What do we want? Jobs. When do we want them? Now.

The Prime Minister has to show that his jobs programmes are more than just good spin. He would be helped in this aim if he was more accurate with his history.

He asserts that previous Conservative governments that went through downturns did nothing. He should remember that, on the contrary, the Conservative government of the 1980s tried many things to get more people into work, as it was well aware of the need to do so and was most concerned by the numbers out of work. Instead of bad mouthing the intentions he would be well advised to study what worked and what didn’t from past periods of recession. In the 1980s there were many programmes to promote employment supported by public money, as well as many so called supply side measures to try to get markets working better again to generate the demand for goods, services and employment.

The sad truth is that whilst these measures can help some people and can be palliatives, the only thing that really works is getting the overall economic policy right. Mr Brown talks about helping create 100,000 jobs with public money. Even if he does this, unfortunately the 100,000 will be swamped by the large number of job losses occuring this winter as the rest of the economy continues to deteriorate at an alarming rate.

The message of business to his Jobs summit appears to be that he needs to fix the banks so they can lend again in order to stem the tide of job losses. It is a necessary condition for economic recovery that he helps mend the banks, but it may not prove a sufficient one. Businesses are not just short of loans for working capital. They are also chronically short of orders. Without enough demand for goods and services they will not wish to borrow huge sums of working capital to make things no-one wants to buy or to employ service sector staff with no-one to serve. In that sense the PM was right to try to reflate demand at the same time as offering help to the banks. It was just that the VAT cut was the least likely way of doing this, as experience has proved.

So what should he do at the summit? He should ask the business community what measures they need so they can export more and substitute home goods and services for former imports. The violent devaluation of the pound preents a unique opportunity to correct the balance of payments in a way which generates many more jobs at home. There is demand there for imports that we need to satisfy from home production. Probably business will need changes to regulation and tax structures to make such a favourable response more likely. That would be something useful for the government to do, in addition to trying to sort out its banking mess. The UK is overtaxed and over regulated, which lies behind the shift of a lot of activity abroad. Detailed measures to alleviate this would be helpful.

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24 Comments

  1. BrianSJ
    Posted January 12, 2009 at 8:04 am | Permalink

    An American sociologist, Peter Rossi, set out the “metallic laws” of the evaluation of social programmes; and his iron law of evaluation is that “the expected value of any net impact assessment of any large scale social programme is zero”. In other words, no effect. There is plenty of support for this in all sorts of health, education, welfare programmes.

    • Posted January 12, 2009 at 9:02 am | Permalink

      Could you provide a link where I might read this man’s work?

      • BrianSJ
        Posted January 13, 2009 at 10:53 am | Permalink

        Sorry, not really. His main book is second-hand at Amazon at
        http://tinyurl.com/8k2yqf

        The evaluation research literature is large and varied. My entry to it was Michael Quinn Patton’s wonderful ‘utilization-focused evaluation’ – now in at least its 3rd edition. The first edition is short and written in one breath with some of the best jokes, quotes etc of any book.
        Good sensible UK thinking is by Ray Pawson and Nick Tilley’s ‘Realistic Evaluation’ at amazon at
        http://tinyurl.com/99ekmu

        The UK Evaluation Society can be found at
        http://www.evaluation.org.uk/

        The American Evaulation Association is at
        http://www.eval.org/
        HTH

  2. Lola
    Posted January 12, 2009 at 8:51 am | Permalink

    A synopsis of your article would be -”to create (genuinely) jobs the government should cut taxes and regulation”. Yes. And?

    (Corrected spelling version)

  3. Posted January 12, 2009 at 9:00 am | Permalink

    The latest nonsense to give two and a half grand to employers to take someone on is utterly wasteful nonsense (as well as an unintended tacit admission that tax-cuts do indeed work if you think about it). First off, if you were going to recruit anyway, would you decline the money? Probably not. Second, if you owned a small business, this is just another tax avoidance strategy. Worst, where do they get the money from in the first place? Of course, business (so employ a civil servant to take the money and another to give it back). Lastly, if your business can’t stand another employee, is the money really going to make a difference? You can tell Gordo has never run a business or had a real job.

    Don’t get me wrong, the offer will be taken up, but the actual impact, won’t make any net difference, though I have no doubt we will hear crowing about all the jobs this government has “created”

    • alan jutson
      Posted January 12, 2009 at 7:11 pm | Permalink

      Interesting that Dear Gordon is shelling out £2,500 of our money to employers who hire those who have been unemployed for more than 6 months.

      Those just made redundant now have another disadvantage in the jobs market, against those who have been out of work for more than 6 months.

      If you were an employer looking at two candidates with the same qualifications for the job, do you choose £2,500 or not !!!!! Is it worth £2,500 to take on the one who is just very slightly less suitable ???

      Another Government scheme which moves the goalposts for one group against another.

      What is the point of all of this, if you are going to pay employers to take on people, then pay them for taking on anybody who is on the unemployed list, or none at all.

      I wonder what criteria (rules and Regulations) will go with the £2,500 does anybody know ???
      Guarantee it will be complicated and will probably decimate the Amazon rain forest with paperwork.

  4. Posted January 12, 2009 at 10:02 am | Permalink

    JR – “Without enough demand for goods and services they will not wish to borrow huge sums of working capital to make things no-one wants to buy or to employ service sector staff with no-one to serve”.

    Answers.
    TAX CUTS to individuals and to businesses in order to create internal demand.
    INCREASE in interest rates in order to create sorely needed investment.
    Switch stamp duty on domestic housing to the seller in order to help a flourish of demand in the housing sector.
    Place restrictions on the purchase of domestic housing for ‘investment purposes’ through TAXATION which will free up housing and balance that sector in accordance with NEED instead of GREED.

    In respect of Gordon Brown’s attempts to taint previous Tory policies of the 80’s, he might do well to remember that NISSAN, SEIMENS, ROLLS ROYCE amongst others are here precisely as a result of Tory policies and that the hundreds of thousands of jobs in the finance industry were spawned by deregulation under Margaret Thatcher. Not some Labour clown who has no idea of how to run an economy or how to create jobs, and not as a result of ANY Labour policy which in the 70’s was plainly “Not Working”. similarly as they are still not working today.

    Instead of preaching to the learned, Gordon Brown would do well to take some advice. I suggest he starts here by reading your blog properly Mr Redwood.

    • DBC Reed
      Posted January 12, 2009 at 2:22 pm | Permalink

      Tax cuts i.e. reducing Guv access to funds and transferring the sums for people to spend will not increase demand in aggregate,will it ?
      The signs are that making cheap money available to the masses under the aegis of popular capitalism is very idealistic,but all the masses seem to want do is over-invest on the stock-market (leading to the Great Depression) and inflate the value of houses (leading to This Depression) .
      For the latter reason I agree with your points on the housing market,which should indeed be based on need instead of greed ( and the every man his own property speculator imperative).
      Boasting of the Tories’ success in shifting so much of British commercial activity into financial services rings a little hollow now ,does n’t it?

      • Posted January 12, 2009 at 3:38 pm | Permalink

        I would think tax cuts would increase demand in the aggregate, simply for reason there is unfulfilled demand now as a result of less means being available by a large number of citizens to actually call that demand into being ? ( Debatable of course ). But also, is it not about ‘confidence’ ? Would a business feel more confident to keep levels of production ready if it knew 22 million people had just received a £500 tax cut ? Would an employee feel more inclined to buy if he’d just received that tax cut and was with an employer who didn’t intend to make him redundant ?

        You’ve got me on the finance jobs however to be fair I was relating to the 80’s….20 years ago. Thatcher didn’t cause those jobs to be lost either. Brown did.

        • DBC Reed
          Posted January 12, 2009 at 7:24 pm | Permalink

          What happened to Bush’s $300 -$1200 tax rebates? I ask because I don’t really know but you do see reports that they weren’t spent. If that is the case,then Bush would have been better spending them directly on public works (??) Unless you dish out Gesellian stamp money (issued before in U.S.) there’s not much hope of getting the volume of money up or the velocity of its circulation.

        • Posted January 12, 2009 at 9:10 pm | Permalink

          Point taken.
          The truth is out there somewhere I guess in between people paying off their debts with it and others struggling to meet mortgage payments. Unfortunately, I think the longer it is left the further away it become of being a viable option to lift demand. I must confess I’m a bit stuck in 6 month groove of cutting taxes directly to business and to individuals and right at this moment it could well be too late to actually be meaningful as a viable option. Who can say? Certainly if it had been done in October/November, then I do have some doubts as to whether we’d have seen so many businesses going to the wall and yet we are still incurring greater national debt anyway and are now in jeopardy of less demand than a dead cat could eat in Whiskas.

    • Posted January 12, 2009 at 5:52 pm | Permalink

      The following comment strikes me as a trifle misguided.
      “Place restrictions on the purchase of domestic housing for ‘investment purposes’ through TAXATION which will free up housing and balance that sector in accordance with NEED instead of GREED.”
      The reasons are two-fold.
      1. The supply of houses exceeds demand at the present time. Restricting potential demand will exacerbate the situation. You will cause the housing market to bottom out at a lower level, and prolong the slump. This will delay recovery.
      2. Many of the people recent landlords are those who are moving to another area. Unable to seel their own house, they let their own house and rent in the new area.
      3. If you consider NEED instead of GREED, where do you stop? A person with a single residence worth GBP1m+ and 8 bedrooms could be considered greedier than the landlord with a small apartment.

      • Posted January 12, 2009 at 8:40 pm | Permalink

        There are a couple of things I’m thinking here.

        When I say shift the balance from Greed to Need, I am saying domestic property is first and foremost built for residential purposes for families ‘to buy’, and they aren’t primarily built ‘for rental’ or for ‘investment purposes’. Large investors have been obtaining large amounts of residential property and helping to inflate prices thus exacerbating the problem of unaffordability.

        A removal of stamp duty on a domestic purchase altogether could kick start the market and a tax on the sale of housing could actually slow the sale of properties sufficient to balance the supply and demand of housing stocks naturally. Also, if tax on investment properties was levied correctly, then investment in housing could decline, help to alleviate the need to build the other 3 million houses Labour says we need, and level prices as they become more affordable.

        I agree that supply could well exceed demand at present but surely that’s a reflection of the current lack of confidence caused by lack of available credit and fear of job loss. Those things do still have to be put right of course, but I can’t see that people who can’t acquire credit are causing a lack of demand. Confidence yes, but demand no except temporarily. Long term, I feel the majority of people would still want to buy their own home but at the moment they lack confidence and/or credit to do it.

        Lastly, I guess we’re faced with Asian Sovereign Wealth Funds buying up our housing stocks en masse unless we get people into them, which could be aided now with an improved programme of part ownership to help get it started, since the government itself has thousands of houses on the books which are standing empty. Why not offer them to families who need them and want to buy them on this kind of arrangement?

  5. Posted January 12, 2009 at 12:17 pm | Permalink

    http://www.order-order.com/2009/01/mcnulty-slams-browns-desperate-golden.html

    Looks like Brown has proposed a plan we suggested only a few months ago to the usual derision of Labour Ministers, who then proceed to nick it!

  6. kevin
    Posted January 12, 2009 at 12:55 pm | Permalink

    the government going to spend more tax payers money trying to create job for the british economy in this downturn so does that mean they will be taxing more and more and borrowing more and more its theses policies that have gotten uk plc in the mess that we are all in and LABOUR answer is lets do more of the same when will labour learn thats its there policies thats making this downturn worse and there huge spending spree and national dept thats doing the damage to the uk economy its like there only answer is to throw more and more tax payers money at the problems and hope that everything will work out in the end LABOUR NOT GOT A CLUE about the impact there policies are creating are who is thinking about paying back all this money nobody what happens when the money runs out or they borrow so much they cant borrow anymore LABOUR JUST MAKING THIS DOWNTURN WORSE NOT MAKING THINGS BETTER, GORDON BROWN LETS HAVE A GENERAL ELECTION NOW AND LET THE PEOPLE DECIDE IF THEY AGREE WITH THIS SILLY POLICY
    OF A BOOM FUELED BY A MASSIVE GOVERNMENT DEPT THAT MEANS TAXES WILL HAVE TO RISE IN FUTURE TO PAY ALL THIS MONEY BACK OR HUGE CUTS IN SERVICES EITHER WAY IT LOOKS AS IF WE ALL GOING TO BE PAYING IN ONE FORM OR ANOTHER FOR ALL THESES MISTAKES WITH HIGHER TAXES THE QUESTION IS HOW HIGH OUR TAXES GOING TO HAVE TO RISE IN ORDER TO BALANCE THE BOOKS

  7. chris southern
    Posted January 12, 2009 at 1:33 pm | Permalink

    I agree with what you are saying John.
    cutting taxes will give business breathing space as well as allow them to drop their prices allowing them to be more competetive.
    this will also help build up our infrastructure allowing companies to produce goods in the UK that will provide for the UK as well as for export.

    Gordon Brown should keep in mind a simple rule K.I.S.S, which stands for keep it simple stupid.
    the more you put in complex regulations the harder it is for people to operate within the system, either by having their hands tied and costs increased or by simply not being able to undestand the increasing complexity of all the regulations.
    (K.I.S.S is something that games desighners use as they found that overly complex rules actualy led to a drop in sales due to people getting fed up with spending days learning the rules when they just wanted to start playing the game.)

  8. Posted January 12, 2009 at 2:15 pm | Permalink

    In the end it all goes back to Adam Smith and “little else is needed…but peace, easy taxes and a tollerable administration of justice.” Sadly taxes in Britain are anything but easy, and the law has spread through so many regulations any administration of them is rather intollerable.

    Freeing up normal lending is the key, and until the banks have their balance sheets back in order this won’t be happening. We need to encourage some sensible saving so banks have the capital to lend again!

    I don’t think demand-side policies will be effective. Far better to use supply-side measures to enable firms and individuals to weather the storm and repay debts. Just like the banks, businesses and individuals won’t start spending until their balance sheets have improved.

    Thay should cut government spending to reduce the deficit – and so stop crowding out private sector borrowing – and also end the crazy Basel II rules that have forced banks to hold more cash in reserve and thus lend less. Otherwise they should cut or axe Employers NIC and Business. Rates, so the costs of keeping a firm going are less.

    David
    http://www.newsjunction.co.uk

  9. mikestallard
    Posted January 12, 2009 at 4:53 pm | Permalink

    Let me ask you this: if you personally were made redundant, what would you do?
    Me? I would try and get a nice safe job within the well paid, state sector.
    Under no circumstances would I try and borrow money, start a new business, face all the convoluted tax regulations and the eye watering insurance premiums before calling in Fire and Health and Safety for a free walk through.
    If I were employed in any form of non government business, I should treat it as temporary.
    And I should be looking very carefully at jobs outside this country.
    Mr Brown in Radio at lunchtime showed that he has absolutely no interest in anything except slagging off the “Tories” (those imaginary people who and his party are coming so much to resemble).
    But, like all Calvinist Socialists, he alone cares and understands the poor. Even though he is not one of us.

  10. Freeborn John
    Posted January 12, 2009 at 8:07 pm | Permalink

    Populis are showing the Tory lead back at 10 points (CON 43%(+4), LAB 33%(-2), LDEM 15%(-2)). I expect Labour are going to fall away quite badly now. My prediction is a Conservative lead of 20 points by June.

  11. THE ESSEX BOYS
    Posted January 12, 2009 at 10:57 pm | Permalink

    Given yet another inaccurate Brown rant about the 80’s recession (which, incidentally, like the one of the early 90s we recall as being international) one has to wonder just why he purports to have such admiration for Mrs Thatcher. Could it be that we don’t have joined-up government because the Great Leader is incapable of joined-up thinking!

    Gee we’re looking forward to the new Mandy/Draper blog site so we can direct remarks to the guilty parties instead of just those who are trying to solve their mess!

  12. Tony Makara
    Posted January 12, 2009 at 11:53 pm | Permalink

    When the government offers more cash for ‘person intensive’ responses to unemployment it invariably means the same thing. People are shunted off the official unemployment count and are sidelined onto sham training schemes. The government has successfully been making people disappear from the unemployment count for years through the New Deal’s mandatory work-experience programmes.

    The tragic thing is that the opposition parties have allowed the government to defraud the nation as to the true nature of unemployment by not holding Labour to account over its many Svengali-Schemes, which appear to be helping people, but in reality are little more than a ruse to massage the unemployment statistics. With Labour’s recession biting hard we can expect far more public money to be wasted on these ‘in-training’ gimmicks.

    If public money is available to alleviate unemployment then it must go into creating transient public works programmes, employing manpower to be used in the process of urban renewal. Such jobs, should as a priority go to those with families and mortgages. The opposition parties, for their part, must hold the government to account and ensure that people in training are not allowed to disappear from the official count.

  13. Posted January 12, 2009 at 11:58 pm | Permalink

    You are right Mr Redwood in saying due consideration needs to be given to the relative success past schemes. However, this needs to be in the context of the current realities.

    1. The budget deficit is already ballooning, with a very real prospect of debt running out of control. Committing to endless schemes will mean massive rises in taxes just as a recovery may be getting underway. George Osborne should make a couple of visits to the IMF to get to know the place, and practice shuffling on his knees.
    2. Any employment schemes will prove most cost effective when the recovery is underway, not while the economy is still shrinking.

    RULES-OF-THUMB need to be used in evaluating policy. At a minimum, any stimulus, business subsidy or job-creation strategy should follow the following criteria.

    1. It must have a reasonable chance of generating more economic benefits that costs. Preferably it should have the prospect of having a positive impact on the Exchequer.
    2. Each project should be, at most, an annual commitment with limits imposed. Reviews should be stringent and the plug pulled if costs run out of control, or if projected benefits are not materializing.
    3. The timing is crucial. If the time is not right existing policies should be pulled. For instance, stamp duty should be re-introduced until the market has started to recover. (Lord Lamont has admitted that it did not work in 1992 and it is not working now) Similarly, if job creation schemes are to be effective, they should only be enacted on a large scale once the economy has bottomed out, when the marginal impact will be greater.
    4. The government should be aware of its own limitations. To be effective means to be shrewd, ruthless of failure and focused on realities. As with any elected government, this conflicts with pleasing popular opinion and maintaining an image.
    5. Finally, the government should limit the difficulties it is imposing on businesses and individuals. It should critically look at the regulations that have little benefits but impose onerous costs, either temporarily suspending them, or removing them off the statute book.

  14. Ian Jones
    Posted January 13, 2009 at 6:21 am | Permalink

    You raise a valid point on employment taxes and regulations and their impact on unemployment. The current Govt adds a new regulation and cost and then stands back and says “look, no adverse effect on unemployment!”.

    What they fail to appreciate is that most employment is based on investment made in the prior 10 years. Therefore, the late 90’s and into 2000 growth came from investment and regulation changes in the 1980’s and early 90’s. The impact of Labour’s regulation and tax rises are now being used in the investment analysis of multinational companies as well as domestic. Reduced investment = lower jobs= lower growth.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. 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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