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David Cameron should support work through tax cuts, not more apprenticeships

27 January 2015

9:00 AM

27 January 2015

9:00 AM

In a Telegraph interview, David Cameron today pledges to cut the welfare cap – to £23,000 from £26,000 – to fund another three million apprentice places. He says that this:-

‘Tells you everything you need to know about our values’

He is refreshingly honest, in that this welfare/apprenticeships policy is designed to articulate Conservative Party values rather than actually help the country. He wants to send a message: the Tories stand for work, not welfare. So here is policy intended to take away from those on welfare, and give to those in work.

It’s encouraging that the Tories seem to be edging away from George Osborne’s spurious claims about the deficit and towards their most solid, spectacular achievement: the jobs miracle (below). But here’s the thing. With British employment rates and ratios at or around record high, there is no burning need for more apprenticeships. Britain does have a whole bunch of economic problems, but lack of apprentices is not one of them.

For example, low wage growth is a problem. Government can help by cutting the tax burden on the low-paid. Right now, we’re doing okay for numbers of people in work – the emerging problem is people trapped in low-pay, only a fraction of whom are on minimum wage. In a free society, the Prime Minister can’t really force employers to pay more, beyond the minimum wage. But a PM can reduce the pain inflicted on the low-paid through government taxation.


In general, government job-creation schemes have a patchy record: far better to cut taxes for workers, and then let employers and workers sort things out between them.

The Tories’ main success comes not from apprenticeships but from applying basic conservative principles: cut taxes, move government out of the way and let people do the rest. This is worked very well, and it’s depressing to see the Tories unable to articulate this. Osborne has cut corporation tax, for example:


This means companies have more money and are better-able to invest — and employ. Here’s how the employment rate has soared, defying even the government’s own projections:

The above has been helped by is raising the starting rate of tax, which means work pays more an increases the incentives for moving people into work. Iain Duncan Smith’s welfare reform has, meanwhile, created an environment were it’s far harder for those who are able to work to game the system.

So these basic (and very conservative) reforms have created a situation where employers are creating more jobs in Britain than the rest of Europe put together. And still, weeks before a general election campaign, the Tories seem unable to understand let alone articulate the linkage between their own reforms and their own success.

The apprenticeships scheme, for all that the Tories want to boast about it in the general election campaign, has not been the star of the employment show over the last few years. The star has been welfare reform and tax cuts. And if you’re cutting welfare again it would have been better to do what the Swedes did ten years ago, and put welfare cuts into tax cuts for low-paid workers.  Rather than a government job-creation scheme, with all the inefficiency that it involves.


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