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Forum for National Recovery: Unemployment 'to stay at 3m': Role of Government in beating recession

THE NUMBER of people unemployed is likely to remain at more than 3 million for many years, Andrew Britton, an economist and one of Norman Lamont's team of forecasters, told the meeting.

Mr Britton, director of the National Institute of Economic and Social Research, opened a session on the role of government in beating recession with a call for more spending on education and training. Noting that economic forecasters had learnt modesty, he said one of the things they agreed on was that the fall in the value of the pound would help recovery. But, as with interest rates, the effect could be slow.

'The idea that we should be seeing very large effects on activity in this country from either depreciation or the interest-rate cuts is mistaken,' he said, predicting signs in the 'early part, or perhaps later, of next year'.

However, Mr Britton said attention should be directed not at the timing of the upturn but at the underlying weaknesses of the economy and particularly at unemployment. 'I don't think even the most optimistic people would suppose there is likely to be a downturn in unemployment until perhaps possibly the end of next year. And even there, we are talking about unemployment in excess of 3 million, which is likely to endure for many years.'

He told the meeting the problem of first importance was not one of fiscal or monetary policy, but of education and training. 'This is the area where government necessarily plays an important role. It would be a good thing if one of the things that came out of this discussion was to point up the public support for more and better focused expenditure on both training and education.'

Several participants lamented the lowly status of engineers and scientists. Patricia Graham, a careers adviser from Tonbridge, Kent, said there had to be a cultural change. 'We value increasingly people who don't make and don't do. Our ablest children are no longer going into qualifications where they make or do.'

Stefan Steiner, an engineer and chairman of the Eland Group, gave his view as one of 'unremitting gloom'. Recovery from recession would be very brief. 'Our industry has been so depressed that demand will be overwhelmingly met by imports. The problem we have is that it isn't possible for a nation of 55 million people to survive on the basis of services. The Thatcherite nonsense that manufacturing doesn't matter is just that - nonsense.'

Mr Steiner complained of a short-term requirement of a 12 per cent return on small business investment in Britain compared to 6 per cent in Germany, and also of the 'anti-manufacturing culture'. 'You go to a cocktail party and when somebody says, 'What do you do?' say 'I'm an engineer' and watch their eyes.'

David Stout of the London Business School also stressed the role of government in helping provide the skilled workforce necessary to make Britain an attractive place for major companies to invest. Emphasising the role of big companies in the economy, he said 0.5 per cent of companies in Britain were responsible for 60 per cent of output.

Patricia Hewitt, of the left-wing Institute of Public Policy Research, commended the example of Singapore as a high-skilled, high-technology, high-productivity economy created through interventionist education and industrial policies. It resembled nothing more than Labour's industrial policy at the last election, she said.

On a hurried show of hands, less than 20 per cent of the 300 participants in the hall favoured a return to the European exchange rate mechanism.

(Graph omitted)