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					                               FIFE PARTNERSHIP
                                                           Fife Partnership Board
                                                           24 March 2009
                                                           Agenda Item 06

               RESPONDING TO THE ECONOMIC RECESSION:
                         A FIFE ACTION PLAN


1.   INTRODUCTION

     1.1   This paper sets out local actions being undertaken and proposed to
           respond to the economic recession and seeks input from the Fife
           Partnership for a coordinated Partnership response.

     1.2   Section 2 reviews the background to the economic difficulties and section
           3 looks at the problems already being encountered in Fife.

     1.3   Section 4 proposes a series of actions and section 5 makes
           recommendations.


2    BACKGROUND

     2.1   The UK has now suffered two consecutive quarterly reductions in GDP,
           the commonly held definition of recession. This is part of a worldwide
           downturn in economic activity, which has gathered pace in the latter part
           of 2008 and early 2009.

     2.2   The causes of the recession are varied and complex. However, the key
           factors appear to be:

           2.2.1 A global imbalance between developed and emerging economies,
                 in which savings from the latter financed budget deficits in the
                 former and led to over valuation of assets and securities in key
                 markets – particularly housing in the USA and other countries
                 including the UK.

           2.2.2. The ‘credit crunch’ – a severe shortage of money or credit which is
                  affecting banks, businesses and families as a result of problems in
                  the sub-prime mortgage market in the USA, reducing confidence
                  and trust within the banking sector leading to restricted lending and
                  availability of credit.

           2.2.3 Rising oil prices and commodity/food prices – which kept inflation
                 and its projections above the Bank of England target rate resulting
                 in minimal slacking of monetary policy until late 2007 and much
                 more rapid cuts in the Bank of England lending rate over the last
                 few months.
    2.3   The results have been felt outside of the financial markets with falling
          house prices, rising bankruptcy and business failure, rising
          unemployment, falling retail sales and falling consumer and business
          confidence.

    2.4   In response, a series of high profile action plans and statements have
          been issued from international and national governments including the
          G7, G20, European Union, UK and Scottish Governments. In general
          these packages have sought to:

             Recapitalise the banks and other financial institutions
             Increase the flow of money in economies through slackening monetary
              policy
             Maintain demand in economies through increasing public sector
              expenditure and reduction in taxes
             Provide public policy support to businesses, homeowners and
              employees made redundant
             Reform the financial system
             Guarantee savings
             Promote sustainable economic growth

    2.5   Latest projections from the Bank of England suggest that the recession
          will last until early 2010 although the effects will be longer, particularly as
          the last recession in the UK in the early 1990s saw six consecutive
          quarters of negative growth.


3   IMPACT IN FIFE

    3.1   The latest Experian forecasts for Fife estimate that during 2000-2007
          annual average growth rate in Fife Output (as measured by Gross Value
          Added (GVA)) was 2.1%. By contrast, Fife’s GVA is expected to contract
          by 1.2% during 2009. The impact of the economic downturn has already
          been felt locally.

    3.2   Statistics from the latest Labour Market Update show that unemployment
          began to increase from July 2008. There has been a decrease in the
          number of job/training placements available especially in the construction
          industry. The latest data for January 2009 shows an increase from the
          same month in 2008, from 2.8% to 4.1%. Fife’s rate of unemployment
          has historically been higher than Scotland as a whole.

    3.3   The Halifax House Price Index has seen a 6.0% decline in Scotland with a
          similar fall forecast for 2009. The Council of Mortgage Lenders recently
          said that updating their house price predictions was ‘futile’ as the housing
          market slump is unlikely to end before 2010.
    3.4   Company bankruptcies in Scotland increased by 30% in the second
          quarter of 2008/09 financial year (equating to a 43% increase year-on-
          year), whilst individual insolvencies have risen by 70% compared to the
          same period last year.

    3.5   Partners have also been impacted by the economic downturn. The
          Council, for example, has seen a reduction in the number of planning
          applications, building warrants and property enquiry certificates with a
          consequent loss of fee income; reduction in income from council tax, non
          domestic rates and capital receipts; and increased rent arrears. Partners
          in the voluntary sector have seen an increasing demand for money advice
          and rights and advice services.

    3.7   Finally, there are opportunities arising from the changed economic
          environment:

             Public sector employment is being seen as safer than private sector.
             Green Travel – The downturn could assist in increasing car sharing
              and use of public transport.
             Procurement and contracts – The market may become more
              competitive and provide better prices.


4   FUTURE DEVELOPMENTS

    4.1   The pace at which the recession is deepening makes it extremely difficult
          to predict future developments. It will be important, therefore, to monitor
          events closely and adapt our responses as appropriate.

    4.2   It is clear, however, that the scale of the downturn requires a strategic
          rather than a piecemeal response. A risk assessment has therefore been
          carried out and is summarised using a Balanced Scorecard approach
          allowing the Partnership to address risks for customers, employees,
          resources and the delivery of Community Plan Outcomes. The timing of
          these risks is difficult to predict. The results are summarised in this
          section.

    4.3   Customers

             Increased demand for consumer rights and advice, promoting benefit
              take-up and campaigns
             Increased contact with customers in financial difficulty
             Possible increase in complaints
             Protection for vulnerable clients against (e.g.) increases in money
              lending, family break-up, stress
             Reduced individual and family income
             Areas of multiple deprivation may suffer relatively worse impacts than
              more affluent areas
             Reduction in confidence and lack of finance could lead to isolation for
              vulnerable people
         Possible reduction in trust of public services and civic leadership

4.4   Employees

         Employees may not have appropriate skills to deal with distressed
          customers
         Training budgets may come under pressure
         Employees themselves may need financial advice and assistance

4.5   Resources

         Individuals may become more sensitive to charges for services
         A new focus on efficiencies could diminish our capacity to respond to
          rising service demands
         Balances and contingencies more difficult to maintain with reduced
          income
         Suppliers’ and contractors’ financial problems lead to reduced service
          delivery
         Issues for treasury management, investments, and Pension Fund
          Management arising from problems in financial markets.

4.6   Community Plan Outcomes

         Increase in Business failure and decrease in start-ups
         Difficulty in placing More Choices More Chances (MCMC) group and
          trainees in appropriate employment and/or training
         Businesses may withdraw from workforce training during recession to
          cut costs
         Reduction in inward investment
         Failure of retail businesses impacting on Town Centres
         Reduction in investment in business infrastructure by private
          developers
         Increase in anti-social behaviour, acquisitive crime and fear of crime
         Increase in accidents and antisocial behaviour at mothballed
          development sites
         Reduction in new private sector house building and downsizing of
          workforces
         Increase in housing repossessions and increased demand for rented
          housing
         Maintaining improvements in educational attainment and achievement
         Reduced financial capacity for individuals and families to access early
          years development opportunities, cultural, educational and social
          opportunities, healthy diet and fitness
         Increased mental health problems
5     ACTION PLAN

      5.1    Appendix 1 contains actions presented to the Council’s Policy, Finance and
             Asset Management Committee, to assist mitigate the effects of the
             recession. These have been grouped under three headings:

                Information and Advice
                Investment and Expenditure
                Intervention and Policy

             and categorised as actions to assist businesses and organisations,
             individuals and employees.

      5.2    As stated above, there is a need to continue monitoring the effects of the
             recession on businesses, individuals, organisations and employees. This is
             being undertaken by Development Services and the Corporate Research
             Team within Performance and Organisational Support.

      5.3    The Fife Economic Partnership has also discussed the need for local action
             to tackle the recession.


6     RECOMMENDATIONS

      The Fife Partnership Board is asked to:

      1     Note the effects of the recession on Partners, Fife residents and businesses.

      2     Note the actions already being taken to mitigate the effects of the recession

      3     Comment on the actions contained in Appendix 1 and suggest additional
            Partnership responses to the recession


                                                                           Ronnie Hinds
                                                                          Chief Executive
                                                                             Fife Council

Contact:
Paul Vaughan
Senior Manager (Policy & Communications)
Performance and Organisational Support
Fife House
Glenrothes
Tel: 08451 555555 Ext.
Email: Paul.Vaughan@fife.gov.uk

12 March 2009

				
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