Transcript The Economy - A crisis of of growth and jobs

The Economy: a
crisis of growth
and jobs
Stephen Boyd, Assistant
Secretary, STUC
The employment
situation is bad and
getting worse!
Start of recession to June ‘10…
Employment down 106,000
 Unemployment up 112,000 to 223,000
 Claimant count up by 66,000 to 135,000
 Youth unemployment up 80%
 Long-term unemployment up over
100%
 Claimants to vacancy ratio around 9:1
 Massive rise in under-employment

The economic recovery
is somewhere
between very weak
and non-existent
Why this time is different…
Remember that the 08/09 recession was deeper
and longer than ‘80s and ‘90s recessions
 Recession was different in origin; effects will be
felt over longer timescale; approx 5 years
 Growth in Scotland Q1 2010 was 0%
 Independent forecasts predicting growth
between 0.3% - 1.4% in 2010; 1.3% - 2.3% in
2011 – implying little if any fall in

unemployment

Slow growth predicted in Scotland’s key export
markets: rest of UK and Eurozone
What are the
prospects for growth
and jobs?
Very bleak
Barriers to growth and jobs include:
 ‘paradox of thrift’
 access to finance
 collapsing confidence
 low demand for goods/services
 withdrawal of stimulus
……..& CUTS!
A ‘double-dip’ recession is
possible…but real issue is the
probability of a sustained
period of low growth and high
unemployment
... does the data agree?
There is an economic
crisis – it is a crisis of
low growth and high
unemployment. It is
not a crisis of the…
The public finances
The deficit
What is it?
The gap between what a country spends and what
it earns in revenues
What size is it?
The UK deficit in 2010 was 11.4% of GDP – the
second largest deficit among G20 nations
Is it a problem?
The deficit is simply a consequence of exceptional
economic circumstances. It is a problem but one
that is consistently exaggerated and
distorted
We are told that cuts are
‘unavoidable’ and that the
UK is an economic basket
case…but was there ever a
genuine possibility that the
UK might become the next
Greece?
The truth about the public finances
Investors continue to enthusiastically fund UK
debt at low cost; interest rates close to 0% on
long term government debt
 Gilt auctions consistently oversubscribed
 Ministers & media raise the prospect of an
imminent debt crisis whilst failing to describe

what is actually happening in the markets

Investors consider a wide range of factors such
as stock of debt, maturity of debt, structure of
debt and future economic prospects as well as
current deficit
5 reasons why the
UK is not the next
Greece
1. The UK is not in the Euro
The UK has its own currency and the
additional economic levers it provides:
 Currency devaluation
 Monetary policy (interest rates)
 The UK can make its own decisions
without consulting EU, ECB, IMF and
France
2
The UK deficit is
high by international
standards; stock of
debt is not
General Government Debt (% of
GDP)
2007
2009
2010
2014
UK
44.1
68.7
81.7
98.3
United States
61.9
84.8
93.6
108.2
Japan
187.7
218.8
227.0
245.6
Italy
103.5
115.8
120.1
128.5
France
63.8
78.0
85.4
96.3
Germany
63.4
78.7
84.5
89.3
Advanced G20
economies
78.2
98.9
106.7
118.4
Key issues (2)
3
The cost of
servicing UK debt is low;
much lower than in
Greece and other nations
judged to be at risk of
default
Debt interest payments
Debt interest payments will rise from
1.6% of GDP in 2007 to 3.1% in 2014
 Greece is currently spending 12%
 Average for G20 advanced nations in
2014: 3.5%
 US in 2014: 4.5%
 Average debt interest payments for 75
years between 1916-1991: over 3%

4 The structure of UK
debt is different: it is
much longer term and
the majority is held
within the UK; not by
external investors
5 UK economy is bigger,
less corrupt and more
diverse and dynamic
than the Greek economy
People generally pay their taxes in the UK;
taxes are routinely avoided in Greece
 Investors trust UK economic Budget data;
Greek Budget data is constantly being
revised
 World Bank rates the UK 5th best country
in the world in which to do business –
Greece rated 109

Avoidable, Unfair and Regressive - Why
Osborne is wrong on cuts

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Timing, pace and scale
Growth and jobs – deficit was already falling due to
stimulus
UK in 2010 is not 1990s Canada
Balance between cuts and tax rises is all wrong
Likely to fail on his own terms – debt will rise as u/e
rises and tax receipts fall further
Markets are not rewarding austerity!
Setting policy to please the markets is never the
right thing to do
An alternative
strategy…
Learn the lessons of economic
history
1 When unemployment is high, the risk is deflation
and interest rates are already close to
zero…deficit/stimulus spending is required to
boost growth and get people back to work.
2 Stimulus should be implemented quickly, be
short in duration and targeted on a) getting
people back to work and b) expanding the
economy’s long term capacity to grow
sustainably.
Recognise the positive relationship
between public spending and growth
Evidence fails to demonstrate any adverse
relationship between public spending and private
investment
 Scottish public sector institutions are critical to
the success of the Scottish economy through
providing basic infrastructure as well as key
human and technological resources for
emergent sectors such as biotechnology
 Need to develop a more sophisticated
understanding of how public & private sectors
inter-relate in successful and balanced
economies

Introduce genuine reform
 Fix
finance
 Reinvigorate manufacturing
industry
 Rebuild ‘equalising institutions’ –
trade unions, progressive
taxation, living wages
 Tackle the tax gap
An intentionally broad message
 Tackle the deficit through sustainable economic
growth and job creation
 Spending cuts will strike at the heart of our
communities and damage the economy
 The better off should pay their fair share
 Ordinary people should not be forced to pay for
the mistakes of policymakers and bank bosses
through poverty pay and inadequate benefits
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EDINBURGH DEMO
SATURDAY 23 OCTOBER