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Forget the budget deficit, the coalition must deal with the jobs deficit

There are now five people chasing every vacancy in the UK.

There can be no doubting Iain Duncan-Smith's commitment to welfare reform. The Secretary of State for Work and Pensions has staked his political career on ambitious and costly plans to simplify the benefits system and make work pay. And though it has received less attention, his Department is also investing in the 'Work Programme', a scheme costing billions annually to improve people's job prospects and help them find work.

But in a year when the number of long-term unemployed workers alone outstrips job vacancies by 330,000, shouldn't we be asking whether these are the only, or indeed the right, priorities? The vast ranks of unemployed workers who are neither 'workshy' nor trapped in a cycle of benefit dependency (some would say the majority) are in for a hard time over the next few years. A quick look at the maths tells us why.

Long-term unemployment has doubled in the last two years to 797,000 while the number of job vacancies on Jobcentre Plus books has fallen to 467,000. There are now five people chasing every vacancy in the UK and our estimates based on Office for Budget Responsibility projections suggest this will shift only slightly to 4.6 people for every vacancy by the end of 2011.

These are not the only vacancies in the job market but they are the ones most likely to be secured by those with fewer skills or less experience - also those most at risk of being left behind in the wake of the recession. Though employment increased in the last quarter much of this can be accounted for by more part-time work and people choosing not to retire.

In today's climate, reforms to make work pay and improve people's job prospects are not wrong, they're just not enough. The Coalition government is relying on private sector growth to fill the jobs gap, with no alternative strategy if this doesn't work out.

A new report published by IPPR this week identifies a number of ways the government can help boost the jobs market without having to resort to expensive job subsidies. Small businesses will be central to sustaining the recovery, creating jobs in new and expanding sectors. Yet many say they can't find workers with the right skills and don't have the capacity to recruit. As well as helping people find work, welfare to work providers could
help stimulate growth by supporting businesses to expand or invest in workforce training, thus creating jobs and boosting productivity.

Similarly, unemployed workers could cover periods of staff training or absence, providing those out of work with new skills and preventing a drop in productivity for employers. This approach was used in Finland and Denmark during the recessions of the 1990s and helped businesses in these countries weather the downturn. In Denmark three out of every four unemployed people found permanent work in this way in the 1990s. Re-directing some existing skills funding and greater employer co-financing could pay for this.

Over the last year we have interviewed unemployed people who are frightened and angry at finding themselves out of work for no reason other than the highs and lows of the economy. We asked people what they want from the system. Their demands were modest. They want to know what jobs they can find locally both now and in the future, so that they can re-train if necessary. In national, standardised system such as the one we have in the UK, this kind of advice is surprisingly hard to find. They want job-specific training that makes it more likely they will find work. They want to know they will eventually find a job if they try hard enough.

But most of all they want to know that they and their families are not alone in being made to carry the burden of a financial crisis they had no role in creating. Unless more is done to create the jobs they need, they may take some convincing on this.

Claire McNeil is a researcher at the IPPR think tank.

Clare McNeil is a senior research fellow at IPPR.

Twitter: @claremcneil1

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.