This week, the Chief Economist of the Bank of England, Huw Pill, generated many headlines when he said that “we’re all worse off” due to the stubbornly high inflation the economy is experiencing – and bluntly, that we all just need to accept that (write MARI SPOWAGE and EMMA CONGREVE) .
Given this follows on from Governor Andrew Bailey’s comments that people shouldn’t ask for pay rises, it adds a bit to the narrative that the Bank of England is a bit tin-eared to the way workers and households feel right now.
However, Pill’s comments are a reflection of the current outlook. Even with the more optimistic forecasts that we had from the OBR recently, meaning that a recession may be avoided, living standards are still projected to fall significantly over the course of 2023.
It is important though that we have a debate about who in society should bear the brunt of the costs we are experiencing, and whether indeed it is ever going to be possible to protect much of our society from these external shocks.
No sign of a recession… yet
On a more optimistic note, data published this week showed that the Scottish economy grew by 0.2% in February 2023, which follows on from growth of 0.5% in January. Services grew by 0.4%, and particularly encouraging was that consumer-facing services grew by 1.3%.
This means it looks like Q1 2023 is going to show some growth, rather than a contraction as many (including us) had feared.
It will be interesting to see how the economy evolves as we move past the end of March, when we know government support for energy bills started to wind down, particularly for businesses.
How does Scotland compare to other regions of the UK?
ONS have published their latest data on regional economic activity – which you can get split up by all sorts of levels of geography, including local authority and city region, and by industry.
This data allows us to compare the level and type of economic activity across the UK, for the year 1997-2021. Looking across the 12 regions of the UK, known as International Territorial Level (ITL) 1 Regions, we can see that economic activity in London far outstrips that of the other region of the UK. Scotland usually performs pretty well on these metrics, generally 3rd or 4th in the UK depending on the year.
Chart: GVA per head, ITL 1 Regions
Source: ONS
[As statto aside, this is “onshore” Scotland only. Aficionados of economic statistics in the UK will be aware that activity associated with the whole UK Continental Shelf is put into a 13th region called “extra-regio”, which also includes activities in embassies abroad.]
There are also significant differences between different local authorities within Scotland, with the main cities outperforming many other areas of the country. We have to remember of course that the economic activity data reflects where activity takes place – i.e. the location of the place of employment – rather than where people live, so there is a significant commuting effect associated with this data.
Chart: GVA per head, local authority
Source: ONS
Despite another instalment in the long running NCS saga, we still have no certainty over what, when or how much
Last week, it became clear that the National Care Service legislation (and by extension its delivery) will be pushed back (again). In a letter to the Health, Social Care and Sport Committee on the 17th April, the Minister stated that the Scottish Government would be seeking parliamentary approval to extend Stage 1 of the Bill till after the summer recess.
We have written before on some of the questions that remained following the introduction of the Bill and the accompanying Financial Memorandum. The Finance and Public Administration Committee shared many of our concerns (and had others) about the lack of detail in the Financial Memorandum and asked the Scottish Government for an updated version. The Convenor of that Committee, Kenny Gibson, wrote to the Minister this week noting that the Committee are becoming:
“increasingly concerned at the lack of information available on the financial implications of the Bill and frustrated that we have still not received the updated FM we requested back in December last year”
They have asked for a new Financial Memorandum no later than Friday 12 May along with a breakdown of spend to date on the NCS.
The importance of the NCS to those who work and draw on social care, and to wider society, is huge. Although there remains a difference of opinion on how reform should happen, all agree that reform is needed. The delays that we have seen with the programme to date have been concerning. Understanding the financial implications of what this all means has been nigh on impossible. This call for clarity is welcome.
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