Jobless figures cap a bad week for Gordon Brown
The Prime Minister will have spent much of this week flinching over the morning papers. New figures published by the Office of National Statistics (ONS), showing that unemployment has broken through the so-called “psychological barrier” of two million, will hardly be a surprise: as any economist will tell you, unemployment tends to lag a few months behind falls in GDP. But in a week when the IMF once again saw fit to single out the UK for special attention, Brown’s recession-busting policies will suffer increasing scrutiny.
Conservative leader David Cameron accused Brown of leading the UK to two million unemployed "without a hint of an apology”, adding that “the British people will never forgive him". Brown countered that Labour's policies are designed to get the country through a recession “as quickly as possible”, but anecdotally at least, there are signs of plenty more hardship to come. Alan Tomlinson, partner at insolvency firm Tomlinsons, insists he’s never been so busy. “Companies of all sizes, and in all sectors, are folding by the day. The CBI's prediction that unemployment will peak at just over three million in the second quarter of 2010 could prove to be wildly optimistic,” he says.
ONS figures show that the number of people out of work and claiming benefits rose by 138,000 in February—that’s a bigger rise than in any single month from previous recessions of the 1980s and 1990s. This time last year, the number of people claiming unemployment benefits fell by 1,200. According to Liberal Democrat Shadow Work and Pensions Secretary Steve Webb, the numbers demonstrate poor planning by the government. “These figures are proof that government forecasts for unemployment are pure fantasy. If unemployment keeps rising at the current rate, we’ll hit the level the Government is predicting for 2012 by April this year.”
Ian Brinkley, associate director at The Work Foundation, said that up until now, unemployment figures were massaged by recruitment freezes and flexibility over hours and pay. “This period of restraint is coming to an end,” he said. Brinkley added that unlike previous recessions, the services sector is also feeling the squeeze. Service sector falls “were heavily concentrated” in retailing, hospitality, business services and finance, although this was partly offset by growth in education and healthcare. “Public sector employment has so far yet feel the downturn,” said Brinkley.
Mark Wallace, of the TaxPayers’ Alliance, said that it adds “insult to injury that people lose their jobs in the private sector to see the government increasing public pay as if nothing is happening.” The CBI said that with government debt “skyrocketing” and the economy under “severe pressure, the gap between public and private sector pay growth must be closed.” The “economic pain is not equally divided,” added Graeme Leach, Chief Economist at the IoD.
The IMF added to Brown’s woes by predicting that of all the industrialised nations, Britain’s recession would last the longest. The gloomy economic forecast shows that the UK economy will contract by 3.8 per cent this year, while the US economy is set to shrink by 2.6 per cent. The Eurozone, according to the IMF, will contract by up to 3.2 per cent, although if you take into account figures published by the IWH research institute, Germany’s export dependent economy is now expected to take a 4.8 per cent hit this year, a much bigger contraction than previous estimates.
The IMF also predicted that Britain will be the only country with a shrinking GDP throughout 2010. Shadow Chancellor George Osborne called it “further evidence that Gordon Brown’s economic model is fundamentally broken and his policies on the recession aren’t working.”
Posted 19 March 2009 : Director.co.uk
