Leading Article: Let them have jobs, Prime Minister

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The Independent Online
WHEN Eddie George, the new Governor of the Bank of England, was appointed on Friday, Norman Lamont, the Chancellor, stated that his main responsibility would be 'to support the Government in our central determination to bring about a lasting reduction in the rate of inflation'. By all accounts, Mr George - known as 'Steady Eddie' - is more than equal to this task. He is described as such a hawk on inflation that he has opposed just about every interest rate cut in his 30 years at the Bank. 'The markets won't stand for it,' is his favoured response.

But there is something millions of Mr George's fellow citizens will not stand much longer, and the sooner he and others responsible for policy understand it, the better. Inflation is 2.6 per cent and falling. Unemployment, however, is 10.5 per cent and rising. In December, the numbers on the dole came within a whisker of three million; it is certain that they have now gone beyond that level; under pre-1979 rules (there have been 30 changes in the definition of unemployment), they would exceed four million.

There is no sign of any 'central determination' to reduce unemployment. The unemployed are told that present policies will eventually provide, as Mr Lamont put it on Friday, 'sustainable growth and secure jobs'. They have been hearing that refrain for nearly 14 years. What, they may ask, has happened to the new growth-led policies that John Major and Mr Lamont promised in the autumn? Interest rates have crept down to 7 per cent - hardly cheap money when inflation is below 3 per cent. Where are the large-scale capital projects that were supposed to boost employment? The Jubilee Line extension is delayed in some network of bureaucratic tunnels involving the banks, the Treasury and the European Community.

Lower interest rates and public sector construction projects must be the starting points for cutting unemployment. No hours of Cabinet working group deliberations, no number of projects with fancy names (combine, at random, such words as 'community', 'action', 'start', 'enterprise') are substitutes for a change in economic policy. But long-term unemployment has reached levels that also require fundamental changes in social policy.

In 1937, in The Road to Wigan Pier, George Orwell observed 'the deadening, debilitating effect of unemployment upon everybody - you can't settle to anything, you can't command the spirit of hope, with that dull evil cloud hanging over you'. In Orwell's day, unemployment often meant near-starvation. That is no longer the case but it can still lead to broken marriages, ill-health, crime and drugs. Short periods of unemployment may assist labour market flexibility and restrain wage inflation. Longer periods are a different matter. Persistent unemployment - and more than 600,000 people have been out of work for more than a year - saps the will and the capacity to find work. As a recent pamphlet by the Employment Institute (an independent research body) puts it: 'People out of work for over a year are out of touch with the grapevine through which so many jobs are filled. A high proportion of employers are unwilling to interview them. And if they get to interview, their self-confidence is so low that they are unlikely to succeed. They have no recent employer who can give them a reference. Thus they become a burden to themselves and to society.'

Britain's record in caring about and caring for such people is pitiful. The Government must accept the principle that nobody should remain idle for more than a year. The state must provide work; the unemployed must take it or lose benefit. The precise details are unimportant. The Employment Institute proposes a subsidy to employers to pay wages; Full Employment UK, another independent body which submitted a report to ministers last week, proposes the cheaper solution of the state paying the unemployed 'work contract income', slightly above benefit level. But they agree on the broad principles: the punitive connotations of the American Workfare scheme should be avoided; work should be provided in both the public and private sectors and not confined to planting trees and other 'community' schemes; the jobs would be temporary and (mostly) part-time to prevent employers using the state scheme instead of paying for their own workers.

Any such innovation must be accompanied by better job placement services, better training, better advice. Contrast Britain with Sweden. The two countries spend roughly similar proportions of national income on helping the unemployed. But the Swedes, who pay no unemployment benefit after 14 months, spend most of it on helping people into jobs and paying employment subsidies. We spend most of it on paying people to stay at home. The Swedish approach looks successful: since the war, its unemployment levels have never risen above 3 per cent.

Changing the British approach will be as unpalatable to the left as to the right. Accepting that people have a right to work is anathema to one; accepting the duty to work is anathema to the other. But we can no longer afford sacred cows, whether they be those of the Beveridge Welfare State, the Tory market economy or Steady Eddie's hard- line monetarism. A 'central determination' to tackle unemployment before it rots a generation must come first.

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