Leaders: Jobless fall a small step, growth would be big one

In other times and in other circumstances, news of a 10,000 fall in unemployment in Scotland, coming on top of a 12,000 reduction in the preceding quarter, would be greeted with unqualified cheer.

The figures would be all the more welcome given the large measure of confusion and scepticism over official statistical measures of our economic performance. While the experts work through the statistical revisions and adjustments, numbers in work have become the most reliable measure of our economic health.

But on this occasion optimism needs to be guarded. First, the bald figures mask a rise in the numbers of those in part-time employment. The more accurate measure of economic recovery would be a sustained rise in full-time employment with a commensurate growth in earnings which then feeds through to higher consumer spending. Of no less concern is that the unemployment rate for 16 to 24-year-olds remains stubbornly high at 94,000, or 23.1 per cent.

But there is another, more immediate reason for caution. The crisis in the eurozone has intensified with the growing prospect of a disorderly exit by Greece. Appalling as the consequences will be for that country, such an event would immediately intensify a much wider banking crisis and capital flight leading to economic seizure across Europe as a whole.

Yesterday, as if to dispel any complacency, Sir Mervyn King, Governor of the Bank of England, warned that the eurozone “storm” remains the single biggest threat to recovery here. This came with a reduction in the Bank’s already modest growth forecast from 1.2 per cent to 0.8 per cent. This does not factor in a Euro breakdown and a consequent massive hit on Britain’s banks and businesses.

This warning was reinforced by Prime Minister David Cameron who said the eurozone must “make-up or break-up”. The blunt wording reflects deep frustration at the inability of eurozone leaders to respond with the speed and resolution required. As former chancellor Alistair Darling pointed out, a key lesson from the global financial crisis was the need for governments and central banks to do more than markets were expecting and to act more speedily than anticipated. In these two regards the response of official Europe has been deeply disappointing.

The policy implications for the UK are clear: to do everything possible to help bolster business confidence and to make it easier for firms to take on and retain new staff. There is some action that governments in Edinburgh and Westminster can take to accelerate planned capital projects that would not add to the debt and deficit burden. Fast tracking the planning system and a speeding-up of equipment ordering and procurement protocols would help. The latest unemployment figures are a small step in the right direction. But the priority to promote growth has become, if anything, more pressing.

Gunboat diplomacy won’t work here

So a Downing Street spokeman has confirmed that if Scotland becomes independent then no warship contracts from the rest of the UK would be sent up here. They may dress it up as a logical extension of not building sensitive defence projects abroad, but it will be seen by most as a threat.

On the face of it, it might seem like a clever threat. Not only is it talking about a massive loss of jobs at a time when we are in a serious economic crisis that does not seem to be going away anytime soon, it also strikes at a hisorical sense of pride for the Scottish nation. Shipbuilding on the Clyde in particular – although not alone – has been an international success and forms a part of our national make-up. It is certainly a threat that will not be taken lightly.

They may think it is playing hardball, but Mr Cameron and his coalition government may well find that this kind of bullying tactic is likely to have the effect of simply annoying most Scots. As a nation we do not take well to threats.

This will come across as strident and aggressive and once again will give the impression that the Union is not regarded in Downing Street as a partnership of equals.

And that leads inevitably to some other thoughts. Mr Cameron says he wants the Union to continue, but once again his actions would suggest otherwise. Is it the case that he is so badly advised and is personally unable to forsee what the reaction to this will be? Or is it that he feels he has to say he is defending the Union, but deep down he has no attachment to Scotland and the prospect of a Conservative-dominated Westminster without Scottish MPs is a very attractive one?