11. > :07:17.return to the surface. What is amazing is that, four years on,
:07:17. > :07:22.we're still not back to levels of output before the recession. And we
:07:22. > :07:29.won't be back until 2014. That is the longest recession for over 100
:07:29. > :07:38.years. That is the first thing to say. Secondly, we are incredibly
:07:38. > :07:41.encumbered, Scotland and England alike, with private debt. I
:07:41. > :07:46.recognise that the small and medium-sized enterprise sector is
:07:46. > :07:55.important, but actually the fact that something is coming back to
:07:55. > :08:04.normal after six years is thank God, but let's be serious and sober
:08:04. > :08:14.about the prospects for a lot of these start-up. -- starts up a rung
:08:14. > :08:18.
:08:18. > :08:25.back. A lot of these are out of -- start ups. A lot of these companies
:08:25. > :08:35.are started out of desperation rather than ambition. It is close
:08:35. > :08:38.
:08:38. > :08:42.You are close to mad. There is this substantial point that you might
:08:42. > :08:47.get an upsurge in people starting their own business, but it is from
:08:47. > :08:53.desperation. It might be better to do that than do nothing but it does
:08:53. > :08:58.not tell you much about the economy. Yes. I do acknowledge the fact that
:08:58. > :09:03.our biggest problem is the very low level of demand in the economy,
:09:04. > :09:09.domestic demand is very low, but we were warned to... The when you say
:09:09. > :09:15.that, is that not the fundamental point that all these hopes that
:09:15. > :09:21.people put in micro-economic ways in what are essentially macro
:09:21. > :09:26.economic problems, never work. In an economy that is doing well, it
:09:26. > :09:29.gives it a focus on encouraging entrepreneurship. There is a
:09:29. > :09:32.fundamental problem of lack of demand and the economy and no
:09:32. > :09:37.amount of people setting up their own companies will make much
:09:37. > :09:40.difference to that. The demand question is big but I would not
:09:40. > :09:44.underestimate the demand of innovation in the entrepreneurial
:09:44. > :09:48.function, it is one of the most important things that people
:09:48. > :09:52.starting up an enterprise need. They do create new markets and new
:09:52. > :09:56.demand and new products, more efficient ways of doing things, so
:09:56. > :10:04.it is a very important thing that they do, it is not just getting a
:10:04. > :10:08.job to see them through a tough. A after getting made redundant.
:10:08. > :10:12.chaired the big innovation centre in London and I am at one with you
:10:12. > :10:17.on this. If you are going to make a claim that Scotland is on the verge
:10:17. > :10:22.of an entrepreneurial revolution he have to say, where are the hot
:10:22. > :10:26.spots for this is taking place? Where are the business sectors
:10:26. > :10:33.where this revolution is taking place? Where are the innovative
:10:33. > :10:40.breakthroughs? What companies are the load bearers of this? Of course,
:10:40. > :10:46.there will be one or 20 and all power to their elbow. To get this
:10:46. > :10:50.right, requires a determined effort by the Scottish government and by
:10:50. > :10:54.the Scottish private sector to create a really strong innovation
:10:54. > :11:03.ecosystem in Scotland and some of the building blocks are there but
:11:03. > :11:08.they are not all there. There is a demand short fall. There is the
:11:08. > :11:12.ability to network ideas at if you great universities into the
:11:12. > :11:17.university's Senate it that it -- into this sector. The idea to sit
:11:17. > :11:23.here and say that we are in the verge of this revolution when the
:11:23. > :11:27.evidence is that that is not taking place, that is curious. It is also
:11:27. > :11:34.the case that business start-up rates in Scotland, historically,
:11:34. > :11:39.have been very low, and there is no evidence that is changing.
:11:39. > :11:43.small-business base is low compared to the rest of the UK, another
:11:43. > :11:49.interesting statistic in the release they came out from the
:11:49. > :11:53.Scottish government yesterday showed us that actually the rate of
:11:53. > :11:58.increase in air semis in Scotland was greater than in the UK as a
:11:58. > :12:04.whole. That did surprise me. There are a lot of things going on at the
:12:04. > :12:08.micro level where the Scottish government is helping, there are
:12:08. > :12:12.about Rio four conferences going on this fortnight on the subject and I
:12:12. > :12:17.cannot recall such a buzz around this whole business of encouraging
:12:17. > :12:22.small businesses as we are seeing now, it is a recognition at last
:12:22. > :12:29.that people are seeing at the small company sector and the medium
:12:29. > :12:36.sector having a critical role to play. OK. I want to move on to the
:12:36. > :12:44.international economy. Of the his first problem, America, this fiscal
:12:44. > :12:50.clef, the fact that all these tax cuts run-out and spending cuts will
:12:50. > :12:58.come end unless President Obama can do a deal with Congress. Is it fund
:12:58. > :13:02.and will? Visit soluble. Might you is that the momentum is with
:13:02. > :13:06.President Obama and the Democrats and it is obvious that the
:13:06. > :13:10.Republicans had electoral reverse and although they hold the House of
:13:10. > :13:18.Representatives they only just about got a lead in the popular
:13:18. > :13:26.vote, it was gerrymander, in many of the congressional districts --
:13:26. > :13:32.districts. They're on the defensive. I think there will be a deal and I
:13:32. > :13:35.am optimistic about the US economy. Perhaps the bigger question for us
:13:35. > :13:42.in his President Obama, he has a certain self-confidence because he
:13:42. > :13:47.has got a second term, his view of macro economics and the need for
:13:47. > :13:52.fiscal stimulus is at variance with the British government and West
:13:52. > :13:58.Angela Merkel. Do you think he might be able to change the
:13:58. > :14:02.international climate on this by getting a second term? At think the
:14:02. > :14:08.international climate will change a bit but the Germans have dug in
:14:08. > :14:12.with their commitment to austerity, although now they have deals in a
:14:12. > :14:18.bold the Portuguese and Greek parliaments on a austerity, my
:14:18. > :14:22.money is on in the next six months, some re scheduling of both Greek
:14:22. > :14:28.and Portuguese debt. We may have to wait until after the German
:14:29. > :14:34.elections in the spring, but I think the darkest moment is before
:14:34. > :14:38.Don and I think we are or at the beginning of the end of the
:14:39. > :14:43.Eurozone crisis. I am optimistic about the United States, less
:14:43. > :14:48.pessimistic than most about Europe and very pessimistic about China,
:14:48. > :14:58.really pessimistic about China at... You have done a quick role-reversal
:14:58. > :15:00.
:15:00. > :15:06.there. Q have been depressed about the Eurozone. I'd do. I am sure his
:15:06. > :15:10.cost just optimism about America, I agree with that. I am much less
:15:10. > :15:17.confident they will reach a deal on the Eurozone. The reasons for this
:15:17. > :15:22.are obvious, but the Eurozone has failed to do what America dead and
:15:22. > :15:26.America took action which was bigger than the markets expected
:15:26. > :15:33.and second league they did it quicker than the markets expected
:15:33. > :15:37.zone has failed. I have lost count of the number of months we are into
:15:37. > :15:41.this crisis and there seems to be no resolution and we are still
:15:41. > :15:49.waiting for the governments of Spain and Portugal to go on their
:15:49. > :15:55.bended knee. I want to talk about China. 10 seconds on Europe. The
:15:55. > :16:00.public debt and deficits are lower than America. Monetary policy is
:16:00. > :16:04.relaxed and ultimately, I think it is technology, science and
:16:04. > :16:09.innovation that drives economy's forward and there is plenty of that
:16:09. > :16:14.in the Eurozone. I am worried about China because I have long thought
:16:14. > :16:18.that the Chinese economy is completely unsustainable. I think
:16:18. > :16:23.there will be a Chinese spring before 2020 and it will happen
:16:23. > :16:28.under this regime of that is coming into power. This is the most
:16:28. > :16:35.corrupt society on earth, you cannot export at 30% per annum into
:16:35. > :16:43.world markets when exports are world and -- are so high. It is
:16:43. > :16:49.impossible. When Chinese leaders tell you that the situation is
:16:49. > :16:56.unsustainable, you listen and hear what they are saying. And we will
:16:56. > :16:58.have to wait for Europe use. We have run out of time. A quick look
:16:58. > :17:02.at the papers starting with the Independent. This could turn into a
:17:02. > :17:10.witch hunt against gay people, according to David Cameron on
:17:10. > :17:15.television this morning. Rage of breast surgeon's victims. But there
:17:15. > :17:25.will be at police probe. New police force in turf war over backroom
:17:25. > :17:31.
:17:31. > :17:34.staff. That is it. We are back on Hello there. At band of rain moving
:17:34. > :17:40.into Scotland and Northern Ireland overnight will push southwards
:17:40. > :17:43.across England and Wales are during Friday. Generally find an cloudy in
:17:43. > :17:46.the South East. Showers for Scotland and Northern Ireland. The
:17:46. > :17:50.wet as weather will be in the north-west of England, not much
:17:50. > :17:54.rain crossing the Pennines. Too much of the Midlands, East Anglia
:17:54. > :18:00.and the South East of England, not a great deal of sunshine and not
:18:00. > :18:03.much rain, at you drizzly showers. Quite a lot of cloud. The main rain
:18:03. > :18:07.band arrives in England quite late in the day, quite cloudy for most
:18:07. > :18:13.of the day in the South West of England and through the afternoon
:18:13. > :18:16.it turns a wetter in Wales. Not a bad day for Northern Ireland after
:18:17. > :18:20.the overnight rain we should get some sunshine, probably not that
:18:20. > :18:25.many showers, at cooler feel. It will feel colder in Scotland and we
:18:25. > :18:30.will see most of the showers in the North West, some heavy with hail
:18:30. > :18:35.and thunder and some snow across the mountains. Try and find in
:18:35. > :18:38.Edinburgh and colder here on Saturday. We have got that rain and
:18:38. > :18:46.running through Cardiff, it will not arrive until late in the day in