Migrants and the downturn

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.

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9 Comments

  1. Acorn
    Posted August 26, 2008 at 12:52 pm | Permalink

    Our Polish plumbers are going home because they are only getting 4 Zloty for a Pound, rather than the 7 they were getting when they came here in 04.

    "If the government is honest in its figures it will help, …". Fat chance John.

  2. James
    Posted August 26, 2008 at 1:01 pm | Permalink

    I started my manufacturing company just prior to the last downturn. At that time there were few industrial units available, especially at the size I required for all the machinery for the manufacturing process. I made three moves into into increasingly larger premises as I expanded and employed more staff. These 'steppingstone' premises had all seen their best days but were perfectly acceptable until I was able to move into a brand new building.
    Alas, I do not think many budding entrepreneurs will be able to follow such a route under this incompetent government. We are beginning to witness the demise of such premises as landlords, unable to find tenants, are choosing to demolish them rather than pay the 100% of business rates they are now liable for depite these premises being empty. Where previously 100% relief was given if industrial premises were empty, Brown has now completely reversed this. The amount so far demolished is recorded in hundreds of thousands of square feet. Recently, near to me a large modern empty building was destroyed by fire and I can't help but wonder if this was a result of this legislation.
    As we drift through this downturn I wonder how much more industrial square footage will disappear as a result of yet another piece of political tax greed.
    I trust the Conservatives won't be so shortsighted.

  3. John of Enfield
    Posted August 26, 2008 at 2:33 pm | Permalink

    I couldn't agree more. What I really dislike is the way all this Government justification is delivered using "Newspeak". The phrase "Fuel poverty" for example is used as the basic assumption to enable them to arrive at the ultimate conclusion of a "windfall" tax. If we use "Poverty" and "Too Much tax on the low paid" then we come to a much more logical conclusion.

    PS Note to the Editor "too sets of" should be "at least two sets"

  4. Posted August 26, 2008 at 2:47 pm | Permalink

    Second paragraph – a typo: migrantion

  5. William B.
    Posted August 27, 2008 at 4:53 am | Permalink

    Any government guided by ideology rather than pragmatism is bereft of ideas when real life does not match their blueprint. This was the problem with all previous Labour governments who seemed to believe that money grows on trees and that spending by the State always produces benefits.

    To the (limited) credit of Mr Brown, after 30 years of arguing the opposite he realised that there is a wealth-creating sector to the economy and did far less damage to it than any of his Labour predecessors as Chancellor. But the ideological spending merely expanded. When the State and the unions were in charge of industry Labour governments overspent, having realised that the private sector is a much better creator of wealth the overspending increased, presumably because the previous levels were the base mark and increased wealth was seen as a reason to spend even more.

    Because their ideology is based on government spending being the only way to solve any problem there is no chance of it being slowed voluntarily. I fear the position by the time of the next election will be dire, not least because they will offer a tax-cut bribe in their final budget.

    As always it will be those at the bottom of the economic pile who suffer most. When I look back at the benign economic conditions over 10 of the last 11 years I find it utterly shocking that a government could act so recklessly, it is an absolute disgrace and will take another decade to reverse.

  6. mikestallard
    Posted August 27, 2008 at 8:26 am | Permalink

    Excellent article in this week’s Spectator about immigration. There is no “immigrant community” because the immigrants come from different places. A Catholic Polish plumber, living in a private house and working all hours to send money home to his family in Pomerania has nothing in common with, say, a Somali Warrior living on the dole in London with three wives with assisted housing in two Council houses. They simply do not connect.
    What is more, the welfare state destroys people who have just enough money for drugs and alcohol, but nothing much else except for a scorn for education and conventional family life.
    Dangerously, too, (Daniel Hannan’s blog yesterday) the handouts allow people time to arrange suicide bombing and terrorism. Several of the Palestinians, for instance, who turned into terrorists have been on the EU payroll in one way or another because they were living off welfare cheques. Very poor people (West African muslims?) do not have time to do anything else than work for their next crust.
    And the welfare state is also terribly destructive, as you rightly point out, of the private sector. The vast, burgeoning army of “carers” who provide for “the most vulnerable members of our society” look after themselves first – their own pensions and their own employment prospects. This, in turn, costs everyone else 42% taxation – and rising.
    And does this win elections? Ask the people of Glasgow East.

  7. Bazman
    Posted August 27, 2008 at 1:29 pm | Permalink

    The Poles now want to live like people, not five to room/car, and most young here for cash and adventure. Time to go home.
    Who's is next to keep the nations businesses viable? My money is on the Ukrainians and the Bulgarians. a.k.a. Russians, as many are Russians with foreign passports who only speak Russian.

    • mikestallard
      Posted August 27, 2008 at 8:40 pm | Permalink

      In Wisbech, Cambs, a Lithuanian passport costs about £50.00 with NI number if you haggle. There seem to be quite a lot of Russians who come to my classes for English who say they are Lithuanians…….

  8. Pat C
    Posted August 28, 2008 at 12:34 am | Permalink

    The comments by William B and Mikesstallard – in reply to John's blog, are two of the most straightforward and lucid descriptions of the essential weakness of this present government – and probably any Labour government, that I have seen.

    I think it is a great pity that these simple truths, couched in this straightforward language, could not reach a much wider audience!

    The aspect of this government that almost makes me feel physically sick these days, is the constant repetition by various ministers of their policy achievements, backed up by positive statistics, none of which stands up to any sort of scrutiny! As the general economic situation gets more depressing, so their jolly statements get more outrageous. I cannot understand how people who like to label themselves socialists – which is supposed to indicate that they want to help the less advantaged in society – can become so dishonest. I suppose the thinking must be that if an untruth is recited enough times, somebody will believe it! But unfortunately, as has become obvious, it has also lead to the general public losing all respect for those politicians, and also for politicians in general.

    Some achievement.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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