08/11/2012 Newsnight Scotland

really have to tackle corruption. Perhaps countries like India do not

Tonight on Newsnight Scotland: The American election is out of the way,

the eurozone crisis has died back a bit and the British economy is

growing. Can we now do the much- delayed Newsnight Scotland special

on the green shoots of recovery? We will have a preliminary planning

meeting. Good evening. The latest economic

forecast for Scotland from the respected Fraser of Allander

Institute is essentially gloomy. Growth and unemployment predictions

are revised in a negative direction. But among the gloom, it is clear

that Scotland's growth over this year and the next two is expected

to be a little higher than growth across the whole UK. Inside those

figures is a slightly mysterious suggestion that somehow

productivity in Scotland has either improved, or at least decreased

less, compared to its UK counterpart. And there is no

obvious explanation for that. All forecasts, of course, need to be

taken with a pinch of salt, as Jamie McIvor reports.

They say forecasting the economy is like forecasting the weather. The

further you tried to look ahead, the less you can guarantee the

forecast. Nor economic predictions can ever be guaranteed to be

completely accurate, however well researched. The clouds have been

clearing and it is now it a lot sunnier over much of the UK. All

lot of good weather down in the south. Not such a good outlet in

Scotland... We revise our growth forecast down this year because of

the consequences of fiscal consolidation which are dampening

the economy down, problems of the eurozone which continue and affect

export demand, world demand is still weak generally, Scottish

households are not spending and are still burdened by debt, so

household spending is weak. That will continue for some time.

the outlook is brighter. Growth year's forecast to be stronger than

for the UK as a whole. It will be brightening up in Scotland...

anticipate that growth will start to be positive again next year, but

it is difficult to call because there is a lot of uncertainty in

the world. We still believe that despite the positive growth, we're

seeing a relatively weak picture, we're still much lower than before

the recession. Scotland might outperform the UK next year West to

GDP growth. Productivity appears to be higher. The number of Scots in

work is also expected to grow again. On the other hand, the institute is

predicting a rise in unemployment. Major storms across the Atlantic

usually come our way later. With economics, there is an old joke. If

America sneezes, the rest of the world catches a cold. President

Obama faces challenges in his second term. There is the issue of

the fiscal cliff where various deals associated with the recession

ended the end of this year. Next year, it is possible that Barack

Obama might find it difficult to negotiate a deal with Congress.

There could be a significant drop of output which will affect other

economies, unless the President and Congress strike a deal very quickly.

China is now the second largest economy in the world. New political

leaders have been chosen. There is the ongoing problems in the

eurozone. Problems still remain. Fiscal austerity is still being

demanded. The demand for goods and services is low in Greece and Spain,

for example. The German economy is on the brink of recession, which is

a major market for Scottish and UK exporters. Whether our economy

heads towards sunshine are not over the next couple of years will play

a big part in the debate over independence. Especially when you

compare Scotland with the rest of the UK. That is one reason high

economic forecasts are so important just now, even if they may well be

revised as time goes on. I am joined now from Edinburgh by

business commentator and blogger Bill Jamieson, and from London by

economist and author Will Hutton, who is also Principal of Hertford

College, Oxford. Bill Jamieson, I believe you finally have something

positive to say about the economy? Unfortunately we could not afford a

drum roll. I would not deny anything that Brian Ashcroft has

said in that report. Although the anecdotal evidence suggests there

has been a slowdown after that 1% rise we saw in the third quarter.

However, one interesting thing that Brian Ashcroft and others overlook

is the role of enterprise -- enterprise and the role of the

entrepreneur in getting us out of downturns. I was struck by two

figures. One was from Scottish Government this week and it showed

the number of small and medium- sized companies in Scotland had

risen quite sharply over the past 12 months. I think the total number

of companies in Scotland was now up at the highest it has been since

2,000. If you look at the pictured nationwide, it is very interesting

to see the figures from Companies House this year. 410,000 new

businesses have been started. A fair number of these will fall by

the wayside, but it is very interesting that people are not

waiting for signs of the macro- economy to turn up before they go

out and start creating a business which will create jobs. The small

and medium-sized enterprise sector is vital for job creation. We know

that from previous recessions. Firstly, economies are a bit like

corks. If you press them below the surface of the water, they will

return to the surface. What is amazing is that, four years on,

we're still not back to levels of output before the recession. And we

won't be back until 2014. That is the longest recession for over 100

years. That is the first thing to say. Secondly, we are incredibly

encumbered, Scotland and England alike, with private debt. I

recognise that the small and medium-sized enterprise sector is

important, but actually the fact that something is coming back to

normal after six years is thank God, but let's be serious and sober

about the prospects for a lot of these start-up. -- starts up a rung

back. A lot of these are out of -- start ups. A lot of these companies

are started out of desperation rather than ambition. It is close

You are close to mad. There is this substantial point that you might

get an upsurge in people starting their own business, but it is from

desperation. It might be better to do that than do nothing but it does

not tell you much about the economy. Yes. I do acknowledge the fact that

our biggest problem is the very low level of demand in the economy,

domestic demand is very low, but we were warned to... The when you say

that, is that not the fundamental point that all these hopes that

people put in micro-economic ways in what are essentially macro

economic problems, never work. In an economy that is doing well, it

gives it a focus on encouraging entrepreneurship. There is a

fundamental problem of lack of demand and the economy and no

amount of people setting up their own companies will make much

difference to that. The demand question is big but I would not

underestimate the demand of innovation in the entrepreneurial

function, it is one of the most important things that people

starting up an enterprise need. They do create new markets and new

demand and new products, more efficient ways of doing things, so

it is a very important thing that they do, it is not just getting a

job to see them through a tough. A after getting made redundant.

chaired the big innovation centre in London and I am at one with you

on this. If you are going to make a claim that Scotland is on the verge

of an entrepreneurial revolution he have to say, where are the hot

spots for this is taking place? Where are the business sectors

where this revolution is taking place? Where are the innovative

breakthroughs? What companies are the load bearers of this? Of course,

there will be one or 20 and all power to their elbow. To get this

right, requires a determined effort by the Scottish government and by

the Scottish private sector to create a really strong innovation

ecosystem in Scotland and some of the building blocks are there but

they are not all there. There is a demand short fall. There is the

ability to network ideas at if you great universities into the

university's Senate it that it -- into this sector. The idea to sit

here and say that we are in the verge of this revolution when the

evidence is that that is not taking place, that is curious. It is also

the case that business start-up rates in Scotland, historically,

have been very low, and there is no evidence that is changing.

small-business base is low compared to the rest of the UK, another

interesting statistic in the release they came out from the

Scottish government yesterday showed us that actually the rate of

increase in air semis in Scotland was greater than in the UK as a

whole. That did surprise me. There are a lot of things going on at the

micro level where the Scottish government is helping, there are

about Rio four conferences going on this fortnight on the subject and I

cannot recall such a buzz around this whole business of encouraging

small businesses as we are seeing now, it is a recognition at last

that people are seeing at the small company sector and the medium

sector having a critical role to play. OK. I want to move on to the

international economy. Of the his first problem, America, this fiscal

clef, the fact that all these tax cuts run-out and spending cuts will

come end unless President Obama can do a deal with Congress. Is it fund

and will? Visit soluble. Might you is that the momentum is with

President Obama and the Democrats and it is obvious that the

Republicans had electoral reverse and although they hold the House of

Representatives they only just about got a lead in the popular

vote, it was gerrymander, in many of the congressional districts --

districts. They're on the defensive. I think there will be a deal and I

am optimistic about the US economy. Perhaps the bigger question for us

in his President Obama, he has a certain self-confidence because he

has got a second term, his view of macro economics and the need for

fiscal stimulus is at variance with the British government and West

Angela Merkel. Do you think he might be able to change the

international climate on this by getting a second term? At think the

international climate will change a bit but the Germans have dug in

with their commitment to austerity, although now they have deals in a

bold the Portuguese and Greek parliaments on a austerity, my

money is on in the next six months, some re scheduling of both Greek

and Portuguese debt. We may have to wait until after the German

elections in the spring, but I think the darkest moment is before

Don and I think we are or at the beginning of the end of the

Eurozone crisis. I am optimistic about the United States, less

pessimistic than most about Europe and very pessimistic about China,

really pessimistic about China at... You have done a quick role-reversal

there. Q have been depressed about the Eurozone. I'd do. I am sure his

cost just optimism about America, I agree with that. I am much less

confident they will reach a deal on the Eurozone. The reasons for this

are obvious, but the Eurozone has failed to do what America dead and

America took action which was bigger than the markets expected

and second league they did it quicker than the markets expected

zone has failed. I have lost count of the number of months we are into

this crisis and there seems to be no resolution and we are still

waiting for the governments of Spain and Portugal to go on their

bended knee. I want to talk about China. 10 seconds on Europe. The

public debt and deficits are lower than America. Monetary policy is

relaxed and ultimately, I think it is technology, science and

innovation that drives economy's forward and there is plenty of that

in the Eurozone. I am worried about China because I have long thought

that the Chinese economy is completely unsustainable. I think

there will be a Chinese spring before 2020 and it will happen

under this regime of that is coming into power. This is the most

corrupt society on earth, you cannot export at 30% per annum into

world markets when exports are world and -- are so high. It is

impossible. When Chinese leaders tell you that the situation is

unsustainable, you listen and hear what they are saying. And we will

have to wait for Europe use. We have run out of time. A quick look

at the papers starting with the Independent. This could turn into a

witch hunt against gay people, according to David Cameron on

television this morning. Rage of breast surgeon's victims. But there

will be at police probe. New police force in turf war over backroom

staff. That is it. We are back on Hello there. At band of rain moving

into Scotland and Northern Ireland overnight will push southwards

across England and Wales are during Friday. Generally find an cloudy in

the South East. Showers for Scotland and Northern Ireland. The

wet as weather will be in the north-west of England, not much

rain crossing the Pennines. Too much of the Midlands, East Anglia

and the South East of England, not a great deal of sunshine and not

much rain, at you drizzly showers. Quite a lot of cloud. The main rain

band arrives in England quite late in the day, quite cloudy for most

of the day in the South West of England and through the afternoon

it turns a wetter in Wales. Not a bad day for Northern Ireland after

the overnight rain we should get some sunshine, probably not that

many showers, at cooler feel. It will feel colder in Scotland and we

will see most of the showers in the North West, some heavy with hail

and thunder and some snow across the mountains. Try and find in

Edinburgh and colder here on Saturday. We have got that rain and

running through Cardiff, it will not arrive until late in the day in