New labour market data…

New labour market data were out earlier today, covering all the headline estimates for Scotland and the UK.

These showed that the Scottish unemployment rate hit 3.7% in the three months to October 2019, down -0.3% points on the three months before and down -0.1% on a year before.

Meanwhile the employment rate hit 74.5%, down -0.4% points on the three months before and down -0.5% points on a year ago.

In this blog we pull out a few important points from today’s data.

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December 17, 2019

Fraser of Allander Economic Commentary for Q4 2019 published today

General election provides moment of clarity amongst recent uncertainty – but debate over Scotland’s economic future likely to intensify in 2020

The Conservative majority means that the UK will leave the EU at the end of January 2020. But SNP gains in Scotland raise prospect of renewed debate on second independence referendum.

Read our latest economic commentary here.

The outcome of the UK General Election has resolved one element of uncertainty in the UK economic policy landscape – the UK will now leave the European Union on the 31st January.

However, any hope of a swift resolution to the recent period of uncertainty is likely to be dashed according to the latest Economic Commentary by the Fraser of Allander Institute at the University of Strathclyde, which is produced in partnership with Deloitte.

The nature of the UK’s future economic relationship with the EU has still to be resolved within just 12 months, whilst the divergence in election results between Scotland and the rest of the UK has fuelled calls in some quarters for a second independence referendum.Continue reading

Today’s Fraser of Allander Economic Commentary in 10 bullet points

Today we published our final Economic Commentary for 2019.

Here we summarise the key points.

  1. Tomorrow we will get new GDP data for Scotland – covering the 3 month period to September

Chart: Scottish growth since 2014 – year and quarter %

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The latest data suggests that the economy will have bounced back somewhat (and thereby avoid a technical recession) after a slip-back in Q2 – following the unwinding of stock-piles in the run-up to the first Brexit deadline.

It will be important therefore not to read too much into one quarterly set of results. Instead, focus should be on the longer-term. This is likely to show that growth for the year as a whole is expected to come in once again at around 1% – marking a further year of disappointing below-trend growth for the Scottish economy.Continue reading

Demographic projections and income tax revenues under the fiscal framework: implications for the Scottish budget

Frantisek Brocek[1] and David Eiser

Under Scotland’s fiscal framework, Scotland’s budget will be better off (than it would have been without tax devolution) if income tax revenues per capita grow more quickly than they do in the rest of the UK (rUK).

Some have argued that demographic projections for Scotland mean that the Scottish budget will almost inevitably lose out from this arrangement.

This is because Scotland’s old age dependency ratio (the ratio of those above working age to those of working age) is projected to grow more rapidly than rUK’s over the period to 2050. Seeing as those above working age pay less income tax per capita, a more rapid growth in this group will act to slow the growth of total income tax revenues per capita, relative to rUK.

But in this blog we show that the issue is more nuanced than this. This is because, as well as there being a difference between the average revenues per capita for those of working age compared to those above working age, there is also significant variation in income tax revenues per capita by age group within the working age population.

When demographic projections by age group are taken into account on a more granular basis, it turns out that the operation of the fiscal framework might actually work in Scotland’s favour. Although Scotland’s old age population is projected to grow relatively more rapidly, its population of children and young adults (who pay little tax) is also projected to decline more rapidly. This more than offsets the impact of a faster growing older population in reducing the growth of income tax revenues per capita.Continue reading

December 4, 2019

Latests nowcasts of the Scottish economy

With official estimates of GDP growth in Scotland in Q3 2019 due to be released later this month, we’ve updated our nowcasts for the Scottish economy for Q3 and Q4 2019.

These estimates put growth in Scotland:

  • For 2019 Q3 growth at 0.21% which, at an annual rate, is 0.83%
  • For 2019 Q4 growth is 0.25% which, at an annual rate, is 0.99%

These estimates represent similar estimates to those released last month – and a continuation of the sustained period of weak growth experienced through much of the past few years.

In the last set of official estimates of growth in Scotland, growth in the year to Q2 was 0.6%, included in this estimate was the contraction in GDP in Q2 itself.

The positive growth estimate for Q3 implies that Scotland will not enter recession in 2019.

Taking our estimates for Q3 and Q4 (above) together with the official estimates for 2019 Q1 and Q2, implies economic growth in Scotland of 0.7% between 2019 Q4 and 2018 Q4, or on a 4 quarter on 4 quarter basis, growth is estimated to be 0.8% in 2019.