UK unemployment will get worse before it gets better

Without targeted action, the UK will suffer.

Everyone knows it is tough to get a job right now. But it’s going to get worse, before it gets better. That’s the judgement of the Office for Budget Responsibility. Their latest forecast, published by George Osborne alongside the Budget, shows that unemployment will peak at 8.7 per cent and it will not fall until quarter three 2013, next September at the earliest.

The UK’s unemployment rate (8.4 per cent) is the worst for 17 years, since 1995. But the OBR’s forecast suggests that another hundred thousand more people in Britain will be without a job before the end of the summer. IPPR analysis – based on the pattern of the increase in 2011 – shows that 50,000 more men and more 50,000 women will become unemployed this year, with 100,000 public sector jobs lost and the 200,000 new jobs created in the private sector being matched by the increase in the number of people looking for work in the UK.

Young people will continue to bear the brunt of unemployment, with an extra 41,000 young people aged under 25 joining those already unemployed breaking a new record, since records began in 1992. At the other end of the age scale, an extra 7,000 people aged over 50 will become unemployed, who will find it very tough to find work again.

Overall, unemployment will not "peak" until at least September and if unemployment rises again this month, as the OBR predicts, it will be the tenth month in a row. In America, unemployment is falling and the economy growing. Last year, the US economy grew by 1.7 per cent versus 0.8 per cent in Britain. US employment grew 1.2 per cent while Britain lagged at 0.7 per cent. And US growth appears to be accelerating: it was 0.7 per cent in the final quarter of 2011 compared with a decline of 0.2 per cent for Britain.

An important reason why America is stronger is that President Obama has maintained his commitment to fiscal stimulus while the UK has focused on austerity. The biggest danger in the UK is not Greek-style default but Japanese-style stagnation. But even if the government won’t change its fiscal stance, there is something to learn from America.

The primary tool for US stimulus has been a payroll tax cut introduced in 2010 and recently extended with cross-party support through 2012. The cut reduced the rate of an employee’s contribution to social security from 6.2 to 4.2 per cent, putting $1,000 per year into families’ pockets. This has injected $92 billion a year of stimulus into the economy and US consumer spending increased by 2.2 per cent last year while it shrank by 0.8 per cent in Britain. One might think this extra spending was at the expense of debt reduction, but the reverse is true — US households have reduced debts by 11 per cent since the bubble burst as against only 5 per cent for Britain.

This combination of increasing consumption and reducing debt is the key to recovery. Businesses in Britain and around the world are sitting on record piles of cash: $2 trillion globally. But they won’t invest that cash and create jobs until they see the demand for their products and services rising. And squeezed consumers won’t create that demand until they have confidence they can spend a bit more and manage their debts.

This has been the longest recession and the slowest recovery that Britain has ever experienced. The personal tragedy of the slow economic recovery is the way unemployment will continue to rise, even once the economy begins to grow. The risk is that high unemployment becomes a permanent feature of the UK economy, as it did in the 1980s. Even within the context of the Government’s deficit reduction plan, it is short-sighted of the not to do more to get people back into jobs.

People queue outside a jobcentre at the height of the recession. Credit: Getty

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

Photo: Getty
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The UK press’s timid reaction to Brexit is in marked contrast to the satire unleashed on Trump

For the BBC, it seems, to question leaving the EU is to be unpatriotic.

Faced with arguably their biggest political-cum-constitutional ­crisis in half a century, the press on either side of the pond has reacted very differently. Confronting a president who, unlike many predecessors, does not merely covertly dislike the press but rages against its supposed mendacity as a purveyor of “fake news”, the fourth estate in the US has had a pretty successful first 150-odd days of the Trump era. The Washington Post has recovered its Watergate mojo – the bloodhound tenacity that brought down Richard Nixon. The Post’s investigations into links between the Kremlin and Donald Trump’s associates and appointees have yielded the scalp of the former security adviser Michael Flynn and led to Attorney General Jeff Sessions recusing himself from all inquiries into Trump-Russia contacts. Few imagine the story will end there.

Meanwhile, the New York Times has cast off its image as “the grey lady” and come out in sharper colours. Commenting on the James Comey memo in an editorial, the Times raised the possibility that Trump was trying to “obstruct justice”, and called on Washington lawmakers to “uphold the constitution”. Trump’s denunciations of the Times as “failing” have acted as commercial “rocket fuel” for the paper, according to its CEO, Mark Thompson: it gained an “astonishing” 308,000 net digital news subscriptions in the first quarter of 2017.

US-based broadcast organisations such as CNN and ABC, once considered slick or bland, have reacted to Trump’s bullying in forthright style. Political satire is thriving, led by Saturday Night Live, with its devastating impersonations of the president by Alec Baldwin and of his press secretary Sean Spicer by the brilliant Melissa McCarthy.

British press reaction to Brexit – an epic constitutional, political and economic mess-up that probably includes a mind-bogglingly destructive self-ejection from a single market and customs union that took decades to construct, a move pushed through by a far-right faction of the Tory party – has been much more muted. The situation is complicated by the cheerleading for Brexit by most of the British tabloids and the Daily Telegraph. There are stirrings of resistance, but even after an election in which Theresa May spectacularly failed to secure a mandate for her hard Brexit, there is a sense, though the criticism of her has been intense, of the media pussy-footing around a government in disarray – not properly interrogating those who still seem to promise that, in relation to Europe, we can have our cake and eat it.

This is especially the case with the BBC, a state broadcaster that proudly proclaims its independence from the government of the day, protected by the famous “arm’s-length” principle. In the case of Brexit, the BBC invoked its concept of “balance” to give equal airtime and weight to Leavers and Remainers. Fair enough, you might say, but according to the economist Simon Wren-Lewis, it ignored a “near-unanimous view among economists that Brexit would hurt the UK economy in the longer term”.

A similar view of “balance” in the past led the BBC to equate views of ­non-scientific climate contrarians, often linked to the fossil-fuel lobby, with those of leading climate scientists. Many BBC Remainer insiders still feel incensed by what they regard as BBC betrayal over Brexit. Although the referendum of 23 June 2016 said nothing about leaving the single market or the customs union, the Today presenter Justin Webb, in a recent interview with Stuart Rose, put it like this: “Staying in the single market, staying in the customs union – [Leave voters would say] you might as well not be leaving. That fundamental position is a matter of democracy.” For the BBC, it seems, to question Brexit is somehow to be unpatriotic.

You might think that an independent, pro-democratic press would question the attempted use of the arcane and archaic “royal prerogative” to enable the ­bypassing of parliament when it came to triggering Article 50, signalling the UK’s departure from the EU. But when the campaigner Gina Miller’s challenge to the government was upheld by the high court, the three ruling judges were attacked on the front page of the Daily Mail as “enemies of the people”. Thomas Jefferson wrote that he would rather have “newspapers without a government” than “a government without newspapers”. It’s a fair guess he wasn’t thinking of newspapers that would brand the judiciary as “enemies of the people”.

It does seem significant that the United States has a written constitution, encapsulating the separation and balance of powers, and explicitly designed by the Founding Fathers to protect the young republic against tyranny. When James Madison drafted the First Amendment he was clear that freedom of the press should be guaranteed to a much higher degree in the republic than it had been in the colonising power, where for centuries, after all, British monarchs and prime ministers have had no qualms about censoring an unruly media.

By contrast, the United Kingdom remains a hybrid of monarchy and democracy, with no explicit protection of press freedom other than the one provided by the common law. The national impulse to bend the knee before the sovereign, to obey and not question authority, remains strangely powerful in Britain, the land of Henry VIII as well as of George Orwell. That the United Kingdom has slipped 11 places in the World Press Freedom Index in the past four years, down to 40th, has rightly occasioned outrage. Yet, even more awkwardly, the United States is three places lower still, at 43rd. Freedom of the press may not be doing quite as well as we imagine in either country.

Harry Eyres is the author of Horace and Me: Life Lessons from an Ancient Poet (2013)

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder