Scots job loss rate fastest in western Europe

Published on Wednesday 17 February 2010 21:42

SCOTLAND is shedding jobs at the fastest rate in western Europe, as the full effects of the recession hit home on businesses.

• The number of Scots out of work rose by 10,000 in the last quarter of 2009

An extra 10,000 people joined the dole queue in the last quarter of 2009, the biggest increase in the UK, where overall unemployment actually fell. It means unemployment in Scotland has risen from about 140,000 to over 206,000 in the space of just a year.

The figures, published by the Office of National Statistics, mark the second time in a row that Scotland has bucked the trend of a slow fall in unemployment across the country as a whole.

Economists suggested it could be because Scotland historically lags behind the rest of the UK, cushioned from the worst effects of a downturn by the public sector, but then showing weaker growth on the way back out.

As a result, Scotland has now almost caught up with the jobless figure for the rest of the UK, with 7.6 per cent of people aged 16-65 out of a job. That compares to the UK-wide figure of 7.8 per cent, which remained steady in the final quarter of 2009.

Scotland's rate of increase is now among the highest across the continent, according to the ONS analysis. Just four countries had a higher rate of increase in the last quarter than Scotland – Greece, Estonia, Latvia and Romania.

However, many countries' actual rates are far higher, with Spain the worst hit, where 19.5 per cent of workers are out of a job.

The disappointing figures prompted the SNP government in Edinburgh to launch a pre-election attack on the UK government, saying they proved it was the wrong time to "turn off the tap" on public spending.

They highlighted figures from the International Monetary Fund showing the UK has ended its fiscal stimulus measures for 2010, unlike most European countries.

The Tories accused Labour of a "complete absence of any plan" to deal with rising unemployment.

But Labour ministers insisted far more people would be out of work had they not moved quickly to provide fiscal stimulus measures over the last year.

Scottish business leaders said that whichever party won the forthcoming general election they should scrap the planned increase in National Insurance, or face even deeper job cuts.

Many employers "hoarded labour" in the recession, either by freezing pay or cutting hours, but there are fears they will have to inflict further cutbacks if costs and taxes continue to increase.

Scottish Chambers of Commerce chief executive Liz Cameron said last night: "It is concerning we appear to be lagging against the reductions in unemployment being experienced in the rest of the UK. It may be some time before improving business."

The SCC said that the marked increase in unemployment in Scotland might be caused by the slower return to growth, caused as a result of its larger public sector.

David Lonsdale, deputy director of CBI Scotland, warned that extra costs on businesses – such as the NI increase, planning charges, and business rates – could all further impact on jobs.

But unions said the onus was on Ministers to keep spending up, via more fiscal stimulus measures.

Scottish Trades Union Congress General Secretary Grahame Smith warned: "Today's figures represent very bad news for Scotland. With the economy and labour market so fragile, it is almost certain swingeing cuts will provoke a double dip recession, if not a full-blown depression.

"Those who propose such economic masochism are apparently content for the mistakes of previous recessions to be repeated."

The increase in unemployment at the end of 2009 will further add to fears that Scotland could still be officially in recession. Figures will not be released until April, with the issue likely to become a key election battleground.

SNP ministers sought to lay the blame squarely at London's feet last night, claiming the UK government should continue to spend to sustain the economy. Enterprise minister Jim Mather said: "The figures clearly demonstrate the compelling case for an economic stimulus package in the UK. Recovery is fragile at UK and Scottish levels, and now is not the time for Westminster to turn off the tap of stimulus measures.

"What we also need is stability in Scotland's budget in 2010/11, which is why the First Minister has written to the Chancellor and shadow chancellors calling for no more cuts next year."

However, Scottish Secretary Jim Murphy said: "There is no doubt if the government had taken no action that unemployment would now be much higher in Scotland than it is today. We know we are still in the midst of exceptionally uncertain times but have learnt our lessons from previous recessions. As a government we are totally committed to supporting those in need.

"This is unwelcome news for Scotland and should act as a wake-up call to ministers that there is no room for complacency nor for grandstanding."

Shadow secretary of state for work and pensions Theresa May said: "There seems to be a complete absence of any plan to deal with the rising levels of unemployment in Scotland.

"Ministers are pursuing a path that will undermine confidence, threaten higher interest rates and mortgage rates and put the recovery at risk. We can't afford five more years of Gordon Brown."

Ninety per cent of the 371 workers who were made redundant a year ago with the closure of Aberdeenshire's last paper mill have found new jobs.

A task force was launched to find work for people who lost jobs at the International Paper Mill in Inverurie in the heart of First Minister Alex Salmond's Gordon constituency. The mill, one of the town's biggest employers for 200 years, was forced to close after losing over 1 million a month

• Analysis: Large-scale public sector job losses might trigger a 'double-dip' recession

• Councils urged to share services in bid to cut costs amid falling budgets

BANK'S POLICYMAKERS UNANIMOUS IN DECISION TO HOLD INTEREST RATES

THE Bank of England was unanimous over its "wait and see" policy on the economy this month, despite the UK's crawl out of recession.

The monetary policy committee decided 9-0 against further stimulus measures – such as an extension of quantitative easing – even though the case was "finely balanced" with the UK economy still effectively flatlining.

The decision was revealed yesterday with the publication of the minutes of the MPC's last meeting earlier this month. At the meeting the MPC agreed to leave interest rates at 0.5 per cent, and not to extend the quantitative easing plan. The fear of boosting inflation was given as the main reason.

The minutes said there was a case for more quantitative easing, but the MPC saw little point in attempts to "fine-tune" the policy amid so much continuing uncertainty.

The minutes also reveal that the rate-setters believe the recent GDP figures, which showed the UK growing by just 0.1 per cent, may have under-estimated the true scale of growth in the economy. Figures on retail sales, car registrations and rising home prices all indicated increasing market confidence, they concluded.

Analysts said the minutes showed the MPC was not moved to tighten fiscal policy soon, and could extend its money-printing programme in the future.

"Those hoping for… more quantitative easing at a later date have certainly not had their hopes dashed," said Marc Ostwald at Monument Securities.

Although the MPC voted unanimously to hold interest rates, Capital Economics' Vicky Redwood added that the tone of the minutes suggested it was a "close-run thing". She said: "We still see a good chance of policy being loosened further later this year – or at the very least, not being tightened."