By David Williams
22 April 2010
Work and welfare policy took centre stage in the general election campaign this week, as official statistics showed that unemployment was on the rise again.
Data released by the Office for National Statistics on April 21 showed that the number of people out of work rose by 43,000 in the three months to February, topping 2.5 million for the first time since 1996. It followed a modest drop in unemployment of 33,000 the month before.
However, the rise contrasted with a fall in the number of people claiming Jobseeker’s Allowance – figures for March show the figure was down by 32,900 to 1.54 million.
Liberal Democrat Treasury spokesman Vince Cable said the figures ‘exposed the folly of Tory plans to pull the rug from under the economy’.
He highlighted LibDem plans to kick-start new infrastructure projects and force banks to lend.
Labour said the data illustrated how fragile the recovery from recession was. Work and Pensions Secretary Yvette Cooper argued that it would be ‘disastrous’ to make redundancies in the public sector before a return to more solid growth.
She also pledged a ‘youth guarantee’, entitling young people to jobs or training after six months of unemployment, and a ‘job guarantee’, providing more assistance for jobseekers to access training, work placements and other support.
On the same day, Conservative leader David Cameron promised to ‘tear up the old ways of dealing with worklessness’.
He outlined plans to give more help for newly unemployed people, along with a package of measures including: help for people wanting to set up their own business; 400,000 new training placements; and ‘work clubs’ to teach new skills to those looking for a job.
Meanwhile, people who turned down ‘reasonable job offers’ would have their allowances cut, and all Incapacity Benefit claimants would be reassessed, with those fit for work transferred on to Jobseeker’s Allowance.
The Conservatives also proposed that agencies contracted to help people back into employment should be paid in full only for clientswho stayed in work for more than a year.
Experts pointed out that there were few significant differences between Labour and the Tories on the issue. Mike Brewer, programme director at the Institute for Fiscal Studies, said that although the Conservatives presented their policy as a ‘new welfare contract’, most of their ideas ‘merely go a little further in the direction of policy taken or planned by the current government’.
He added that Tory plans to spend an extra £600m on training schemes using savings generated by moving some claimants off Incapacity Benefit did not add up. The savings were already planned by the government, he said.
‘It’s extremely difficult to assess how much welfare policies ever save,’ he told Public Finance. ‘Governments and opposition parties always like to say, “we will spend more money helping people find work and this will generate savings in the long run”.
‘It’s always incredibly hard to verify that.’
He added that an economic recovery and subsequent fall in unemployment would make much more difference than any reforms to the welfare system.
Ian Brinkley, associate director of the Work Foundation, agreed. ‘Encouraging more people to go into small business is helpful but marginal,’ he said.
‘What you’re not seeing from either party is where the new industries, the new jobs and new economic growth are going to come from.’
Brinkley also warned that the JSA claimant figures were deceptive, and that an 89,000 fall in the total number of people in work showed that the labour market was stagnating, with little growth outside of the public sector.
Benjamin Williamson, economist at the Centre for Economics and Business Research, said all data on employment should be viewed in the context of the coming retrenchment of the public sector. ‘Our forecasts show that unemployment is going to start rising again when the public sector starts to contract.’
The CEBR calculates that the UK economy will have grown by 0.4% in the first quarter of 2010 – which Williamson said could be wiped out if public spending were cut back too quickly.
He added that a surprise leap in the consumer price index was no cause for optimism. The inflation index jumped to 3.4% in March from 3% in February, according to ONS data published on April 20.
‘It’s mostly imported,’ Williamson said. ‘It’s not down to high demand – it’s mostly due to the relative price of oil going up due to currency depreciation, that has made everything more expensive for us.’
As Public Finance went to press, the ONS was preparing to publish economic data on gross domestic product and the state of the public finances.
22 April 2010
Work and welfare policy took centre stage in the general election campaign this week, as official statistics showed that unemployment was on the rise again.
Data released by the Office for National Statistics on April 21 showed that the number of people out of work rose by 43,000 in the three months to February, topping 2.5 million for the first time since 1996. It followed a modest drop in unemployment of 33,000 the month before.
However, the rise contrasted with a fall in the number of people claiming Jobseeker’s Allowance – figures for March show the figure was down by 32,900 to 1.54 million.
Liberal Democrat Treasury spokesman Vince Cable said the figures ‘exposed the folly of Tory plans to pull the rug from under the economy’.
He highlighted LibDem plans to kick-start new infrastructure projects and force banks to lend.
Labour said the data illustrated how fragile the recovery from recession was. Work and Pensions Secretary Yvette Cooper argued that it would be ‘disastrous’ to make redundancies in the public sector before a return to more solid growth.
She also pledged a ‘youth guarantee’, entitling young people to jobs or training after six months of unemployment, and a ‘job guarantee’, providing more assistance for jobseekers to access training, work placements and other support.
On the same day, Conservative leader David Cameron promised to ‘tear up the old ways of dealing with worklessness’.
He outlined plans to give more help for newly unemployed people, along with a package of measures including: help for people wanting to set up their own business; 400,000 new training placements; and ‘work clubs’ to teach new skills to those looking for a job.
Meanwhile, people who turned down ‘reasonable job offers’ would have their allowances cut, and all Incapacity Benefit claimants would be reassessed, with those fit for work transferred on to Jobseeker’s Allowance.
The Conservatives also proposed that agencies contracted to help people back into employment should be paid in full only for clientswho stayed in work for more than a year.
Experts pointed out that there were few significant differences between Labour and the Tories on the issue. Mike Brewer, programme director at the Institute for Fiscal Studies, said that although the Conservatives presented their policy as a ‘new welfare contract’, most of their ideas ‘merely go a little further in the direction of policy taken or planned by the current government’.
He added that Tory plans to spend an extra £600m on training schemes using savings generated by moving some claimants off Incapacity Benefit did not add up. The savings were already planned by the government, he said.
‘It’s extremely difficult to assess how much welfare policies ever save,’ he told Public Finance. ‘Governments and opposition parties always like to say, “we will spend more money helping people find work and this will generate savings in the long run”.
‘It’s always incredibly hard to verify that.’
He added that an economic recovery and subsequent fall in unemployment would make much more difference than any reforms to the welfare system.
Ian Brinkley, associate director of the Work Foundation, agreed. ‘Encouraging more people to go into small business is helpful but marginal,’ he said.
‘What you’re not seeing from either party is where the new industries, the new jobs and new economic growth are going to come from.’
Brinkley also warned that the JSA claimant figures were deceptive, and that an 89,000 fall in the total number of people in work showed that the labour market was stagnating, with little growth outside of the public sector.
Benjamin Williamson, economist at the Centre for Economics and Business Research, said all data on employment should be viewed in the context of the coming retrenchment of the public sector. ‘Our forecasts show that unemployment is going to start rising again when the public sector starts to contract.’
The CEBR calculates that the UK economy will have grown by 0.4% in the first quarter of 2010 – which Williamson said could be wiped out if public spending were cut back too quickly.
He added that a surprise leap in the consumer price index was no cause for optimism. The inflation index jumped to 3.4% in March from 3% in February, according to ONS data published on April 20.
‘It’s mostly imported,’ Williamson said. ‘It’s not down to high demand – it’s mostly due to the relative price of oil going up due to currency depreciation, that has made everything more expensive for us.’
As Public Finance went to press, the ONS was preparing to publish economic data on gross domestic product and the state of the public finances.
