Labels: 2010 Election When Gordon Brown launched the election campaign by insisting that he would "tell the truth", it was clear that he intended no such thing. His campaigning style is to pick a falsehood and repeat it. Eventually, interviewers grow tired of correcting him and his message is hammered into the electorate's subconscious. Yesterday, he produced a figure that he would like us all to know: that even after the recession, some 2.5 million jobs have been created since 1997. His economic stewardship, therefore, has been a triumph after all. His problem lies in the word "created". A better one would be "imported". Unpublished figures sent on request to The Spectator show that 98.5 per cent of jobs created for working-age people since Labour came to power are accounted for by immigration. Britain's boom was great news for the unemployed of Gdansk, but failed to transform Glasgow. And this cuts to the heart of what is, arguably, the greatest and most deplorable of Brown's economic failures: failing to find (as he memorably put it) British jobs for British workers. To deal with a problem, one must first recognise it – and there are precious few signs of this happening. I have never believed in claims of a great conspiracy about immigration, simply because it is beyond the organisational skills of this Government. When John Hutton was Work and Pensions Secretary, he told me that immigrants accounted for only "2.5 per cent of the workforce, even less". He was quite adamant. The real figure was 12 per cent. He was genuinely in the dark: his civil servants had not briefed him because such data is not produced. One has to work in Westminster not to know the seismic impact of immigration on Britain. A third of London's population is now foreign-born; most babies born in the capital have immigrant mothers. On the city's local radio yesterday, a phone-in was being conducted: why is it that, when you buy a cup of coffee or a sandwich, you are never served by a Brit, of whom 780,000 in London are on benefits? Why is youth unemployment so high, yet demand for immigrant labour so strong? Why do employers prefer foreigners? There is an answer here, and it does not lie in racist employers or workshy Brits. It is a question of financial incentives. If an unemployed Pole gets a job as a barista in Starbucks, even for 15 hours a week, his situation improves dramatically. A young man in Britain would be just £10 a week better off than if he stayed at home on benefits. Why break your back for an extra tenner? The situation is even more pernicious for young women who leave school with low qualifications, because the alternative to low-paid work is pregnancy. A woman with one child and on benefits has, on average, more disposable income than a hairdresser or teaching assistant. With two children, it's more than a receptionist or library assistant. With three, it's a lab technician, typist or bookkeeper. So there should be no mystery about why Britain came to have so many children in workless households (one in five, the highest in Europe). The young mothers, and the young men on benefits, are walking down a road to dependency paved for them by the state. This is a peculiar definition of compassion. What Beveridge denounced as the "giant evil" of idleness is now being incubated on a mass scale by the very welfare state designed to eradicate it. As Britain positions itself for a recovery, this raises an ominous question for a prospective Conservative government: will it do any better? If the economy is to recover, might it simply suck in more of these industrious, hard-working immigrants while leaving between five and six million British people on out-of-work benefits? The answer does not lie in tightening borders, even if we could. The problem is not supply of overseas workers – the problem is demand for them. So the way to solve this problem is to reform welfare so that work actually pays. This will arguably be the most important task of the Conservative government and could end up being David Cameron's most significant lasting legacy. Many of those about to be elected for the first time as Tory MPs have been radicalised by the scandal of welfare ghettoes – seeing the unemployed as the victims of an uncaring socialism, which uses statistical manipulation to deal with unemployment. Iain Duncan Smith has led the field here. A trip to the east of Glasgow (the most heartbreaking example of state-induced poverty) led him to set up the Centre for Social Justice, to propose new ways of dealing with the problem. And he has recently proposed a measure which could end this scandal at a stroke. He would introduce a single benefit, aimed at ensuring that work always pays. Part of it involves reducing tax on low-paid jobs – on the principle that if a woman gets up at 4am to clean offices, the state has no claim on a single penny she earns. Part of it would be in-work benefits, giving a boost to low wages. It would mean tearing up the Department of Work and Pensions, which has more "clients" than Ireland has people. Just over a year ago, Cameron looked set to deliver this. He had, in Chris Grayling, a man utterly dedicated to welfare reform. But the agenda died when Theresa May was sent in and Grayling was promoted to be shadow home secretary. With a nine-year track record of achieving precisely nothing in Opposition, May is spectacularly ill-suited to what should be the toughest task in government. It is not enough for her to have David Freud, a banker turned welfare adviser, in the wings. There is only one man appropriate for this job. Duncan Smith wanted to stay on the back benches, to be a Wilberforce-style campaigner rather than be part of a cabinet. But now there is a compelling case for him to head a new Department of Social Justice – set up on the explicit basis that the welfare state is bankrolling the worst type of injustices. It should replace the Department for Work and Pensions, and provide a single universal benefit. When Tony Blair was elected, he was deadly serious about "ending welfare as we know it". The economy was stalling for lack of workers in the late 1990s – some bus companies were even trawling homeless shelters to find people to train. Then, around the turn of the decade, immigrants started to flood in. They provided an easy answer. Why go through the political agony of welfare reform if you can pay the poor to live in edge-of-town council estates and let immigrants expand the economy? Mass immigration gave Labour the option not to deal with welfare reform. The party took it, and the result can be seen in the welfare ghettoes of Liverpool, Manchester, Newcastle and Glasgow – and in the Babel-like atmosphere of the Olympic village, with workers from around the world, but local unemployment as high as ever. Cameron speaks convincingly about wishing to heal the "broken society": in Duncan Smith he has someone with an agenda to do it. We will see, after the election, if he will dare to put the two together. Fraser Nelson is Editor of 'The Spectator'FRIDAY, APRIL 09, 2010
State Dependency Vs Economic Growth
General Election 2010: The Tories have just the man to find more jobs for British workers
Iain Duncan Smith's ideas on benefits reform could overturn Labour's dismal legacy, says Fraser Nelson
Friday, 9 April 2010
http://burningourmoney.blogspot.com/
Governments can never deliver prosperity
The dividing lines are suddenly becoming clearer. Labour is offering a continuation of the high spending high taxing policies pursued over the last 13 years, and the Tories are finally starting to spell out the alternative.
The argument over National Insurance Contributions (NICs) precisely captures the point.
Labour says that the increase in NICs is necessary to finance £6bn extra public spending. They say that cutting that spending will cost tens of thousands of public sector jobs (now estimated at 40,000), and cause untold damage to public services.
The Tories say that increasing NICs will destroy even more jobs (it could be half a million - see this blog). Moreover, the £6bn spending cut will not damage public services because it will be deliverable from cutting costs not services. After all, it's less than 1% of total public spending.
The debate is a very familiar one: do we think that public spending is required to shore up the economy, or do we trust the private sector to do the job?
Socialists have always mistrusted the market. NuLab accepted it under sufferance, but only so long as we were in the long boom. Once we hit the bust they immediately reverted to type, nationalising the banks and stoking up public spending even further than they'd already done.
The problem with that approach is the same as it's always been. By increasing the size of the public sector, the government squeezes out the market sector. And it's the market sector that delivers long-term sustainable growth.
Now, according to Labour, that's not what they intend. According to them, they'll cut the public sector back down again as soon as the time is right - as soon as the economy has returned back to self-sustaining growth. In other words, they want us to believe this is simply a timing issue.
But the real world isn't like that. In the real world, once the public sector has expanded, it's the devil's own job to cut it back down to size (aka the ratchet effect). And once private sector employers have laid off the staff to pay for the additional taxes, it's the devil's own job to get them to rehire - especially if the economy is bowed down under massive government debts.
The net result is that the economy becomes even more dependent on state support, and even less able to generate growth and prosperity for the future.
Just in case you'd forgotten, the key to long-term prosperity is productivity growth - delivering more output with fewer inputs. And on that measure - despite constant claims about so-called efficiency savings - the public sector has turned in a truly abysmal performance.
As we blogged here, the ONS estimates that during Labour's first decade, public sector productivity fell by between 0.3% and 1% pa (the smaller fall depends on a number of tenuous assumptions such as counting the increased passes in our dumbed-down state exams as, ahem, "quality improvements").
Over the same period, private sector productivity increased by 2.2% pa.
It's no wonder our business leaders are up in arms. They're the ones who've had to struggle and sweat and sack surplus staff in order to deliver that productivity growth, while public sector managers have just sat on their spotty behinds avoiding any such tough decisions. Why shouldn't the public sector start feeling the heat? There must be millions of ways to deliver productivity growth without torching services.
Consider this. If the public sector could match the private sector's productivity record, within 5 years we'd be saving around £70-80bn pa. And the cumulative saving would be about £200bn, straight off our soaring debt mountain.
At the same time, we'd be releasing resources for redeployment in the private sector - the bit that earns Britain's way in the world, generates the growth, and ultimately pays all the taxes.
What's that? Redundant public sector employees would be fit for nothing other than joining the dole queue?
Listen, Tyler successfully made the transition. And according to Mrs T, if Tyler could do it, anyone can.
PS Driving along yesterday, Tyler listened to a depressing report from the Walton area of Liverpool (see vid above for Jackson tour). It's an area that has been totally whacked by welfare dependency. Unemployment is high, crime is rife, and hopelessness pervades. During the discussion, some prof was asked what we should do? Was more money needed? He said money was already being spent - lots of it - but it hadn't done the trick. What was actually needed was small business entrepreneurs to create jobs. Unfortunately Liverpool doesn't have many of them, and it was difficult to see how they could be created. Well, screamed Tyler at the radio, I've got an idea. Cut taxes on small businesses in Liverpool (and Hull and various other apparent basket cases) to zero. Start here. And while you're at it, see this excellent DT article by Fraser Nelson.
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