Unemployment rise hits key Tory seats

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A NEW analysis showing that unemployment has risen faster in the top 50 Tory marginals than elsewhere yesterday threatened to take the shine off Government satisfaction over another sharp fall in the jobless total.

As David Hunt, the Employment Secretary, hailed the 'downward trend' in the jobless total and predicted a 'sustained period of non-inflationary growth', a City survey showed that joblessness rose by 6.6 per cent in the key marginals while it went up by 3.6 per cent in the rest of the country.

Unemployment fell unexpectedly sharply last month, with the number of people without work and claiming benefits dropping by 30,300 to 2,722,600, the lowest since May 1992, the Department of Employment said yesterday.

Joblessness fell in every region of the country and now totals 9.7 per cent of the workforce, lower than in most other big industrial countries. A survey of 7,500 companies by the British Chambers of Commerce also showed that employers are more optimistic that they will be able to create jobs in the coming three months than at any time since early 1990.

But the Kleinwort Benson survey of the change in unemployment between the 1992 general election and February 1994 in the 50 most vulnerable Tory-held constituencies suggests that unemployment may prove a particularly resistant factor in seats the party most needs to hold to win the next general election. The survey also says that the joblessness fall in the 12 months since February 1993 has been slightly slower - 5.9 per cent compared with 6.7 per cent elsewhere.

The bank argues that the figures cast doubt on Tory hopes that those regions hardest hit by the recession will benefit most from the recovery in terms of falling unemployment and rises in house prices. It estimates that property prices are rising more slowly in the marginals - 2.48 per cent in the first quarter of 1994 compared with 2.72 per cent elsewhere. The survey also argues that the unemployment figures in the marginals point to the election being delayed in order to give the recovery the best chance of feeding through to the key Opposition-targeted seats.

Yesterday's announcement of the drop in the jobless total saw hopes of an early interest rate cut to boost the recovery fade in the City, helped by a surprise rise in the annual growth rate of average earnings. Earnings grew at an underlying 3.5 per cent in the year to February, up from 3 per cent late last year. This was boosted by bonus payments for workers in financial services and helped fuel fears that inflationary pressures are re-emerging in the labour market.

The International Monetary Fund in Washington yesterday urged the Chancellor to hold back on any further interest rate cuts until there was 'firm evidence' that underlying inflation was on course to meet the Government's 1 to 2.5 per cent medium- term target.

It added that the recovery was strong enough to produce growth of 2.5 per cent this year despite the tax increases now being imposed.

Tories' jobless gloom, page 3

Leading article, page 19

Tax cuts ruled out, page 35

View from City Road, page 36