The gang of four does its worst

Young people are being hit hardest by the economic crunch. As more chase university places, apprenti

I remember as if it was yesterday the day I got my A-level results. But this year was different - there was disappointment on a grand scale. Too many qualified youngsters chasing too few university places. And the universities minister, David Willetts, could only wring his hands and say, "I am sorry." Pathetic.

According to the Universities and Colleges Admissions Service (Ucas), 187,488 hopefuls have entered the clearing system, but more than 150,000 will be turned away. At the time of writing, 13,597 had found places through clearing. That means more than 25 per cent of the 675,465 who applied for undergraduate courses this autumn are as yet without a place (including Gary Lineker's son George). Applications were up 11 per cent compared to 2009.

From conversations I have had with university vice-chancellors and principals, it seems that most of those in clearing are perfectly capable of following a degree course and the universities are willing to take them, but they can't, because the government won't allow it. If they take more students, they risk fines.

The 150,000-plus without places this year is bad enough, but there will be even more in 12 months' time. Not only has the coalition cut the number of places by 10,000, but many of those who failed to get one this year will apply again next year, and many of those will not get in, and so on for years to come. The government must fund a lot more places, and quickly.

Growing unequal

Many of these young people are setting their sights on an apprenticeship instead, but their prospects of getting one are slim. On 16 August, BT announced that it had received 24,000 applications for 221 places - up from 9,000 last year. This is many more applications than were received by the London School of Economics (18,738), Cambridge (16,211), Oxford (17,882) or my alma mater, Leicester (22,074). Not much hope there.

Interestingly, the most popular subjects are nursing (110,000), design studies (96,000) and law (94,327). The only major subjects with declining applications were finance (-5.5 per cent), economics (-2.3 per cent) and building (-6.7 per cent). There were more applications for drama (49,301) than for economics (48,028).

It's not just A-level students who are facing a bleak future. What will all those 16-year-olds do who are leaving school with few (if any) qualifications? There isn't much they can hope for, now that the government has scrapped programmes such as the Future Jobs Fund, which helped young people into work. In a recession, better-qualified candidates enter lower down the job pyramid, pushing out the less qualified.

The unemployment rate among the under-18s is already 33 per cent; for those without GCSEs and from minority groups it is more than 50 per cent. Youth jobs have been disappearing fast. Over the past two years, employment across all age groups fell by 494,000, while it fell by 140,000 among those aged 16-17, and by 238,000 among 18-to-24-year-olds. That means 77 per cent of the decline in employment has been suffered by young people.

It is hard to blame private-sector companies for not hiring people when they are watching consumer confidence fall. Many of them hoarded labour through the downturn by cutting working hours and pay; if and when any recovery comes, they will increase hours for existing employees before taking on new staff. As for the public sector, recruitment freezes hit young jobseekers the hardest.

So much for that "social mobility" and "big society" claptrap. The Chancellor may insist that "we're all in this together", but a recent report published by the Organisation for Economic Co-operation and Development, titled Growing Unequal?, suggests otherwise. The OECD study found that it is difficult to carry out major fiscal consolidation without driving up inequality. That is exactly what happened in Canada, Finland and Sweden - countries the British government has held up as models of where such programmes "succeeded".

In the past week, even more evidence has emerged of the dramatic drop in business and consumer confidence provoked by the heartless gang of four - George Osborne, David Cameron, Chris Huhne and Nick Clegg - with their talking down of the economy. About half of the 2,000 households surveyed by YouGov and Markit expect their finances to worsen over the next 12 months; only a quarter expect them to improve. And negative sentiment has spread from workers in the public sector to those in the private sector, among whom the degree of pessimism has reached its highest point since June 2009. Job insecurity remains a great concern for many, while fear of falling house prices is adding to the worries of homeowners. None of this is good for consumer spending.

Last resort

The latest ICAEW/Grant Thornton UK Business Confidence Monitor, meanwhile, suggests that economic recovery will slow in the second half of 2010. The chart (below) shows that business confidence has weakened significant­ly, falling from 25.5 in the second quarter of 2010 to 21.5 in the third quarter. In particular, confidence has weakened in the service sector and fallen sharply in banking, finance, insurance, retail and wholesale. Confidence in construction also weakened considerably.

blanchflower graph

On 19 August, the Bank of England reported that trends in lending to businesses remained negative in June, contracting by £3.5bn compared to £2.2bn in May and £1.1bn in April. The new external member of the Monetary Policy Committee, Martin Weale, warned of a "significant chance" of a further recession as approvals for home loans fell by a fifth.

I agree with the distinguished economist Sir Tony Atkinson, who said: "If governments can take on the role of lender of last resort, then we should be willing to see government as the ­employer of last resort. Put bluntly, governments have to step up to the plate, as Roosevelt did in the Great Depression."

So, Slasher, it's time to step up to the plate and do the right thing. I suspect our kids are not going to become a lost generation quietly.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 30 August 2010 issue of the New Statesman, Face off