If we want a budget that creates jobs, here are some policies


12:50 pm - March 15th 2012

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contribution by Tim Page

Next week’s Budget must tackle the jobs and growth crisis facing the UK. So said the TUC in our Budget Submission, which has been submitted to the Chancellor.

Domestic demand (consumer, business and government spending) fell in 2011, contrary to government expectations. Inflation was higher than expected, while wage growth was lower, squeezing household incomes. Add to this the fact that over one million more people are now unemployed compared to at the start of the recession and the challenge is there for all to see.

So what should the Chancellor do?

» Firstly, and most obviously, he should scrap the austerity programme. The Government has already admitted that it will have to borrow £158bn more than originally forecast, to meet the costs of low growth, so the spending cuts are failing on their own terms.

» The public sector pay freeze, which is leading to serious falls in income among public servants, should be scrapped. And action should be taken to kick start job creation, especially for young people.

» The TUC calls for a job guarantee for every young person who has been unemployed for six months or longer. We also call for a new Youth Credit, for all 16-24 year olds to boost access to training, work placements or progression into better jobs.

» VAT clearly needs to be cut, as it is the unfairest tax of all, hitting pensioners and the low paid as hard as it does millionaires. A VAT cut would help to boost consumer demand at a stroke.

» There is an obvious need to try to encourage business investment, so rather than cutting corporation tax, which benefits already highly-profitable sectors, we seek the reversal of cuts in capital allowances and cuts to taxes on wider investment and infrastructure development.

» Procurement policy needs to support British industry and a state investment bank must be created, so those strategic technologies that are not in tried-and-tested sectors and are therefore are unattractive to risk-averse high street banks, can get funding.

» Finally, a modern industrial strategy must be underpinned by action on skills. In particular, the apprenticeship programme must be strengthened. Apprenticeships must have a minimum three year duration and trainees should have a right to graduate to a level three apprenticeship.

The austerity programme is not working. Action on jobs and growth must be put in its place.

There is no better time to start than next Wednesday.


Tim Page is a Senior Policy Officer at the TUC, responsible for economic and industrial policy.

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Reader comments


1. Disgruntled Gnome

So basically what we need to do is spend, pay, pay, cut tax, cut tax, lend and spend? Um …

Job creation is obviously the main goal, but wages must be fair: low pay is the (I hate this phrase) elephant in the room whenever job creation is mentioned.

Lets look at this then.

» Firstly, and most obviously, he should scrap the austerity programme. The Government has already admitted that it will have to borrow £158bn more than originally forecast, to meet the costs of low growth, so the spending cuts are failing on their own terms.

Well, spending cuts there are not – but this is hardly a reason to go spending more. You have seen what happens to the economies of countries that do this haven’t you? OK – we wouldn’t suffer the fate of sourthern Europe, but we would have high borrowing costs and a devalued currency (and hence high inflation, as we import so much of our consumption

» The public sector pay freeze, which is leading to serious falls in income among public servants, should be scrapped. And action should be taken to kick start job creation, especially for young people.

Erm, aren’t you meant to show why scrapping the pay freeze would be good for the country, rather than the public servants? Wouldn’t this actually be a relevant argument? As to the job creation, how would you suggest this is done – the best way would presumably be tax breaks, but that would reduce the money available to pay public servants.

» The TUC calls for a job guarantee for every young person who has been unemployed for six months or longer. We also call for a new Youth Credit, for all 16-24 year olds to boost access to training, work placements or progression into better jobs.

That’s nice. But as you noted above, the jobs need to be created – government can’t magic them up you know.

» VAT clearly needs to be cut, as it is the unfairest tax of all, hitting pensioners and the low paid as hard as it does millionaires. A VAT cut would help to boost consumer demand at a stroke.

I’d agree with this, but again cutting revenue makes funding your other ideas difficult.

» There is an obvious need to try to encourage business investment, so rather than cutting corporation tax, which benefits already highly-profitable sectors, we seek the reversal of cuts in capital allowances and cuts to taxes on wider investment and infrastructure development.

Erm, you do realise that incresing profits in marginal sectors as opposed to profitable ones will result in lower rates of investment? Investment is made easier by higher profits – marginal sectors will normally seek to invest to survive; proftiable sectors will invest to grow (because the risk of investment is much reduced on a relative scale). So not sure you’ve quite grasped what is needed here.

» Procurement policy needs to support British industry and a state investment bank must be created, so those strategic technologies that are not in tried-and-tested sectors and are therefore are unattractive to risk-averse high street banks, can get funding.

You do realise that state investment banks either make a loss (by not picking the correct technologies) or are actually more conservative than the existing banks. And new technologies should not be seeking conventional bank loans (which we want – look what happens when banks take silly risks…) but be looking at venture capital – incidentally, generated normally by highly-profitable areas of the economy, allowing risky investment.

» Finally, a modern industrial strategy must be underpinned by action on skills. In particular, the apprenticeship programme must be strengthened. Apprenticeships must have a minimum three year duration and trainees should have a right to graduate to a level three apprenticeship.

Can’t say I know enough to comment on this one – however, should not apprenticeships be matters for the industry, rather than something constrained to fit a framework? This sort of unnecesary control might explain why apprenticeships fell into relative decline.

Overall, something of a lack of understanding of investment there, and some nice wishful thinking about higher spending and lower taxes, without realising that this does not seem possible (one or the other, probably – but with consequences; both, just would look stupid). Now, if only I could be confident that the actual Chancellor was smarter than this…

Job creation is obviously the main goal, but wages must be fair: low pay is the (I hate this phrase) elephant in the room whenever job creation is mentioned.

I can’t help but feel there must be plenty of jobs in getting pachyderms out of enclosed spaces as a result of the use of common metaphors (is that a metaphor?). Probably not well paid though…

In my opinion a load of driveling nonsense from an interest group that already costs this country too much money.

@Disgruntled Gnome – Of course! didn’t you know? that is the economics of the economically incompetent. (IMO)

“The public sector pay freeze, which is leading to serious falls in income among public servants……”

No it isn’t. That’s as far as I read. If the only case you have to make is one based on childishly obvious porkies then you’re not going to get very far. It’s ridiculous that you think you can get away with this.

Chris,

No it isn’t. That’s as far as I read. If the only case you have to make is one based on childishly obvious porkies then you’re not going to get very far. It’s ridiculous that you think you can get away with this.

To be fair, I think Tim is suggesting a fall in real terms – wages not keeping track with inflation. This might be serious (and his job is to say it is…) and is certainly an issue I would expect unions to be harping on about, for the sake of their members.

1. Disgruntled Gnome

Er, because the current strategy is working so well…?

5. Freeman

In my opinion a load of driveling nonsense from an interest group that already costs this country too much money.

Gotta love rightwing sneering.

People wanting to keep their jobs should be dismissed as “an interest group”?

No doubt about it. The Right is intellectually and morally bankrupt.

@BenM

If you don’t like your job leave. If you have been treated badly take your employer to the tribunal. What purpose do these unions serve? seriously?

All they have managed to do recently is hold the government to ransom over the Olympics. Try working in the private sector. We are all expected to work under normal working hours with normal remuneration, with no extra time off.

Please tell me…what have they done that is of benefit to society recently?

11. Northern Worker

* Scrap the austerity programme – Is there one? I gather the Coalition will borrow more than Gordon Brown.

* Can public sector pay freeze – Given that the public sector earns a lot more than the private sector and the latter is suffering a de facto pay freeze, I can’t see why the already over-priviledged public sector (pensions anyone?) should have special treatment.

* Job guarantees for every young person unemployed for six months or longer – How? Where I work (private sector and no pay increases for four years) we haven’t taken on anyone in two years except to replace leavers and only if absolutely necessary. And our suppliers and customers are much the same.

* Cut VAT – How when we are already borrowing at record rates?

* Encourage business investment – Our firm and suppliers/customers of ours are barely making money. Where do you think we’d get the money to invest and why would we when there is no prospect for growth?

* Government procurement to support British industry and a state investment bank – EU anyone? I think you’ll find there are many regulations prohibiting favouritism. Perhaps it’s time to leave the EU, which would save us £50 million per day as well. And no government should be allowed to pick favourites, which is bound to happen if the state runs a bank – old pals act all over again. Really, would you trust the tories to run a bank and pick who gets a loan? No I thought not.

* Apprenticeship programme – see above about taking people on.

Tim, I don’t know about your background or experience, but take it from someone who has survived four recessions in industry, you really don’t know how the real world works.

If you want to know what needs to happen, the state must stop spending so much and leave a bit for industry to grow and prosper. Oh and we must leave the EU, which is drowning us in red tape.

There is a new by pass locally recently planted with trees and schrubs.
Trouble with it though it is now suffering from roadside litter to a great extent.

I propositioned an ex schoolteacher friend of mine who is of very decent type although a little too liberal and soon we will be venturing on to these verges with some empty black bin bags..

Now that is job creation.

@ 9 Ben M
People wanting to keep their jobs ARE an interest group. Just as are those wanting to eat or to come out of an NHS hospital without a fatal infection.
Come back when you have acquired a brain

George Osborne should swallow his pride and adopt Labour’s proposal for six months compulsory workfare for young people, paid for by taxing bank bonuses.

Procurement policy should definitely support British business and industry. The removal of wider economic consideration from government procurement guidance is a crime: British taxpayer money should be spent in the UK so profits (and wages paid to UK workers) can be taxed, thus returning a reasonable chunk of the initial investment to the public purse. This aside from the fact it supports employment, often in the long-term (train building and maintenance, for example).

Good work, Watchman.


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