National Insurance plans will not fill jobs gap, says new research

New research has found that between 2002 and 2009 only one in four of all new enterprises created in England was based in the most deprived areas, despite decades of government programmes encouraging enterprise in regions with high unemployment.

In the North East for example, even before the current round of public spending cuts takes effect, the “jobs gap” between the number of jobs available and the number of people of working age is more than 447,000. Across England as a whole the “jobs gap” is currently 5.3 million.

The report; Filling the Jobs Gap: Why enterprise-based regeneration isn't working, says that the growth in enterprise since 2002 has been in service industries who have not located in areas where manufacturing previously provided employment. The government’s optimism that new enterprises can fill the “jobs gap” in deprived areas is unfounded.

• For every 100 people able to work in the North East, there are only 72 jobs. Whereas in the South East, there are 86 jobs per 100 people able to work.
• The growth in the number of new micro enterprises in more deprived areas has not automatically led to a growth in employment in those areas.

The government’s NI waiver will not change these long term trends in deprived areas. The report recommends the following immediate action:

• Protect the most deprived areas from public sector cuts.
• Initiate much more highly focused longer term programmes to support and credit enterprises in the most deprived areas.
• Extend the NI waiver to companies based in London and the South east who want to set up operations in the most deprived areas.
• Develop an industrial policy targeting deprived areas with manufacturing in the renewable energy and green jobs sector.

“While the government’s Office of Budget Responsibility optimistically forecasts that 1.3 million new jobs are likely to be created by 2014, our research shows that the private sector is highly unlikely to emerge and absorb those pushed out of the public sector, particularly in already deprived areas,” said Dr Faiza Shaheen, co-author of the report. “This tinkering at the edges will do little to stop the local economies in already deprived areas tipping over into further decline.”

The report challenges David Cameron’s post election pledge to “rebalance” the economy away from London and the South East, saying that token incentives such as the NI waiver for small enterprises will barely begin to tackle the huge jobs gap in deprived areas.

The report highlights how cities like Birmingham, for example, would need to create an additional 124,000 jobs, Liverpool 54,900 and Burnley 7,000 new jobs just to reach average employment levels for England, even before taking into account proposed public sector cuts which promise to widen the jobs gap further.

“It is totally unrealistic to expect the enterprise sector to create an additional 124,000 jobs in Birmingham, of 54,900 in Liverpool, for example, just by offering a temporary waiver in NI contributions for new small enterprises,” said Dr Faiza Shaheen, “Government needs to acknowledge that here is a strong case for protecting public sector jobs in the country’s most deprived areas, at least in the short term.”