The coalition’s economic strategy will reduce growth and cut jobs and support for the unemployed

By Nicola Smith

The government has recently announced the sharpest cuts in public spending since the second world war – cuts that the Office for Budget Responsibility has recognised will reduce growth in future years, and lead to higher claimant unemployment. But even these revised forecasts remain optimistic. Given the current state of the global economy, and given the experience of past recessions, it seems inconceivable that the OBR can meet its employment forecasts – and that net job losses will be far higher.

The latest economic data show how fragile the recovery still is. We have had two quarters of low growth, business investment is failing to rebound (and in manufacturing is still falling), surveys show that business confidence is low and falling, vacancies are limited (in May there was around one vacancy for every five jobseekers nationally) and unemployment is still high. No indication has been given of the government’s projections for where jobs will come from – the economic outlook remains bleak.

The budget was also remarkably short on any real measures to support jobs growth – perhaps unsurprising given its focus on a deficit reduction strategy driven by extremely sharp and immediate cuts. Its main proposal on creating jobs was a one-year National Insurance holiday targeted at new employers starting businesses in specific regions.

But as my colleague Richard Exell has shown, the last time a similar policy was tried only 2,000 jobs were created and the DWP’s evaluation found that only a quarter of employers had heard of the programme. Last week, the IFS concluded that the current government’s proposal was “complicated and open to abuse by firms looking to save money through tax”. They stated that: “The only good thing you can say about it that it won’t last that long and won’t, because it is relatively small amounts of money, do that much damage.” Employers as well as unions have criticised the abolition of investment allowances for manufacturing, and while announcements re: a Green Investment Bank and a Regional Investment Fund are welcome, their scope will be a drop in the ocean compared to the capital investment cuts that the government will be implementing.

And at the same time, the cuts announced so far have been particularly bad for labour market programmes. So far we have seen:

* Cuts of £290 million from the Future Jobs Fund, which provides paid employment for unemployed young people. The cut will mean a loss of 94,000 jobs for 18-24 year olds facing long-term unemployment.

* A likely loss of jobs at JobCentre Plus – at a time when staff are dealing with caseloads that remain close to double those of the last decade, and when the re-assessment of Incapacity Benefit claimants is going to significantly stretch resources.

* Cuts of £30 million from the “golden hello” scheme which offered a subsidy of £1,000 plus help with training costs for businesses that employ someone who has been unemployed for over 6 months. This scheme will now close nine months early, and will cease to operate at the end of this month. Care First Careers – a scheme to help young people enter the social care workforce, has also been affected.

* Cuts of £450 million from the Young Person’s Guarantee, a promise to all unemployed. young people that if they were out of work and claiming JSA for six months they would be guaranteed a job (via the Future Jobs Fund), a training place or work experience. This guarantee will now not be extended beyond the current financial year, and will cease to operate in March 2011

* Cuts of £515 million from the two year Jobseeker’s Guarantee, which promised every adult who had been out of work and claiming JSA for two years a guaranteed offer of a job, internship, volunteering placement or work experience. It now appears that the Guarantee will now be completely cut.

* Cuts of £49 million have been made from the Working Neighbourhoods Fund, which aimed to tackle unemployment in the most deprived areas.

Overall, the coalition’s economic strategy looks set to reduce growth, cut jobs and cut support for those facing unemployment. The prospects for Britain’s 2.5 million jobseekers are poor.