SCOTLAND may experience a slightly shallower recession than the rest of the UK due to relatively lower mortgage debt north of the Border, experts have told MSPs.
However, the Scottish Fiscal Commission (SFC) said Scotland and the rest of the UK are expected to follow broadly similar paths amid an economic downturn next year.
The SFC says Scotland has already entered recession this year and in 2023 real household income is expected to see its sharpest decline since records began in 1998.
Speaking to Holyrood’s Finance Committee, SFC chairman Professor Graeme Roy said those with the lowest incomes would be disproportionately affected by this.
READ MORE: Glasgow tech sector expanding ‘at rapid rate’ with £100m investment
Committee convener Kenneth Gibson said the forecast was “grim news indeed”.
Roy said: “Broadly speaking – this is a judgment call – we think the recession will be slightly shallower in Scotland compared to the UK.”
He continued: “Some of that is about the level of mortgage debt relative to the UK as a whole which then means that if interest rates go up, Scottish households are – all else remaining equal – less exposed to that increase in potential mortgage payments.”
A rebound in North Sea earnings could also boost Scotland’s relative economic performance, he said, as would difficulties in the financial services industry in London.
Professor Roy added: “Broadly speaking, we see Scotland being pretty similar to the UK over the next couple of years in that challenging environment.”
The SFC representatives said Scottish house prices are lower on average than south of the Border.
Earlier, a separate panel of the Scottish Government’s economic advisors gave evidence to the committee.
Professor Sir Anton Muscatelli said MSPs should give “serious thought” about public sector reform as difficult times lie ahead.
Discussing the Scottish Government’s recent Budget, the principal of Glasgow University said: “There are more difficult times ahead.
“We expect, simply from the UK Government’s announcement, further constraints on fiscal policy ahead in the next couple of years.
“We don’t know, of course, what will happen after a UK election, it may or may not get tighter.”
He added: “Therefore, this is an important time I think for the Scottish Parliament to think seriously about how it engages in public service reform to get the most efficient outcomes in terms of total public spending.
“Because there will be pressures on public service salaries and therefore hard choices may need to be made.”
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here