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Emerging indicators of impacts of Covid-19 on the economy and households in Scotland

There is a great interest in data that can provide timely information on the impact of the Coronavirus pandemic on the economy and ultimately the living standards and wellbeing of the population.

One of the challenges is that, unlike many of the health measures that can be used to track the impact of the virus (such as hospital admissions etc.), economy measures aren’t as straightforward to collect or interpret.

Indeed, and unfortunately, traditional economic statistics, such as GDP, often aren’t the most useful at such times. They are published with a lag, they are built upon ‘sectors’ as defined by national accounts rather than type of business activity (which is most relevant for social distancing), and they are subject to a greater margin of estimation error than normal.

Moreover, the nature of this crisis means that we will see large swings in such measures. It’ll be important to interpret them carefully and to avoid reading too much into one month or quarter of data, but instead to look at the longer-term trend.

For example there is usually a reasonable link between movements in aggregate output and in overall employment, but we know that GDP is taking a hit through the present crisis while its effect on employment (which we care more about in many ways) is being cushioned through the policy measures that have been adopted.

Traditional economic statistics also don’t measure things that might be of particular interest to policymakers at the current time, for example the risk of collapse and insolvency.

So instead, we have to rely upon different types of data and information gathering to build up a picture of the economy.

Here we produce a summary of some of the data for Scotland and highlight key gaps.

Changes in working hours, causes and implications – an introduction to our new project

We have recently started a new year-long project to examine how patterns of weekly hours worked have been changing in recent decades, examine what factors help explain those trends, and to consider implications for poverty, inequality – and policy. Whilst the distribution of hourly pay receives a lot of attention as a metric and for the design of policy, the level and distribution of hours worked is just as important for issues as diverse as poverty rates to tax revenues.

The project is funded by the Standard Life Foundation. Although the project was conceived well before the Covid-19 epidemic took hold, we plan in due course to examine how working patterns are changing during the pandemic and (hopefully) the recovery. But in the meantime it is useful to consider what has happened in recent years. Past trends may shed light on how the labour market might respond to current and future economic shocks and policy responses and help us identify who is most exposed to challenging outcomes.

We plan to share some of our findings as they emerge. In the first of such articles, we outline some of the changes to male working hours over the past 25 years across the UK. Subsequent analysis will consider trends for females (who have experienced quite different trends) and at the level of households, as well as individuals. What do we find? Continue reading

Scottish budget risks and uncertainties – implications of Covid-19

The Scottish Budget 2020/21 was published and agreed before Covid-19 was perceived as posing a significant health risk to the UK. This post examines how the policy response to Covid-19 will affect the size of the Scottish budget, the outlook for devolved revenues, and the financial risks the budget is exposed to. It also considers longer-term implications for the devolved fiscal framework.

Unforeseen uncertainties

In what feels like a different age, but was in fact earlier this year, the Scottish Government had expressed concern over the uncertain environment in which it had to prepare and publish its budget plans for 2020/21. Linked to this was a concern that parliament might scrutinise draft spending plans that were subsequently subject to substantial change.

These risks had nothing to do with a perceived threat of Covid-19 (the budget published on 6 February makes not a single reference to coronavirus or covid-19), but reflected the necessity to publish Scottish tax and spending plans a month before the UK budget.

As it happens the outlook for the 2020/21 budget has turned out to be far more uncertain that anyone could have anticipated, not because of surprise fiscal announcements from a buoyant new Westminster government, but from the necessity to shutdown large swathes of the economy to mitigate the impacts of Covid-19, and the resultant policy response.Continue reading

Yesterday, a framework for decision making… tomorrow, what next?

Yesterday, the Scottish Government published “COVID 19 – A Framework for Decision Making”. This document sets out how and under what circumstances the SG will take decisions on relaxing the current lockdown restrictions that we have all been getting used to.

The First Minister presented this as an attempt to have a “grown-up” conversation with the Scottish people about the ongoing realities of dealing with this pandemic, and what it is likely to mean for all aspects of our daily lives for the foreseeable future. While this can be seen as a thinly veiled criticism of some of the current Westminster rhetoric, and an attempt to differentiate the Scottish approach from that of Westminster, it is welcome that the SG are setting out this structure for decision making.

What has become clear is that we are not going back to pre-lockdown life any time soon. So the frankness of this document and the associated narrative from the FM and the CMO is helpful to set the scene for this honest conversation.

So what does this framework tell us?Continue reading

Covid 19 – Impact on Scottish Universities

This article was written by Stephen Boyle, a visiting researcher at the Fraser of Allander Institute.

Scotland’s universities have been successful in attracting international students. Among the richest ‘western’ countries, only in Luxembourg is the share of such students greater than in Scotland. In 2018-19, 23% of enrolments in Scotland’s universities were from outside the UK compared with 20% at universities in the rest of the UK.

Income from non-EU students has been growing rapidly for over a decade. The Scottish Government reported that between 2005-6 and 2015-16, total sector income rose by 38% in real terms while non-EU tuition fee income grew by 154%, a rate of almost 10% per year. Audit Scotland reported that the total income increased by 3% in real terms between 2014-15 and 2017-18 while non-EU fees rose by 31%, again around 10% per year. In the absence of this growth in fees from international students the universities’ income would have fallen in real terms in recent years.Continue reading