George Osborne rather glossed over the single most solid piece of good news in the Budget today: the Jobs Miracle. His pensions announcement means that tomorrow’s papers are likely to skip over it too. But it’s worth looking at – the government seems genuinely baffled as to why so many people are finding work. As I wrote in my last Telegraph column, the Treasury does not seem to recognise a supply-side, cross-departmental success when it bites them on the nose.
I’m just back from the annual Spectator Budget presentation, sponsored by Aberdeen Asset Management. We spoke a lot about this – the below graph sums it up…
As my earlier blog on the “six scary graphs” shows, almost all of George Osborne’s initial forecasts have proven to be laughably optimistic. But not jobs. Employment is rising, having seemingly become detached from the sluggish growth. Employment data has a life of its own.
The brown line shows Osborne’s June 2010 forecast – and the other lines show subsequent OBR forecasts. Every budget or Autumn Statement seems to involve a massive upwards revision in employment. Something is going badly right.
It’s not as if George Osborne has gone easy on public sector workers. He’s shed 780,000 jobs – but for every one of these jobs shed, he said the economy would create two private sector jobs. Ed Balls once called this a “fantasy”. Osborne has been amply vindicated:-
Now, there were jobs galore under Labour. But the vast majority of rise in employment under Labour was accounted for by foreign-born workers. Until fairly recently the same trend was visible under Osborne too. As an unreformed welfare system trapped people rather than helped them back to work. But in recent months there has been a surge in UK-born workers – look at the red line below…
The deeper you look into Osborne’s jobs figures, the more encouraging the signs. So why didn’t the Chancellor boast about it more? As I said in my Daily Telegraph column, the Treasury isn’t quite sure why all of these jobs are being created. Programmed by Brown, it cannot recognise the fruits of supply-side reform – even its own reform. If you raise the tax threshold and cut taxes, work will be more attractive so more people will choose work.
When the Bank of England was mulling the jobs miracle a few weeks ago, it credited
…a tightening in the eligibility requirements for some state benefits might also have led to an intensification of job search.
In other words, the IDS reforms – and tougher sanctions regime – are making life on welfare less of an option. So the DWP can play its part in this extraordinary government success story.
So can the Home Office. Michael Sunders from CitiGroup recently pointed out that the non-EU immigrants, whom Theresa May is cracking down on, are finding it harder to work here. As Saunders put it:-
The gap in job growth between people born inside the EU and outside the EU also suggests that the tightening in visa policies for non-EU workers is biting. This effect probably will continue.
So the British Jobs miracle is brought to you not just by a Chancellor who culled public sector jobs to free up the rest of the economy but a radical welfare secretary (IDS) and a Home Secretary (Mrs May). It’s a real story of joint Tory government success – but not a story the Chancellor felt like telling yesterday.
More Spectator for less. Stay informed leading up to the EU referendum and in the aftermath. Subscribe and receive 6 issues delivered for just £6, with full web and app access. Join us.