22/01/2014 Newsnight Scotland

is acceptable for these people being paid to live in a hotel. The Syrian

people in the end should decide. Thank you very much indeed.

Tonight on Newsnight Scotland, a record-breaking drop in

unemployment. Do the figures really prove the economy is on the mend and

austerity has worked? We will discuss.

Also tonight, nobody seems very keen to host the 2022 Commonwealth Games.

Is it now up to Glasgow to rescue the brand?

Good evening. Unemployment in Scotland is down to 6.4%. That is a

striking fall since last month's figures and compares with the UK

average of 7.1%. Politicians of all shades are spinning the figures to

reflect their own views. But can this really be anything other than a

sign the economy is on the mend? Graham Stuart reports.

The storm clouds of the economic downturn look like they are

gradually clearing. Recent job numbers have been fairly consistent

in looking brighter and the latest figures show the number of jobless

in Scotland fell by 21,000 between September and November. There are

now officially 176,000 people here unemployed. That means the

unemployment rate is at its lowest level since the beginning of 2009.

That compares even better when compared with the UK as a whole.

10,000 people found employment over the three months to November but

what stands out is the number of women in employment in Scotland,

which has seen the largest annual increase on record. As far as people

out of work are concerned, there are around 2000 fewer people claiming

job-seeker's allowance between September and November, a fall of

around 24,000 over the year. We have seen strong growth in recent months,

transferring to good figures for unemployment. The number of people

out of work -- in work are up to a level close to levels before 2008.

Some of the things the government are doing are paying off. A small

business like this needs to be lent to and it is really important

getting folk back to work so it is encouraging to see that starting to

pay off. A long way to go but unemployment is falling, youth

unemployment is falling and it looks like we have better times ahead.

Highly encouraging. Estimates released last week indicated that

the Scottish economy grew by 0.7% in the third quarter of last year. With

these latest job figures showing a faster than expected improvement it

points to productivity as a continuing concern and without

improved and activity there will be -- there will not be a sustained

growth in spending and earning power.

I am joined now by the economist Jo Armstrong of the Centre for Public

Policy for Regions, and from London by Professor David Blanchflower,

formerly a member of the Bank of England's Monetary Policy Committee.

Jo Armstrong, on a point about these specific Scottish figures, there is

something odd about them. It looks like the fall in unemployment is not

matched by a rise in people in jobs. Is it that evil are reporting that

they are no longer available for work? -- is it just that people are

reporting. There is an increase in people reporting being self-employed

so maybe they are choosing not to register for job-seeker's

allowance. That caveat aside, it still gives you quite a strong

recovery. These are good figures. The figures specifically for

Scotland but also for the UK. And they reflect to some extent the

operating in the figures from the IMF. -- the uprating. David, you

presumably would agree with that. Jo is right, yes. Various organisations

have been predicting that the economy would start to grow again.

These are good figures but the question is, we start from a pretty

low, output is much lower than before the recession started. The

question is, is it sustainable, given what it is based on? A great

start but are we going to see it continuing? Let's talk about

sustainability in a moment but doesn't George Osborne get some of

the credit? You forecast that if his policies were pursued unemployment

would rise to 4 million. I did not say that, I said that if monetary

and fiscal stimulus was removed unemployment could rise. It has not

been removed. We should look at where we are now compared with where

we should be. The reality is that we are 5% lower in output than we

should have been if Osborne had not implemented his policy. I live in

the US. Output there is 4% higher than it was at the start of the

recession. In the UK today, even with the growth we have seen, it is

still 2% below. We have seen terrible growth over the last few

years and at long last we are seeing growth but the question is, what is

driving it? It seems to be driven by people stopping doing precautionary

saving, why or ring against a house price boom. -- by borrowing. There

are things to be cautious about and we have not mentioned the fact that

real earnings are still falling, they are 10% what they were at the

start of the recession. Yes, America has recovered faster but what is

happening here is pretty good campaign to most countries in

Europe. Most countries did not face the same level of decline. We have

come from a much, much lower base and what we are now seeing is what

we might in the past have expected to be growth -- normal growth

rates. At this stage we would have expected significant growth because

of the depth of the recession we have experienced. Can I make a

heretical suggestion, that perhaps one reason why you are more gloomy

-- that you're more gloomy forecasts did not come to pass is that there

has not been much austerity. When you look at the public spending

figures, total expenditure, the gross figure, has actually gone up

every year. According to the government the cut in real terms

will be about 3%, which is trivial. We have had a big cut in capital

expenditure, a massive monetary stimulus that has gone on and the

evidence appears to be that output is lower because of the policy the

George on to -- the policy that George Osborne implemented. It is

about 1.5% lower because we have spent money on benefits and welfare.

We have had jobs in tax revenues. Yes, you can say that there has not

been any real austerity but that is not true. The output level here,

let's put it in context, we have never seen in 100 years. We have

never seen a recession of this kind and such slow recovery in 100 years.

You can say some of those things but the reality is that we, from a

collapse of the kind we have had, we should have seen a very rapid

recovery and we have not. Does that really address the point? I accept

that taxes went up, VAT. I access that perhaps some of the rise in

what is called annually managed expenditure and benefits Justin Rose

perhaps as a consequence of cutting public spending, but actually

spending is not fallen. -- benefits rose. If we are talking about what

kind of spending we might want for a longer term growth, spending on

benefits has been necessary as one of these automatic stabilisers...

You both seem to agree with John Swinney, that spending on capital

projects was important and that was cut very dramatically. And spending

on increasing human capacity. But it seems like the austerity is an

optical illusion. Yes, we are still increasing our borrowing level, so

part of the spending has gone on increasing borrowing costs, which

looked like they are continuing to rise. Yes, spending overall has not

fallen in real terms, but at some point the borrowing will have to

stop. What is your worry about the balance of the recovery, and how it

is based on debt? Surely it is better than no recovery at all? I

agree with that, at all, of course. But George Osborne said he had a

series of benchmarks, he said, keep the AAA credit rating, he said we

would see a growth in savings, exports and investment, and we have

seen none of those. The way we get balanced growth is, we are going to

get investment and exports rising, consumption rising, all potentially

from government. But consumption is rising not through real wage growth.

And net trade is falling. The other thing we worry about is they

promised we would see a rebalancing away from the housing and financial

services. We have seen none of that rebalancing. Right now, what happens

when the next shock comes along, perhaps a housing market shock, and

we are in a situation, unlike in 2008, and we cannot cut interest

rates any more? We have not really made the economy more resilient,

which is what Osborne promised us. The worry is, we are not really

ready for the next shock, and we are worse off. One thing which would

follow from that, Jo Armstrong, is that there is a regional dimension

to this recovery. Even if you look at the unemployment figures, 5.3% in

the south-east of England, more than 10% in the north-east of England.

Scotland is doing relatively well. And of course, the Bank of England,

I know they are saying maybe not in the short-term, but if they consider

putting up interest rates, it could be even more unbalanced across the

regions? Yes, clearly, the Bank of England thought that because

inflation was above its target, using something else to justify

keeping interest rates down, so it chose the unemployment rate. But

that has now reached the trigger point. But the minutes of the

Monetary Policy Committee clearly signalled that inflation is expected

to bob around 2%. They really do not want to put up interest rates. They

have got to maintain low rates of interest as long as possible to

allow some kind of rebalancing across the region 's. Thank you both

very much indeed. Now, just about everyone is looking forward to the

Commonwealth Games. You will recall the pride when Glasgow won the

competition to become the home city. The next Games will go to Brisbane

after a contest with a town in Sri Lanka. But it is looking as if there

is not much interest for the 2022 Games. So, is it up to Glasgow to

rescue the Commonwealth brand and doing this report from Huw Williams.

I think there is a serious concern within the, Love Games Federation

about exactly where the Games are going. But it seems that countries

are not exactly queueing up to host the 2022 Games. More than 1 billion

people are expect it to tune in for the opening ceremony in Celtic Park.

That in itself is a massive boost for the city. One of the sponsorship

deals, spectators, the tourism money, and of course, attracting

some big names to your city. These can attract a city to read for a

Commonwealth Games, but it seems at this stage, most cities around the

17 nations and territories believe it is just a little bit too

expensive. That appears to be what is putting them off. And we are

talking serious money, perhaps ?1 billion if you are starting from

scratch, building new stadiums and infrastructure. So, you would think

that for Sheva now, you may be looking again at some of the more

developed communities -- for Sheva now. -- for 2022. Maybe even

Singapore or Kuala Lumpur. I know that the federation is very keen on

2022 and future games taking place in South Africa. There have already

been attempts to them into taking them on, but at this stage there

seems to be no silly as interest -- no serious interest. This is the

leaked letter which expresses concern about the way the executive

board behaved at a meeting in Glasgow. It accepts that the Games

needs to be modernised, and says there is concern that there are few

candidates to host the Games in 2022. In his reply, the president of

the Federation accuses Sir Andrew of spreading inaccuracies. Also, of

being discourteous and disingenuous. He does not comment on whether Games

could be held in eight years' time. But there is still interest in the

Games, not least from Wales. -- on where the Games. They came to

Glasgow to assess the costs and benefits of being a host city.

Glasgow to assess the costs and benefits of There will be an

economic impact study done to give an idea of the legacy and the

impact. After that the Welsh government will take a long, hard

look at it. Hosting a multisport Games is a fantastic way of

advertising a country in the world. After Glasgow, we would like to see

what the full benefits were for Glasgow and for Scotland hosting

these Games. The organisers of Glasgow 2014 said they were not the

right people to talk to, and we should ask the city council, but

they were not able to make anybody available for interview. The

Commonwealth Games Federation said kids to host the 2022 Commonwealth

Games remained open until March next year, and the Games would not be

awarded until next autumn. And we should not think that the future of

the Games is in any doubt. They will carry on, there is absolutely no

doubt about that. Just what they might look like in the future might

be up for discussion. There are some who feel that for too long, they

have tried to hang on to the coat-tails of the Olympics, so we

may well see a new, streamlined Commonwealth Games, at some point in

the future. But will they carry on? I think they probably will. I am

joined from the mirth by Doug Gillon, who has covered just about

every Commonwealth Games there has ever been. -- from the earth. Is

there a crisis? -- from Plymouth. I certainly think there is a crisis.

You had three people in the race for Glasgow, one of whom dropped out. It

was then a two horse race. It was a two horse race the time before that,

for Delhi, but the two Games before that, Melbourne and Manchester won

them by default, there was no other candidate. So, we have just been

hearing about shoots of economic recovery, but not enough to tempt

countries to invest in the Commonwealth Games. They have got 13

months to put their bid on the table, so there is still plenty of

time. But if nobody comes forward, are we saying the Games will

continue? Maybe not, if there is no candidate to host them. How are they

seen by athletes, but if two other events? Well, they are seen as,

obviously, inferior to the Olympics and, in some cases, also inferior to

the European Championships. In many events, many sports, the European

Championship 's rate very, very highly. It is very hard to win a

sprint title in the Commonwealth, with Jamaica. It is very hard to win

endurance titles, with the likes of Kenya. But for Scots, it is really

important, it is one of the rare occasions in which most Scottish

sports get the chance to be on the world stage. It is a very rare

occasion. 's represent their country. Given this crisis you are

talking about -- occasion for Scots -- does this mean the whole future

and status of the Games is at stake? I wrote in the Herald not

long after I returned from Delhi at rescuing the Commonwealth Games

brand economically was really what they had to do. Let's be fair, 94%,

more than that, of tickets, were sold. That is more than any other

Commonwealth Games in history. It is more than the Sydney Olympics, and I

believe it may even be more than London, in terms of a percentage of

advance sales. That is a too horrific bonus. It does not help

that there was a huge number of defections from the Delhi games.

Chris Hoy did not go, Jessica Ennis did not go. We had world medallists

and European medallists in gymnastics who did not go. There

were a lot of Scots who did not front up and go there. People never

really remember who do not go. They remember the winners. I think it is

unfortunate to go talking about who might not turn up. No Chris Hoy and

no Jessica Ennis-Hill in Glasgow, but the tickets for these two sports

are completely sold out. Thank you very much for joining us. A very

quick look at tomorrow's front pages. Starting with the Scotsman...

And that very dramatic picture of the riot outside the parliament

building in Kiev. That is all for tonight. I will be back tomorrow.

Showers will be rattling across the country first thing in the morning.

But they will soon clear through. It will be feeling cold, and there will

be some snow down to quite low levels. Further south, fewer

showers. Most of us will have a dry