Download Setting the Scene for Change

Setting the Scene for Change
Richard Murray
Office of the Chief Economic Adviser
Synchronised Global Downturn
Annual GDP Growth
15
10
%
5
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
-5
-10
-15
France
Germany
Japan
UK
US
Poland
Australia
N. Zealand
Norway
Switzerland
Canada
Portugal
France
Chile
United
Belgium
Korea
Spain
Czech
Netherlands
Austria
Scotland
United
Germany
Italy
Slovak
Sweden
Denmark
Hungary
Luxembourg
Mexico
Greece
Finland
Japan
Turkey
Ireland
Iceland
Scale of the Recession in Scotland
Total Decline in GDP During the Recession
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
-16%
Top Quartile
Second Quartile
Third Quartile
Bottom Quartile
Fiscal Impact of Recession
UK Public Sector Revenue and Expenditure
800
Government
borrowing
600
500
Expenditure
Revenue
2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
400
2003-04
£ Billions
700
15-16
14-15
13-14
12-13
11-12
10-11
09-10
08-09
07-08
06-07
05-06
04-05
03-04
02-03
01-02
00-01
99-00
98-99
Net Borrowing (% of GDP)
Sharp Rise in UK Borrowing
Public Sector Net Borrowing
12
10
8
6
4
2
0
-2
Type of Borrowing
10
9
8
7
6
5
4
3
2
1
0
-1
Cyclical
15-16
14-15
13-14
12-13
11-12
10-11
09-10
08-09
07-08
06-07
05-06
04-05
03-04
02-03
Structural
01-02
% GDP
Cyclical vs Structural Borrowing
UK Government’s Fiscal Mandate
UK Cyclically Adjusted Current Budget Balance (% of GDP)
2.0
1.0
% of GDP
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
OBR - November 2010 Forecasts
March 2010 Budget
Total Scottish Government Budget
Real Growth in the Scottish DEL Budget 2010/11 Prices
4%
3%
Approximately half the cuts to occur next year
Real % Change
2%
0%
-1%
-2%
-2%
-2%
-3%
-4%
-6%
-6%
-8%
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
Long-Term Budgetary Impact
Scottish Government DEL Expenditure (2010-11 prices)
2009-10
2025-26
16 years
32,000
30,000
28,000
26,000
24,000
22,000
/2
7
/2
6
20
26
20
25
/2
5
20
24
/2
4
20
23
/2
3
/2
2
20
22
/2
1
20
21
20
20
/2
0
20
19
/1
9
20
18
/1
8
/1
7
20
17
/1
6
20
16
20
15
/1
5
20
14
/1
4
20
13
/1
3
/1
2
20
12
/1
1
20
11
20
10
/1
0
20,000
20
09
£ Millions (2010-11 Prices)
£39 billion
Stage of the Recovery
Scottish & UK GDP Growth
(Quarter-on-Quarter)
Percentage Change on Previous Quarter
2.0
1.5
1.0
0.5
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-0.5
2005
2006
2007
2008
2009
-1.0
-1.5
-2.0
-2.5
Scotland
UK
2010
Unemployment Remains High
Unemployment Rate (16+), Scotland and UK
8
6
4
2
Scotland
UK
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
0
20
Unemployment Rate (%)
10
Gradual Recovery in Scottish GDP
Level of Output in Scotland
105
Forecast
100
90
85
80
75
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Index
95
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Significant Risks Remain
• Impact of the fiscal consolidation
• Rising inflationary pressures
• Sovereign debt concerns in Euro Area
Concluding Thoughts
• Scottish economy in early stages of recovery
• Effects of the recession still being felt
• Significant uncertainty remains over strength
of the recovery
• Impact on the public finances over the
medium to long term