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7 July 2010updated 27 Sep 2015 2:17am

Will the coalition listen to warnings over unemployment?

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

By George Eaton

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:

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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.

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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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