Bill Jamieson: Lies, damned lies and the economy
ON THE Edinburgh Festival Fringe last week I enjoyed The Liar Show. Four actors came on stage in turn and told a story. Three of them were telling the truth. One was a liar. But which one? The audience had to guess.
The show was staged at Riddle’s Court, one of the Old Town’s oldest buildings and now the home of the Scottish Historic Buildings Trust. The performance charmed with its humour and professionalism. Judging by a show-of-hands vote, the audience was fairly evenly split between the four. Indeed, if anything, the liar was the least suspected of all.
Several recent events have left me wondering whether modern life has become one big performance of The Liar Show. Totally conflicting statements about the economy and our prospects are made with such conviction and certainty as to brook no doubt among the public that they must be true. But they cannot all be true. One – in all likelihood more than one – must be a lie.
Here I lay out two sets of statements – four in all – made over the past few weeks where we have been left to guess the truth. Two must be false. But which two?
The first two statements concern the state of the economy. The first performer on the stage is Sir Mervyn King, governor of the Bank of England. Sir Mervyn’s story is deeply convincing.
The lights are dimmed, a mist descends, the distant baying of a wolf can be heard. Through the sepulchral gloom, the governor tells us of an economy barely halfway through a miserable process of deleveraging and correction. To the side can be heard screams of anguish and despair as the Eurozone crisis continues to lay waste to our hopes of an export-led recovery.
Behind him a spectral graph of the UK economy shows a line marked “GDP growth”. It shows a decline over the last three quarters, the latest figure showing a 0.7 per cent fall. For 2012 as a whole, the Bank is now forecasting economic growth of zero. Forget all previous forecasts the Bank made in the past about recovery. There will be none this year, and 2013 will be well below previous forecasts. The Bank’s massive efforts at revival through quantitative easing have so far failed. Manufacturing output is in decline. Business confidence is flat.
From the sound system, a ghostly wind howls across the auditorium. “Remember,” intones the governor as an impenetrable gloom descends, “we are barely halfway through.”
For the next performance, the stage set changes. A rosy light shines through the gloom. Twittering birds can be heard. Onto the stage bounds a spokesman from the department of labour market statistics. Here is his story.
Forget those gloomy GDP numbers. The labour market is performing remarkably well, given the weakness of the economy here and overseas. In the three months to June, numbers in employment across the UK grew by 201,000 to reach a near four-year high of 29.476 million. Full-time employment is up by 130,000 in addition to a 71,000 rise in part-time employment. This helped unemployment on the International Labour Organisation measure to fall by 46,000 to 2.56 million and took the unemployment rate down to 8 per cent. Further good news saw claimant count unemployment fall anew, by 5,900.
The choice for the audience could scarcely be more stark. Both stories are convincing. Both come packed with statistics. But which one is a more truthful reflection of the UK economy? Are the labour market figures, giving the impression of an economy doing appreciably better than the GDP numbers show, being bolstered by a rise in part-time work, thus giving a too-rosy view of our condition? Or might those GDP figures be subject to revision? Recent upward revisions to construction output and industrial production data already indicate that the contraction in second-quarter GDP was likely to be nearer 0.5 per cent quarter-on-quarter rather than the 0.7 per cent drop reported.
The next two performers on the public stage last week were closer to home. But, speaking within hours of each other, they could not have been more contradictory. And this time the audience vote will be very real.
At the Edinburgh Book Festival we saw a re-energised former prime minister Gordon Brown delivering the annual Donald Dewar Lecture. During this he tore into the SNP prospectus for an independent Scotland, asserting with vigour and passion that if through fiscal autonomy we had to fend on our own without a public spending allocation from Westminster, we would face a stark choice between cuts in public spending or higher taxes. One or the other: the choice would be unavoidable.
Barely had Brown left the stage than a sharp riposte from “a spokesman for the Cabinet secretary John Swinney” stepped up to the plate. “Scotland,” he asserted, “is better off than the UK as a whole, and therefore Gordon Brown is wrong on tax and spending, and wrong about fiscal autonomy and independence.”
Over the five years to 2010-11, he intoned, Scotland was in a stronger financial position relative to the UK as a whole by a total of £8.6 billion – a figure equivalent to more than £1,600 for every man, woman and child in Scotland. And in 2010-11, Scotland contributed 9.6 per cent of UK taxes, but we received only 9.3 per cent of UK spending. “The bottom line,” he insisted, “is that Scotland will be better off with independence and control of our own resources.”
Public spending cuts or tax rises on the one hand, or Scotland better off on the other? An economy trapped in recession with no growth in prospect, or an economy that may be ticking over (just), showing growth and creating jobs?
This performance of The Liar Show is no Festival Fringe event, but poses sharply contradictory versions of reality on which we will have to decide. Which one is the lie? Only time will tell. My own hunch is that those GDP numbers will be revised to present a picture slightly less severe. As for the battle on Scotland’s future, the need for some independent Institute for Fiscal Studies in Scotland to help sift and analyse these claims becomes ever more compelling. However, for the moment, like that captivated audience in Riddle’s Court, we’re in the dark.
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Weather for Edinburgh
Monday 20 May 2013
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Wind Speed: 9 mph
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