Britain praised by OECD for jobs policies

The jobs policies of the previous government were singled out for high praise in an authoritative new report yesterday, while France and Germany were criticised sharply for their failure to introduce more flexibility in the jobs market.

Helen Liddell, economic secretary to the Treasury, told the annual meeting of ministers at the Organisation for Economic Cooperation and Development that the new government would put a fresh emphasis on social inclusion, introduce a minimum wage and reform the tax and benefits system.

Her statement was received with caution by OECD officials who said the impact of Labour's plans on jobs, especially the minimum wage, would need to be monitored closely.

In a report published yesterday the club of rich industrialised countries singled out Britain, along with Ireland, the Netherlands and New Zealand, for praise with its jobs record. Many continental countries were advised to introduce greater flexibility.

The report refers to "deteriorating conditions" in those countries where unemployment is well above the OECD average. It sets them a long list of recommendations but for the UK it advises only two specific measures. These are closer monitoring of the effect of employment policies and action to reduce the drop-out rate from higher education.

The document lists benefit cuts, reduced job protection and industrial relations legislation as the key UK reforms of the 1980s. It challenges the notion that such measures to increase flexibility must be at odds with fairness and social cohesion. "Increased employment as a result of policy reform will tend to offset at least partly the impact on income distribution," it says. It adds that past reforms in the UK have met with "considerable acceptance" by the general public.

The UK unemployment rate, measured on the same basis as other countries, is one of the lowest in Europe.

While officials accept that there are alternative routes to high levels of employment, they hope the new government will proceed with caution. They welcomed Tony Blair's stress last week on the importance of flexibility in the job market.