Leader comment: Here’s to the New Year

It seems the good times are behind us, at least for the immediate future. The worrying questions are how bad will the economic situation become and how long will it last? The challenge is to diagnose the problems and opportunities confronting us and chart a roadmap back to prosperity. All but the most extravagant optimists would concede that journey will be long and hard. Scotland’s economy is in difficulties, but there are some glimmers of hope. A recent forecast by the Fraser of Allander Institute predicted 0.4 per cent growth over the whole of 2011, with increases in 2012 and 2013. Other forecasters are slightly more optimistic, but all predictions carry a heavy health warning in such uncertain circumstances and it is quite likely the first quarter of 2012 will see Scotland in technical recession, though followed by a recovery.

The most immediate and catastrophic effect the financial crisis has on the lives of citizens is its destruction of jobs. Scotland has an ingrained folk memory of unemployment: nothing is more dreaded in our national psyche. Scotland’s employment rate is 1 per cent higher than that of the UK and there has been a slight improvement. But these superficially encouraging figures conceal underlying problems. The main cause for concern is the number of Scots either in temporary posts or in part-time employment. By the third quarter of 2011 there were 127,000 employees on short-term contracts, of whom 44,000 had failed to find permanent posts. They can only view 2012 with a sense of insecurity. Larger still is the issue of part-time employment, currently occupied by 652,000 Scots. For many this is an arrangement they choose because it suits their circumstances, but for nearly 100,000 – many of them women – it is a reluctant alternative to full-time employment. Women are now 15 times more likely than men to join the dole queue, in which 215,000 Scots are now languishing. The Scottish Government has to become ever more business-friendly: growth is the key to recovery and growth must be nurtured.

For now, many of the levers to stimulate growth are in the hands of Westminster. It is becoming evident that Chancellor George Osborne’s Plan A, though it has reassured the markets, is inadequate to stimulate growth. The private sector is not sufficiently compensating for contraction in the public sector. Austerity must be tempered by investment. The Chancellor displayed creativity in devising an off-the-books scheme to draw £20 billion in infrastructure investment from pension funds in the Autumn Statement, and we need similar feats of improvisation. The trick should be to deploy resources for investment without alarming the markets.

Overshadowing the British and, to some extent, the world economy is the Eurozone crisis. A collapse of the euro would be devastating for this country, especially in view of the exposure of UK banks to Eurozone debt. The solution is to make the ECB the recognised lender of last resort, with the Germans biting the bullet. America, too, is in financial trouble; Barack Obama’s presidency has been a disappointment to his staunchest supporters and the uncertainties of an election year are unhelpful to the markets. But there have been some encouraging economic figures recently and it is to be hoped the United States, as the world’s economic superpower, will lead the march back to prosperity.

In this uncertain climate, optimism is hard to muster, but muster it we must. We may not be able, with any degree of confidence, to wish you, our readers, a prosperous New Year. But we certainly wish you a happy and peaceful one.