The official economic data for the first half of 2020 is out, and according to the ONS there is only one country in Europe that Britain has not had a deeper recession than in the first half of the year. Spain. Apart from Belgium, the two countries which have the worst deaths per million from Covid-19 are of course Spain and the UK.* Remember when this crisis hit in March, all those commentators who were wailing about how failing economies affect people’s health too, as if it was an either/or between health and the economy? Governments should bear that in mind next time they are under pressure for early easing of lockdown restrictions.
What does the worst recession statistically on record mean in practise in Scotland? The Fraser of Allander Institute has published a useful review of the ONS’ data, finding that employment has fallen by 0.4 per cent in Scotland, compared to 0.2 per cent in the UK as a whole. These numbers are minuscule compared to the scale of the crisis, and the only explanation can be the furlough scheme, which Chancellor Rishi Sunak appears determined to pull the plug on at the end of October. A better indicator of what’s really going on with work is total hours worked, which has decreased in the UK by the most since records began in 1971. The jobs picture may be given a false image to many that the economy has not tanked, but beneath the headline employment figure the reality is clear.
Another factor is the sharp rise in zero-hours contract work since the pandemic crisis began, exceeding one million for the first time in the UK. It suggests employers are exploiting the difficult labour market to rip up contracts and demand increased flexibility, a development which will further increase pressure on standards of living. Scotland has also now had four successive months of declining wages. As jobs become harder to come by, they are also likely to become more insecure, precarious and low-income. This downward pressure on incomes will crash up against pre-pandemic contractual agreements to mortgages, credit cards, rents, etc, squeezing living standards and reducing consumption, which will then impact again on jobs in conspicuous consumption sectors like hospitality and retail. Recessions are vicious cycles.
The UK Government are currently chucking cash at the problem to keep this vicious cycle from accelerating, with £33.8 billion being spent on keeping 9.6 million people furloughed, while 1.16 million small firms having taken up the government’s ‘Bounce Back Loan’, introduced because the banks clearly weren’t up to the job. That’s another £35 billion. Add in the Bank of England’s hundreds of billions in low-interest loans to corporations and of course QE, and it’s clear that the state is now structurally critical to keeping almost every corner of the private sector afloat.
Contrast these sums to the Scottish Government’s £60 million for a “jobs guarantee” for young people announced yesterday, and Holyrood looks like a bit of a side-show in the big picture of this recession. Scottish Greens MSP Andy Wightman was right to describe it as “tinkering at the edges” in parliament on Wednesday. Even Benny Higgins, chair of the Scottish Government Economic Advisory Group and head of Buccleuch Estates, wrote yesterday that he found the Scottish Government’s response to his recommendations a little “dilatory” in places, which to you and I means pedestrian. Of course Scottish Ministers do not have the financial muscle of the UK Government, but they do have significant power over a range of economic areas that currently appear to be in business as usual mode.
Higgins’ suggestion, that we should “focus on education and skills development as a key to resolving inequality”, is pure Blairite, ‘third-way’ politics. This is no time for ‘education, education, education’ chat. As one Oxford University study of the “skills panacea” found way back in 2010, skills are “seen as one of the few avenues for government intervention that can, within a neo-liberal paradigm, be depicted as being both ideologically neutral and unthreatening to vested interests.”
They added: “Skills are thus the first and often the only resort because this approach excuses government from acknowledging and addressing issues such as ownership structures, product market strategies, work organisation, job design, employee relations, patterns of innovation, property rights, corporate governance regimes, or wider investment patterns.”
The Scottish Government has U-turned on the SQA debacle after initially not listening until the crisis reached fever pitch. They shouldn’t make the same mistake with their economic recovery strategy. A re-think is needed, with those who don’t have a vested interest in defending the status quo doing the thinking. Fiddling while Rome burns will not do in a crisis this big.
*This has been corrected after a previous version of this piece wrongly stated that Spain and the UK had the worst deaths per million in Europe.
Source Direct is a free morning newsletter providing you with all the latest Scottish news in your inbox each morning, including:
- Analysis of the key stories
- A summary of what’s in the Scottish papers
- The latest on Source
- Interesting opinion pieces from around Scottish media
To sign-up for Source Direct, click here.