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.