Why the government needs to start putting jobs first – my Tribune column

The true impact of David Cameron and George Osborne’s reckless economic policies became even clearer last week.

With our stalled economy now in reverse the latest unemployment figures showed the number of people out of work rising again – to levels not seen since John Major was Prime Minister. Almost 1.4 million people have now been out of work for more than six months. And the number of young people on the dole for over six months has doubled in the last year.

As we know from the 1980s and early 1990s, long-term unemployment has huge social costs. But it’s also a huge cost to the exchequer, because every person out of work means the government gets less money in from tax revenues and has to pay out more in benefits.

For a coalition whose founding purpose was to get the deficit down and balance the books by the next election, month after month of rising unemployment is the one thing they cannot afford. In fact slower growth and higher unemployment means the government is now set to borrow £158 billion more than they planned. As even the credit rating agencies have now said, “austerity alone risks becoming self-defeating”.

That’s why Labour is clear that if we were in government we wouldn’t be cutting spending and raising taxes as far and as fast and we’d be putting jobs first. Labour’s five point plan for jobs is essential to get the deficit down and avoid the long-term costs and permanent dent in our nation’s prosperity of months, and even years, of slow growth and rising unemployment.

Our plan includes a tax on bank bonuses to fund 100,000 jobs for young people and 25,000 more affordable homes, a temporary VAT cut to help-hard-pressed families and pensioners, bringing forward infrastructure investment and tax breaks for small businesses taking on extra workers.

And it’s not just on the economy where we’d be making different choices. We’ve called for an end to the reckless reorganisation of the NHS which will cost £1.8 billion – half of which could protect 6,000 nursing jobs for three years. And the over £100 million being spent on installing elected police commissioners could pay for 3,000 new police constables.

But if the government ploughs on regardless with policies that aren’t working, we don’t know how bad things will be in 2015 on the economy, jobs, the NHS or crime.

That’s why we cannot make any promises now, three years before the election, to reverse spending cuts or tax rises. The government’s failure on the economy means the next Labour government will inherit a substantial deficit. We will have to sort out the deficit, clear up George Osborne’s economic mess and deliver social justice in tougher times.

This government’s failure on the economy also means tough times are set to continue now. George Osborne has been forced to extend public sector pay restraint with a 1% cap in 2013-14 and 2014-15. But Ed Miliband and I cannot just promise public sector workers higher wages when public spending is so tight and the costs of rising unemployment are pushing up borrowing projections so massively. In tough times the priority has got to be protecting jobs rather than pay rises.

Pay restraint in the public sector in this parliament would have been necessary whoever was in government. But George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer and Labour cannot duck that reality.

But pay restraint can and should be done in a much fairer way, which is why last month I called on the Chancellor to insist on tougher settlements at the top to give bigger pay rises to those on lower incomes.

The difference between a pay settlement delivered fairly and one which is not is stark. Two years of a one per cent increase in the salary of a local government chief executive earning £190,000 a year is over £3800 a year, or more than £316 a month. For a teaching assistant earning just £15,000 two years of a one per cent increase represents just £300 a year – or just £25 a month.

By being tougher on those at the top we believe that rises of at least £250 a year can be achieved for the lower paid – which in this case would leave a teaching assistant £200 a year better off at the end of the two years than a settlement which does not reflect difference in salary.

This is what Labour means by prioritising jobs and making different, fairer choices in difficult times. It’s time this out of touch government realised that they won’t even succeed on their own terms – getting the deficit down and keeping the credit agencies happy – if they don’t now start putting jobs first.

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Posted February 24th, 2012 by Ed