Today the government’s favourite think tank is being given air time to tell us how important migrants are to our economy. It is true that in the boom time migrants often came here to do jobs others were unwilling to do. The government made the labour market much less flexible for people born here, through its new labour laws, and its tax and benefit regime. The evidence of that is there to see in the 5 million people of working age who do not have a job. It offset this inflexibility to some extent by inviting in large numbers of migrant and temporary workers. That was better than leaving the economy ossified , but not as good as making the UK labour market strong enough and flexibile enough to get many more people back to work or into work for the first time.
Now we are entering a very unpleasant downturn, brought on by government waste and overborrowing, as well as by the loose monetary policy of past years and the overborrowing in the private sector, the market will partly adjust by some migrants going elsewhere where there are better job opportunities.Nonetheless, there will be all too many job losses, and some rise in overall unemployment, as the economic winter sets in. The inward migrantion kept wages down at a time of boom, and will offset some of the job losses in times of downturn, but not all of them.
What will the government do to show it is tackling the problems of joblessness and income squeeze? It will spend and spend, as it still does not realise governemnt over spending is much of the reason why the UK is in such a poor position to correct the excesses of past years of easy money.It will offer one off help this winter with fuel bills and maybe with food bills. It will seek to augment people’s income in the short term by borrowing more money which the same people will have to help repay with interest in later years! At a time when people struggle to get a mortgage or afford a mortgage to buy themselves a home we will all be forced to help pay for a collective mortgage to offer sops to people faced with a struggle to pay the family bills.What we need is a governemnt which can deliver much more for less, and eave us more of our own money to pay the bills.
The government should be more cautious. Offering benefits rather than tax cuts is an expensive and complicated way of easing the squeeze, involving too sets of extra officials to collect the money in and then dish it out. Doing it all on borrowing risks the ultimate wrath of the markets. This autumn the government will have to come out with revised figures, showing just how much above its own budget its current spending now is, and revealing just how much worse both spending and revenue looks in the months ahead thanks to much slower growth than forecast. If the government is honest in its figures it will help, but the figures will be bad. If it understates them it will undermine market confidence even more, as markets are getting ready for a lot of red ink in the government’s budget. The more red ink there is, the worse the downturn and the longer will recovery be delayed.