Will the coalition listen to warnings over unemployment?

OECD warns that decision to scrap job schemes could lead to surge in unemployment.

When George Osborne's deputy, Danny Alexander, announced the abolition of a series of employment schemes last month there was understandable outrage from voters. David Cameron responded that the coalition would announce its own comprehensive employment scheme in time but we're yet to receive any more detail.

Either way, the OECD, Europe's leading economic think tank, isn't impressed. Here's what it had to say about the decision to axe the Future Jobs Fund, which subsidises job placements for 18-to-24-year-olds, and the Six Month Offer, which offers training to those who've been unemployed for longer than six months:

While the large fiscal deficit makes it essential to focus on cost-effective programmes and target the most disadvantaged groups, labour-market programmes should remain adequately funded. In this context, it may also be of concern that the new Budget ends funding for two crisis measures -- the Future Jobs Fund and the Six Month Offer.

The body added that the measures introduced by Labour had prevented unemployment from rising as fast as in previous recessions:

Considering that GDP fell by 6 per cent, the increase in unemployment in the United Kingdom is smaller than would have been predicted based on historical experience. For example, the unemployment rate rose nearly as sharply in the 1990-91 recession even though GDP fell by less than half as much.

It goes on:

Effective re-employment assistance has prevented an even sharper increase in UK joblessness and should be reinforced even in the current context of fiscal consolidation.

The lesson of the 1980s is that the costs of high unemployment -- increased mental illness, higher crime levels, wasted talent -- are too high for any government to bear. But the report warns that unemployment is set to remain at nearly 8 per cent until the end of 2011. Osborne, who is fond of citing the OECD when its findings agree with him, needs to provide some answers now.

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George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.