Highland Council Response To Econmic Downturn

31st October 2009

The following is extracted from the Highland Councils paper presented to councillors on Thursday 29th October 2009. The full paper can be found at -
http://www.highland.gov.uk/NR/rdonlyres/BF39295D-7D8A-4538-A54E-BC79835E2E30/0/Item12hc3309.pdf

1. Economic Update
1.1 The latest Bank of England Agents' Summary of Business Conditions, published in
September 2009, is summarised below. It provides information on the state of
business conditions from companies across all sectors of the UK economy
between late July 2009 and late August 2009:
• Consumer spending had grown modestly.
• The pickup in housing market activity had continued.
• Investment intentions remain very weak, though somewhat less so than at
the trough of the recession.
• The rate of contraction in export volumes had slowed.
• Extend of de-stocking continued to moderate with de-stocking cycle drawing
to a close.
• More evidence that manufacturing and service sector output has stabilised
but construction activity had continued to shrink.
• Small firms continue to encounter difficulties in securing bank funding.
• Employment intentions less negative than earlier in the year with some
considering that cuts in staffing may be sufficient as long as demand
conditions do not deteriorate.
• Per capita labour costs remained lower than same period last year. Annual
inflation in material costs had eased further.
• Consumer goods and services price inflation remained low but positive.
1.2 The Scottish Government have advised that in August 2009 the Scottish economy
contracted by 2.4% in the first quarter of 2009, a rate consistent to that of the UK
and other advanced economies. This decline could further dip sharply in 2009 by
between 2.9% and 4.1% with only modest growth expected in 2010. This matches
closely the anticipated UK dip of 4% in 2009 and modest growth in 2010 of around
1%.
1.3 The Fraser of Allander Institute reported in their June 2009 economic commentary,
that:
The recession in the UK economy may be over. The National Institute for
Economic and Social Research in London called the end of the recession as
occurring in March and is estimating small positive growth in April and May of this
year. Due to lack of data the position in Scotland is much less clear. There is a
clear danger of a 'false dawn', since it is not unknown for previous UK recessions
to have one or two positive quarters of growth before growth turned negative again
… but the extent that a recovery may be emerging in the UK it is likely to be slow
and protracted.
Scotland economy faces many challenges in successfully recovering from
recession and establishing a favourable growth path. Analysis of structural change
over the past decade reveals that Scotland became more of a service sector
economy as manufacturing share and electronic production fell. The Scottish
economy effectively turned inwards and relied more on financial services,
construction, property related and business services and the public sector as
manufacturing exports played a smaller part in the demand for Scottish goods and
services. Because of this Scotland may have difficulty in adjusting to a situation of
higher household savings and severe cutbacks in public spending and/or higher
taxation, which will require the economy to become more export and private sector
orientated over the medium to long term.
1.4 The Highlands and Islands Monthly Economic Report produced by MacKay
Consultants, for September 2009, estimates that economic output in the region
was -2.2% lower than the July 2008 estimate. Overall the region's economic
performance has been a little above the national one but it is estimated that once
economic growth returns the region's rate will mirror that if not slightly lag the
Scottish and UK rates.
1.5 The number of people unemployed in Highland as measured by Jobseekers
Allowance (JSA) in August 2009 was 2.8%, lower than the averages for both
Scotland and Great Britain (4.2%). Unemployment in Highland is highly seasonal
and was above the Scotland and Great Britain average around the millenium but
has fallen steadily since then until beginning to rise in late 2008. Highland's
seasonal unemployment makes short term interpretation difficult but the figures
from late 2007 to date (July 2009) show that unemployment appears to be rising,
but at a slower rate than in Scotland and Great Britain. The number of young
people receiving JSA who are aged under 25 (ie aged 24 and below) generally
follows the national pattern with 1.7% of young people in Highland receiving the
benefit compared with 2.8% for Scotland overall and Great Britain 2.6%. As
Members will appreciate the unemployment rate varies across Highland from 1.3%
in Caol and Mallaig to 5.8% in Inverness Central.

2. Action Plan
2.1 The Council's approved Action Plan details actions across six headings:
• Housing
• Capital Programme
• Money Advice and Support to Individuals
• Employability and Support to Individuals
• Business Advice and Support
• Wider Economic Initiatives/Other Actions
2.2 Significant effort has been directed to deliver on the actions proposed. While a
wide range of activity is underway across the Council, actions worth noting include:
Housing
• Investment of £3m brought forward for affordable housing (132 homes) with
a further £2m investment to be considered by the Housing and Social Work
Committee in November 2009.
• Work is ongoing to finalise innovative funding models to help individuals
purchase their own home.
• A bid has been submitted to the Scottish Government for funding to help the
Council and use of the Land Bank fund to build 51 houses for rent.
• Contracts have been let and work has commenced on site for Scotland's
Housing Expo which will run in Inverness in August 2010.
Capital Programme
• The programme is on target to deliver c£70m of spend including £6m of
accelerated spend brought forward from 2010/11.
• The Convention of the Highlands and Islands has discussed a proposal to
align capital spend across the Community Planning partners in Highland to
gain better value for money in the procurement and delivery of capital
programmes across the public sector.
Money Advice and Support to Individuals
• A progress report on the development of a credit union for the Highlands
will be provided to the Resources Committee in December 2009.
• Advice agencies funded by the Council reported 8113 contacts for general
and welfare rights over Q1 2009/10. This is slightly lower than the
equivalent period for 2008/09 although a new monitoring system introduced
had an impact on the number of cases dealt with.
• The financial gain from closed cases dealt with by the advice network was
£1.07m in Q1 2009/10 and £784k in Q2 2009/10.
• The number of debt cases presented to the Council's own team and the
agency network was 292 in Q1 which was consistent with previous quarters
with the debt level remaining high at over £5m for the quarter
Employability
• Council employability services to help people into work are being reviewed
by a short life Member task group. This will focus on: the coverage and
targeting of services; how they should be delivered; how they can be funded
including with EU grant support; and how they can be better aligned with
services delivered by other public bodies. The review will report to the
Resources Committee in December 2009.
• An application for the Future Jobs Fund will be made by the end of October
for the first phase of Council sponsored posts. A total of 60 posts will be
available mainly in TECS (re-cycling and community works), ECS (sports
centres and youth work) and Housing and Property Services in two 6 month
tranches. The first posts will be available in February 2010. A further 30
posts are also under consideration for Future Jobs Funding in a second
round application creating 90 posts overall.
Business advice and support
• Business Gateway has had a successful launch with over 600 inquiries
dealt with since the service began in April 2009. John Swinney, Cabinet
Secretary for Finance and Sustainable Growth, officially launched the
Business Gateway service in the Highlands and Islands on 25 September
2009 from the Council's Business Gateway office at Castle Street,
Inverness.
• At the end of August 2009, 22 courses had been run on topics such as
business start-up, marketing, and finance with 131 participants. 82
business start-ups have been assisted.
• The Highland Business Growth Fund has offered assistance to 12
companies across the area with low cost finance to the value of £370k. In
excess of 66 jobs have been created by this funding.
• A new business start-up grant scheme was approved at PED using funds
transferred from HIE for Business Gateway. A LEADER application to
support this funding is currently under consideration and if approved should
be operating early in 2010. In total the fund could provide £250k of support
over the current and next financial years supporting 100 new businesses.
• The Small Business Bonus scheme is continuing to be marketed with 6418
businesses now benefiting from the scheme which represents 37.94 % of
all business's in Highland or 47.56 of business's that are of a size that may
qualify.
• Prompt payment is continuing to feature as a means of supporting
companies. In Q1 54.4% of invoices were paid within 10 days, an increase
of almost 6% on the last quarter of 2008/09. In Q2 this figure has improved
further with 56.21% of invoices paid within 10 days.
Wider economic initiatives/other actions
• The Nigg Masterplan has now been submitted to Scottish Ministers together
with a response to the Appropriate Assessment which has gone to Scottish
Natural Heritage. It is intended to report the outcome to the PED Committee
on the 18 November 2009 at which point the Council can adopt this as
Supplementary Planning Guidance. In the meantime KBR are considering
an in-house proposal to redevelop the site for offshore renewables.
• The Council is working with HIE and the Crown Estate on a Memorandum
of Understanding to maximise local benefits from offshore renewables. A
draft proposal will be discussed by the Highlands and Islands Conveners in
November 2009.
• The Council was successful in securing £463k for the Dingwall Streetscape
improvement project from the Town Centre Regeneration Fund. Further
bids were submitted for Thurso, Wick, Nairn and Fort William by the Council
as well as support for a bid from Tain. The results of the second round bids
are expected shortly.
• The Vacant and Derelict Land Fund has allocated funds to a number of
projects, notably in Wick where a contribution of £380k has matched
Conservation Area Renewal Scheme funding of £297k enabling the
Highland Housing Alliance to commence work on site at Larnach, Saltoun
Street/Williamson Street in Pultneytown.
• The Highland LEADER Programme has since it was launched in December
2008, committed £2.36m towards 106 projects with an anticipated total
projects cost of £7.2m.
• The Highland Economic Forum at its October 2009 meeting agreed an
Action Plan with lead organisations identified for the priority actions. Shortlife
working groups will now be established to progress these actions.