Osborne’s budget could leave shortfall of 520,000 jobs, warns think-tank

A new report, The Good Jobs Plan, has warned that the Government’s public sector cuts could leave a shortfall of 520,000 jobs because it has not adopted a coherent strategy for growth in key sectors of the economy. As many as 1.4 million people could remain unemployed.

Last week, the Chancellor spoke about “reforming the nation’s economy so that it can have enduring growth and jobs in the future”. The Office for Budget Responsibility has predicted that 1.3 million jobs will be created in the private sector, particularly in manufacturing.

But nef’s report, The Good Jobs Plan, argues that the Government has not done enough to restructure the economy for private sector growth. Private companies will lose business because of public sector spending cuts, creating more unemployment beyond the public sector job losses. Small measures such as a business tax cut and the creation of Enterprise Zones do not amount to the industrial strategy that the country needs.

The report calls on Government to adopt a long-term industrial strategy, rooted in the social objectives of well-being, stability and rebalancing the economy away from finance, high-carbon industry and the South East. It sets out ten goals for Government action, including:

• Good jobs: The Government should aim not just to create jobs, but to create jobs that are satisfying and secure, and which pay enough for a flourishing life. Good jobs also leave time to spend with family, friends and community.
• Good consumption: Economy policy should encourage consumption only within environmental limits: this may mean discouraging passive consumption of products, and encouraging more active consumption based on experiences and services.
• Good future: Economic policy also needs to ensure that we are resilient against future shocks, such as rising energy prices and an increasingly unstable climate.

 “David Cameron has set out a vision of an economy where well-being matters, where Britain is a leader in green technology and where all regions of the UK can flourish. But how are we going to get there without decent signposts? The Government urgently needs to adopt a coherent industrial strategy to avoid the huge shortfall in jobs that could result from public sector cuts.” said Charles Seaford, co-author of the report, and Head of the Centre for Well-being at nef. “The Government also must ensure that this strategy is anchored in broader social objectives to create the kind of future that we all want.  Without objectives, we won’t get growth in the right sectors, we won’t get good jobs for all and we won’t get a green economy.”

nef’s report surveys the history of government industrial policy and makes a series of recommendations based on the successes and failures of previous programmes, including:

• Sector specific credit creation: Making finance available for socially important and sustainable sectors of the economy.
• Make time-limited interventions: Government intervention in the economy should be restricted to a set time period, to avoid bubbles and capture by vested interests.
• Use enterprise coaching: External support for business works. Over the past 10 years, nef has helped create 770 small businesses in deprived areas through its BizFizz enterprise coaching programme, with 90 per cent of those business surviving for four years or longer.

“George Osborne claimed he is putting fuel in the tank of the UK economy. But there’s no point refuelling a wreck,” said James Meadway, senior economist at nef. “The private sector in the UK is bad at creating new jobs, even during boom times, and whole regions currently depend upon public sector employment. Cuts in public spending will simply exacerbate that weakness.

“Government action is needed to deliver good, sustainable employment for the future. That means developing an industrial strategy worthy of the name, with targeted support for key sectors, and a government commitment to delivering it.”