Mass unemployment will test Boris Johnson’s resolve

As Margaret Thatcher’s economic plan drove unemployment over 3m, one member of her 1980s cabinet recalled in his memoirs looking at the latest figures “with disbelief”. Social unrest and rioting scarred the cities and she faced a ministerial revolt against her strategy. Now, as Covid-19 deaths start to fall, the […]

As Margaret Thatcher’s economic plan drove unemployment over 3m, one member of her 1980s cabinet recalled in his memoirs looking at the latest figures “with disbelief”. Social unrest and rioting scarred the cities and she faced a ministerial revolt against her strategy.

Now, as Covid-19 deaths start to fall, the UK will be hooked on a new measure of misery as it again faces politically paralysing mass unemployment which saps governmental resolve.

And while voters are being generous to Boris Johnson’s government over its handling of the Covid-19 crisis, despite very serious early errors, they will not be so forgiving about recession. The prime minister may be right not to end the lockdown, yet. But the economy is paying a price in businesses and jobs for every extra week that it holds. The furlough scheme is, in the words of the former deputy prime minister Michael Heseltine, “a form of masked unemployment”. Many on it face redundancy as soon as it ends.

Mr Johnson has already, rightly, decided to keep borrowing and spending high to support the economy. But Tories will want the deficit reduced eventually and without higher taxes.

The government’s starting point is the plan it had before: investment in infrastructure, better skills training and new industries. But that strategy, while sound, now offers a slow-burn response to an immediate crisis. There is immense pressure also to support the old economy and Mr Johnson, as we know, is a “cake and eat it” premier.

The first big question is how much to try to slow the jobs shakeout. Rishi Sunak, the chancellor, worries about the huge cost of the furlough scheme — already more than £8bn — and fears it discourages people from looking for work elsewhere. But allies say he feels a “powerful bond” created by having “stepped up for workers”. Tapering the support to allow part-time work would help establish which jobs are still viable. He is clear that some are gone for good, but the Office for Budget Responsibility predicts 2m jobless if the furlough is eased for three months from June. Yet to what extent is Mr Johnson prepared to mortgage tomorrow for today, lumping further debt as well as joblessness on the next generation?

A second challenge is the balance of support for younger and older workers. The commitment to expanding non-graduate further education and investing in apprenticeships remains — these need to be valid training schemes ideally attached to a job. Norman Fowler, one of Mrs Thatcher’s employment secretaries, recalls the schemes of the early 1980s. “They were often temporary jobs building football pitches or whatever, and how many can you need?” Subsidising new apprenticeships is appealing but, amid high unemployment, is the government ready to prioritise jobs for the young over the middle aged? With predictions of a lost generation and 600,000 unemployed 18- to 24 year-olds, there is a strong case for that. But it is the older workers who voted conservative.

A third debate is old versus new industries. Mr Johnson and Mr Sunak believe in a dynamic new economy and want to double down on support for life-sciences, green technology and pharma, along with new demands for industries of national resilience. Before the crisis, they saw Brexit as the catalyst to force the UK to be more competitive. Some in government dismissed certain sectors as “legacy industries”. Is there still the same readiness to abandon those jobs for ones in new industries which may take years to come to fruition? (And also to accept the extra business costs of not delaying Brexit by a year?)

Another issue is whether recovery is locally or centrally led. Lord Heseltine argues for regions and big city mayors playing a leading role in shaping strategy for the first time: “They cover huge swaths of the economy. You say to those areas, ‘Work out the best way to stimulate your economy’. Some are manufacturing, some are service industry based.” The same would apply to training, where employers would be given far more input into what skills are needed locally.

Thatcher endured the pain to defeat inflation and make Britain more competitive and attractive to inward investment. Will Mr Johnson be as steely over his vision as unemployment rises and his ratings slump?

Many Tories fear the crisis has made the country used to government intervention and that Mr Johnson will find it hard to reduce the spending. Like quantitative easing, it is easier to get into than out of. After the initial life support to keep the economy alive, how much hard medicine does this government have the stomach to administer?

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