My friend and critic Jonathan Portes obviously took exception to my remarks about Keynesianism having been disproven. His entertaining rebuttal claims to have exposed my misreading of data. That’s not quite how I see it.

I agree with him that the appalling build-up of out-of-work benefits happened before 1997. The Tories badly miscalculated incapacity benefit; thinking it would be a one-off way to help those affected by deindustrialization. But, in fact, it created a welfare dependency trap, and the 1992 recession caught too many people in it.

John Major had an excuse: a recession. Tony Blair had no such excuse. I wasn’t joking about a quarter of Liverpool and Glasgow being on the dole at the height of the Labour boom. In May 2007, precisely 25 per cent of Glaswegians were on out-of-work benefits, and 26.2 per cent of Liverpudlians. In Birmingham, it was 21 per cent. In Manchester: 22 per cent. In Blackpool: 23 per cent. (Full data here.) I cannot agree with Jonathan that this represents an economic success. Instead, I’d categorise it as a scandalous failure – one made even worse by the fact that so few in the Labour Party pointed to this failure.

Jonathan also says that I’m wrong to claim that the link between British jobs and British workers is being repaired. CoffeeHousers may remember that Gordon Brown boasted about having overseen the creation of 2.6 million jobs. And, while it’s true that employment did rise by that amount, 1.9 million – 72 per cent – was accounted for by foreign-born workers. Now, to me, that prompts a question: what’s the good of a growing economy if it doesn’t shorten British dole queues?

Scarfe3

Under Cameron, the breakdown of new jobs has been different, which is why I say that the coalition’s welfare reforms and tax cuts are coming together to make growth work in a way that reduces the number of workless households. Just 17.1 per cent now, at this time of austerity; lower than it ever was at any point in the Labour years.

I agree with Jonathan that the best bits of the coalition’s welfare plan build on the excellent reforms of James Purnell, Jim Murphy and John Hutton. In many ways, they can be seen as the real pioneers. But these Labour reformers were set to work too late, after it was clear that Gordon Brown’s “let then eat tax credits” approach had failed. Blair was very close to doing proper reform (as his hero Clinton has) from the offset, but gave up when the protests started. Welfare reform is the toughest thing you can do in government – lots of pain for very little Politcal reward.

If I were to attack Cameron and Osborne, I’d point to the low real wages which make such jobs growth attainable, a function of Britain’s appalling productivity levels. I would not say how much better things were under Labour. The jobs boom was fuelled by migrants, while pockets of the most appalling poverty were simply ignored – when there was the money to help the people trapped in such areas. And that, to me, is New Labour’s single greatest failure.

Tags: Benefits, David Cameron, Economy, Employment, George Osborne, Gordon Brown, Immigration, Jonathan Portes, Tony Blair, Welfare