This is the fifth occasion in just the past eight years on which I've had the pleasure of giving this biennial report on the state of the UK economy to our Scottish stakeholders. On each previous occasion I have been able to report to you relatively steady growth of overall output, a continuing fall in unemployment and stable low inflation. But I've then gone on to discuss the risks and uncertainties ahead and to worry out loud as to whether or not we could keep it up. On each occasion I have concluded - usually somewhat tentatively - that we could. And indeed we have in the UK - as a whole, though I have to admit it was a close run thing last winter in the wake of the unexpectedly sharp economic slowdown that hit the whole of the industrial world from the beginning of 2001. Despite that global economic shock - which produced near-simultaneous recession in the world's three largest economies, the US, Japan and Germany - we in the UK - at the overall, aggregate, level have now enjoyed continuous quarter by quarter growth at an annual average rate of 2¾% throughout the past 10 years. That is far and away the longest period of consecutive quarterly growth since quarterly estimates began nearly 50 years ago - and the annual average growth rate has remained somewhat above most estimates - at least until recently - of the longer term trend rate of some 2¼% - 2½%.
Those who look for a sharp downward adjustment typically point to the ratio of household debt to income, and to the ratio of house prices to earnings. They discount the relatively low debt-service to income ratio on the grounds that it could rise sharply if interest rates went up, and ask what might happen if unemployment were to start to rise sharply. To my mind those arguments have a degree of circularity. The possibility of a sharp rise in unemployment depends substantially on a sharp slowdown in consumer spending rather than the other way round. Similarly a sharp rise in interest rates is less likely if consumer spending is slowing down. So it is not all obvious to me at least that the household sector will suddenly run for cover in the  current environment, where the labour market remains remarkably robust, and the prospect for inflation - and hence the prospect for interest rates - remains relatively benign, remaining somewhat above target in the near term but moving down gradually as we move into next year. I don't say that things could not turn out rather worse than that - and there are other uncertainties, like development of the exchange rate, or the effect of the upcoming increase in National Insurance Contributions, which I have not touched upon this evening. Uncertainty is a fact of economic life.