British jobs for British workers?

The Government are wiping statistical egg off their faces again.

Up until this week, we were being told that only 0.8 million foreign migrants had come to work in the UK, while the labour market had grown by 2.7m new jobs. Now the Government has had to revise both figures, admitting that in fact 1.1m new migrants had entered Britain, while only 2.1m new jobs had been created. Far from creating "British jobs for British workers," it appears that Gordon Brown has been creating British jobs for foreign workers.

Except that it's all tosh, of course.

For one thing, Gordon Brown has created only about a couple of hundred thousand new jobs, largely by employing new civil servants, nurses and other public sector employees. Most of the 2.1m new jobs were created in spite of Labour efforts rather than because of them. They are private sector jobs, and a good job too.

But what of Brown's supposed crackdown on migrant labour? Does it matter that 52% of the new jobs have gone to migrants? And who is to blame?

The crackdown on migrant labour is boneheaded Labour nonsense and should be treated with disdain. A real policy of creating "British jobs for British workers" would be illegal under European law, and even if one would rather be out of the European Union it remains an ignorant and self-defeating policy. 1.1m workers are 1.1m workers, whether they come from Portsmouth, Poland or Peru. As long as they work hard they are creating value for the whole community; as long as they earn and spend they are creating jobs for other - mostly British - people; and as long as they are paying taxes they are contributing to the schools and hospitals that we all use.

That these "British jobs" could have gone to "British workers" is of course true, but it is not as though British workers could not have filled them. There are 1.65m unemployed in the UK, and one has to wonder why so many remain unemployed if we have had to import 1.1m workers from abroad to fill the vacancies. The explanation comes from debunking three myths:

1. Jobs are not created by ministers and civil servants. They are created by businesses that can see a way of turning labour into profit. If they can hire a person and generate more capital than they need pay in wages, it is worth their creating a job. Those jobs were potentially there as long as people were willing to work at that price. It is the availability of foreign labour prepared to work at those prices that created those jobs.
2. Britain's unemployed were more than welcome to apply for those jobs. Many may have done so; many more did not. There have been numerous managers interviewed for TV and the papers who have stated that they have offered jobs in areas of high unemployment for years and local people have not applied.
3. We would not have created 2.1m jobs if 1.1m foreigners had not come here to work. As noted above, they spend their wages in our shops, require us to hire our teachers and use products made by our manufacturers. A significant part of those 2.1m jobs are feedback; many of those 2.1m exist because othes within that 2.1m (including within the 1.1m) exist;

The simple truth is that as long as we pay people not to work, we will need to import foreign labour to do the jobs that British people are unwilling to take on. On any day in the UK there are approximately two thirds of a million job vacancies. The problem in the UK is not too many foreign workers; it is too many British people who are not willing to take the jobs that are available.

The end of the free society?

I came across some disturbing statistics over the weekend. Apparently, less than half of the eligible voters in the UK work in the private sector. The rest are either state employees or on state benefits.

This is important because a free society requires the citizens to keep their government in check. It is easy for those who do not rely on welfare and who are not paid a salary by the government to insist that their rulers take a long term view of their needs, look to the health of the economy and not just the wealth of the public finances, and rule in the interests of the nation and not simply serve a host of special interests. But a client nation where the citizens rely on receiving money from the state cannot exercise the same restraining hand.

Of the 44 million on the electoral register, only 20 million are either employed in the private sector or are self-employed. Over a third as many (7.1 million) are employed by government, and their interests lie in pushing up public sector salaries and benefits at the expense of taxpayers; we have already seen the effect of this in the government’s spineless and unprincipled decision not to properly reform the civil service pension scheme. The rest are made up of 11.8 million pensioners, 2.7 million on incapacity benefit and 3.2 million on various other benefits, many of whom pay very little direct taxes and yet all of whom have a vested interest in seeing public spending – and consequently direct taxes – rise.

Benjamin Franklin described democracy as “two wolves and a lamb voting on what to have for lunch.” In this case, the welfare dependent and those on the government payroll now outnumber those whose productivity must ultimately pay the government’s bill. Yesterday I wrote that “It may seem at present that intervention and the large state dominates, but the tide will turn. The voters, be they the over-taxed middle class or working class playthings of bureaucracy, want freedom.” However, if over half the voters are dependent on the government’s ability to squeeze money out of the remaining less-than-half, that is not the case.

Ultimately, freedom relies on autonomous individuals agreeing to pass over a proportion of their wealth to the public good. This is not the case if a predatory government can use the votes of its clients to extract ever more from a minority of independent wealth producers. The results will not only be spiralling taxes and unemployment and a generally worsening economy, which we are already seeing. It will be to draw ever more people into government control, ever expanding its power until we are all its subjects.

Three-out-of-three is bad

Before Christmas I reported that the Labour Government has managed to increase both taxes and unemployment. In my enthusiasm for the festive fun, I overlooked a third painful statistic: inflation, too is rising.

That taxes and unemployment were rising simultaneously should come as no surprise, as high income and corporate taxes squeeze entrepreneurs and businesses, while high employment taxes (National Insurance to my British audience) raise the price of labour and make expansion unprofitable or shift the balance in favour of capital (i.e. it is cheaper to mechanise than to employ).

In the dark and dismal past, however, it was generally held that unemployment and inflation were opposing sides of a great balance. Between the 1940s and 1970s economists – inspired by J M Keynes – convinced governments that unemployment could be countered by inflationary policies (which surreptitiously reduce real earnings and so free up capital to employ extra workers). This was a flawed thesis, as demonstrated by Nobel economics laureates such as Milton Friedman and F. A. Hayek, who persuasively argued that policies aimed at full employment were both misguided and counter-productive.

Even more flawed, perhaps, was the resulting myth that inflation and unemployment were a trade-off. In theory, unemployment could be reduced only by inflationary policies, while the eventual need to rein in inflation would cause unemployment. It did not, however, follow that the two were in balance. In fact it is possible to have both rising unemployment and rising inflation. Our current Labour government is in the process of proving it.

Britain’s consumer-price inflation rate in November was 2.7 per cent, the highest rate since records began and also the highest rate since Labour took office. Combined with the rise in unemployment to 5.6 per cent from 4.7 per cent a year ago, a budget deficit of 3 per cent, further expected tax rises and GDP that is predicted to fall in 2007 and this is a pretty miserable picture of Labour economic failure.

Another old Labour story: taxes are rising

Yesterday I reported that unemployment was rising under Labour. Today, it’s the turn of income taxes. Hard working taxpayers are being squeezed as never before.

Taxes on average incomes are at their highest since records began in 1987. The Office of National Statistics reports that taxes on incomes are now 23.6 per cent of wages and salaries.

This must be borne in perspective; taxes on average incomes have hovered between 20 and 23 per cent throughout the two decades in which they have been measured. But taxes are creeping up, with no sign now that in the near future they will be reigned in.

The squeeze is especially painful for two reasons. Firstly, it is outpacing rises in wages: taxes rose by 6.7% compared to wage rises of 4.6%. Secondly, this comes as other inescapable costs are also rising: interest rates are rising; inflation is rising; utility bills are rising. Consumers are under intense strain. This year’s Christmas cheer is increasingly being funded by savings rather than income, which can only be a short-term solution.

2007 is likely to be a very happy new year for Gordon Brown as he finally realises his lifetime ambition and moves into Number 10. In doing so, he will leave behind a Treasury in a parlous state. Whomever he makes his Chancellor (and my bet is on Alistair Darling) will inherit a poisoned chalice; inflation, unemployment and taxes are all rising as Brown’s public sector profligacy bites home. A happy new year for Mr. Brown, perhaps, but for the rest of us, the long hangover is coming.

Labour isn't working

It’s an old story, but it appears that they’re remaking it again. No, it’s not the BBC dramatisation of Dracula. It’s rising unemployment.

Youth unemployment is particularly troubling. In November this year 11,200 young people had been claiming benefits for more than a year. Youth unemployment is now worse than it was when Labour came to power. Figures from the Office of National Statistics are instructive:

1997 2006 Change
16 – 24 year olds unemployed 665,000 702,000 + 37,000
16 – 24 unemployment rate 14.4% 14.5% + 0.1%
16 – 24 unemployment rate – London 22.5% 42.9% + 20.4%


Labour MPs are rushing to blame the usual suspects – immigrants. With simple but flawed logic they suggest that hundreds of thousands of East Europeans have flooded in and taken jobs that might otherwise be filled by British workers. However, if this were the case, why was it that two thirds of a million 16 – 24 year olds were unemployed before the East Europeans arrived? How has Britain managed to absorb hundreds of thousands of East European workers when unemployment has only risen by tens of thousands?

This scapegoating of hard working, tax paying immigrants is a sordid attempt to shift attention from the real culprits: the Labour government. Youth unemployment is on the rise because Labour has strangled business with masses of extra regulation and rising taxation. It is rising because our schools are still failing to teach basic skills to far too many of our children; a quarter are functionally illiterate, innumerate and leave school at 16 with no qualifications worth speaking of. And it is rising because the government’s New Deal is a disaster, costing more and proving less effective than similar schemes in comparable countries, while massaging the jobless statistics by placing young people in jobs that last less than 13 weeks, so that returning jobless do not appear to be long-term unemployed.

In 1997 Gordon Brown described the levels of youth unemployment that Labour inherited from the Conservatives as “sickening”, a “human tragedy”, “an economic disaster”. After nine years of his chancellorship, it is now worse. It is an old Labour story, and each time we read it we feel the same despair. Labour isn’t working.

Welfare is a product of state failure. It is time for Reform

Independent liberal think-tank Reform have today launched an excellent report on Reforming Welfare. Britain faces a ballooning welfare crisis. A shocking 5.4 million working-age Britons (14 per cent of the working age population) rely on state aid, over two thirds of them for longer than a period of a year. The UK spends £79 billion on non-pension social security: more than we spend on Education, which Labour promised would be its priority and which in the long-run is the best hope for reducing poverty and benefit-dependency in the future.

The Government is currently failing. Unemployment is falling more slowly since the New Deal has been launched. The number of people on sickness benefits has nearly quadrupled in 25 years, so that 5 per cent of men aged 25-49 are now ill or disabled. Tax credits are now paid both to the unemployed, which was never their purpose, and to those on high-incomes: a third of tax credit spending is paid to those with above average incomes. Despite a 400 per cent increase in welfare spending under Labour, the UK has the worst poverty trap in the OECD.

The state-monopoly approach has not worked. Fortunately, and perhaps at first glance surprisingly, the market offers the solution. The report notes that “paying independent agencies on results is more effective at getting people back into work than paying official agencies flat rates no matter what they do (or don’t) achieve. It has also unleashed a wave of innovation and of flexibility.” Reform offer six recommendations:

• Abandon the state monopoly of provision – the state should put welfare out to tender and invite private and voluntary bodies to bid for the contracts
• Job schemes should be about finding work rather than training, and the unemployed should be required to look for work if they want benefits (this includes those on Incapacity Benefit)
• Reset the benefit levels and tapers to reduce the poverty trap that results from people seeing massive drops in benefits as they work so that they keep little or none of the extra money they earn
• Simplify the system by merging some of the 51 benefits, 26 of which account for less than 1 per cent of spending
• Raise the personal allowance so that somebody working full-time on the minimum wage pays no income tax (a proposal I have made several times before, most recently on 21 November)
• Transform part of National Insurance into a form of unemployment insurance so that individuals who lose their jobs have ownership of a fund to help them during their period of unemployment.

These reforms are urgently needed. Unemployment is rising under the current Government and one in seven adults now rely on state aid. The current system squeezes ever more money out of the hard-pressed middle classes while failing to address the crushing poverty that afflicts the poorest in our society – it is those just below the “poverty line”, and not the chronically poor, that are the focus of this Government’s efforts.

Rather than continue with the state-centric solutions that have been characteristic of this Government, it is time to employ market mechanisms and the innovativeness of enterprise to address this costly and tragic disaster. This report could not come soon enough.