UK labour record challenged

DIANE COYLE

Economics Editor

Britain's job creation record is little better than that of its main industrialised rivals, according to a new report published today.

The study, released to coincide with the start of the two-day Group of Seven jobs summit in Lille, France, is likely to disappoint the British government, which hopes that the summit of the big industrial countries will endorse its view that deregulation of the labour market is the most effective way to create jobs and reduce unemployment.

The independent Employment Policy Institute argues that the only time employment growth in Britain has been higher than in the other G7 countries was during the unsustainable late-1980s boom.

``The pay-off in terms of extra jobs in Britain has not been spectacular in European terms, let alone in comparison with the US,'' according to EPI director John Philpott.

Some officials from other countries at the summit predict that the event will be a damp squib. Partly due to British insistence that contentious issues should be kept off the agenda, the final statement is likely to be a "lowest common denominator" endorsement of sound macro-economic policy and structural reform.

This means that some countries are unenthusiastic about the meeting of employment and Treasury ministers. The US and France, for example, would have liked to include the scope for ``social clauses'' in trade agreements. These would incorporate trade penalties against developing countries deemed to have an unfair cost advantage by exploiting child labour or indentured workers, for example. But Britain was joined by Canada and Japan in opposing a discussion.

The Americans would also have liked to include an assessment of active government labour market programmes such as retraining.

A further dampener will be the inability of France and Germany to admit that unemployment could be made worse by the need for European countries to reduce their government deficits simultaneously in order to qualify for the single currency. All of the governments stress the importance of deficit reduction - or ``fiscal consolidation'' in the G7 jargon.

The tone for the summit will be set by an opening paper presented today by Jean-Claude Paye, the outgoing director general of the Organisation for Economic Co-operation and Development. Drawing on work commissioned by the last G7 jobs summit, in Detroit two years ago, the OECD emphasises the need for growth based on higher skills and knowledge. It will stress that governments play an essential role in this.

The rich countries' think tank has already criticised Britain for weaknesses in education and training. These shortcomings are acknowledged by Employment and Education Minister Gillian Shepherd, who is eager to avoid a triumphalist tone about Britain's relatively low unemployment rate. ``We lag behind our competitors in areas such as skill levels,'' she says.

The summit will focus tomorrow on how to improve job prospects and incomes for the unskilled and others ``excluded'' from the jobs market.

G7 unemployment

rate (%)

US 5.5

Japan 3.3

Germany 11.1

France 11.8

Italy 12.2

UK 7.9

Canada 9.6

Average 8.8

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