One in 10 Scots ‘to be jobless’ by end of year

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ONE IN ten working-age people in Scotland will be on the dole by the end of the year, according to a major new report painting a bleak two years ahead for families across the country.

Amid further evidence of the weakness in the economy, Strathclyde University’s Fraser of Allander Institute has markedly revised upwards its estimates on unemployment this year, saying it expects 265,250 people to be searching for a job by the end of 2012.

Brian Ashcroft: hit out at UK government's economic policies. Picture: Robert Perry

Brian Ashcroft: hit out at UK government's economic policies. Picture: Robert Perry

The report, however, does suggest there could be some green shoots emerging, but only in 2014.

And in what could end up being a major economic boost for the SNP, the institute suggests that Scotland will finally recover from the Great Recession in the weeks before Alex Salmond proposes to hold his independence referendum.

Before then, however, it appears that families and businesses will have to accept further cutbacks in their budgeting, with little prospect of growth.

The unemployment figure represents 9.8 per cent of the labour market, and an extra 34,000 people compared to the end of last year.

Willie Rennie: UK government's Youth Contract will help young people get work

Willie Rennie: UK government's Youth Contract will help young people get work

The labour market is “now clearly weaker than the UK”, the institute’s quarterly commentary says, warning that the country is facing an “economic tragedy”, as tens of thousands of youngsters leave school or training places only to head straight for the job centre.

In a blunt analysis of the crisis, Professor Brian Ashcroft, the editor of the commentary, blames in part the UK government’s austerity measures for choking off growth, describing it as a “serious economic policy mistake” which will be remembered for “generations”. Ahead of his budget later this month, however, Chancellor George Osborne has warned that the UK government has “run out of money”, saying the private sector has to be driver for growth if jobs are to recover.

With families continuing to rein in spending as they pay down boom-time debts, and amid a eurozone-inspired crisis of business confidence, analysts at PricewaterhouseCoopers (PwC), which supports the research, are warning that the country is set to “continue to bump along the bottom” in the short term. The quarterly report markedly revises down its 2012 forecast for Scottish economic growth from 0.9 per cent at the time of last report to just 0.4 per cent now. In 2013, the economy improves a little, with the report predicting growth of around 1.7 per cent.

By 2014, growth will be back up to a healthy 2.6 per cent. If proved correct, such a course will finally see Scotland make up for the 6 per cent slump in GDP which the country has suffered in the course of the recession.

Unemployment will fall from its high at the end of this year, but the economists believe it will be 2014 before it returns to current levels, with unemployment still likely to be running at 8.8 per cent even then.

The core problem, the commentary suggests, is that the supply of labour is rising too fast compared to the number of jobs on offer. This mis-match between people and available jobs is now “identical to the trough of the recession”, the report says.

It means the amount of “net” jobs available fell by 40,000 last year, and is set to fall by a further 16,000 this year. The institute expects more jobs to be available in 2013 and 2014, helping to kick-start the economy once again.

Prof Ashcroft last night hit out at the UK government’s economic policies, saying that the slowdown on spending was causing much of the problem.

He said: “The UK economy is labouring under a programme of fiscal austerity which is slowing growth and which may ultimately prove to be self-defeating. With unemployment in the UK rising towards three million and a quarter of a million in Scotland, a generation of young person’s job prospects are under threat.” He added: “This austerity policy is a serious economic policy mistake that will arguably be remembered for generations to come”.

He contrasted the UK policy with the direction in US which, he said, has already recovered the lost ground from the 2008 recession.

Households had a glimmer of light at the end of the tunnel, he said, if the eurozone remains stable, and if inflation continues to fall, thereby increasing household spending power.

But, he added, with families still weighted down in debts, there remained a risk that shops and businesses may not see any benefit from that, if households opt instead to increase savings.

Paul Brewer, senior partner at PwC in Edinburgh, said a problem for businesses remained the availability of credit from banks.

But he added there was also evidence that demand for credit was falling, with firms scaling back any risky investments.

Mr Osborne is under massive pressure to inject a growth stimulating measure into the budget in three weeks’ time. He has warned that any stimulus measures have to be paid for by spending cuts from elsewhere.

In Scotland, opposition parties turned their fire on the Scottish Government saying it needed to do more to boost growth using its own powers. On the new forecasts on unemployment, Scottish Labour finance spokesperson Ken Macintosh said: “We don’t just face the prospect of a lost generation. We are experiencing a lost generation right now.”

He added: “People don’t want to hear Scottish Government ministers passing the buck. Every time there is the slightest element of good news on the economy, the SNP are quick to take credit, so they need to take responsibility now.”

Scottish Conservative finance spokesman, Gavin Brown MSP said: “The SNP must use all of the levers they currently have at their disposal to maximise economic growth in Scotland.”

Scottish Liberal Democrat leader Willie Rennie said the UK government’s £1 billion Youth Contract would help get young people back into work.

However, a Scottish Government spokesperson said last night: “Tackling the scourge of unemployment is an absolute priority for this government and we are using every lever currently available to us to secure new investment and create and safeguard jobs, in the face of severe cuts from Westminster.”