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The truths they don't want you to read....

Wednesday, October 21, 2009

#Things can only get better#

A Scottish Government press release gives a flavour of the economic problems facing Scotland.


Scotland's Chief Statistician today announced the release of Gross Domestic Product for Scotland for 2009 Q2.

This quarterly publication measures growth, in real terms, in Gross Domestic Product at Basic Prices, also known as Gross Value Added, for Scotland.

The main findings are:

* GDP fell by 3.2 per cent annually and fell by 0.8 per cent in the second quarter of 2009 (seasonally adjusted)
* In the year to end-October 2009, the Scottish service sector fell by 2.5 per cent, the production sector declined by 5.7 per cent and the construction sector fell by 6.3 per cent
* In the second quarter of 2009, the service sector fell by 0.4 per cent, the production sector declined by 1.9 per cent and the construction sector fell by 2.8 per cent


I'm not going to shoot the messenger, but I am going to caution against the impact of trying to spend your way out of this deep hole. As in the 1980's, manufacturing is being hit especially hard and the capacity of the Scottish and British economy to recover seems to lie with services and with public sector spending.

Neither of these are the way to built a strong long-lasting and resilient economy, with the former being more transitory and easily transferable to a lower-cost country; and the later having the effect of smothering the country with bureaucracy and paperwork whilst delivering ego-stroking and over-priced capital projects at the expense of public services.

Counter-cyclical spending is - of course - part of the answer, but there is also going to have to be economic contraction towards the essential public sector core. And that is a fact that the Scottish Government would do well to acknowledge and take action upon now, before the Westminster Government force these unpleasant decisions upon them.

And, yes, I do realise that provoking a battle may be part of the strategy, but that's not really going to help economic growth.

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