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April 10, 2012 - Bill Esterson's Westminster Diary

Bill Esterson


The coalition government has been in power for nearly two years. So it is useful to look at what has happened in that time. 

There has been virtually no growth over the past 15 months, which stands in direct contrast to the previous 15 months under Labour when, the economy was given the support needed to create jobs and growth. In fact, growth was 31 times higher in the last 15 months of the Labour government than it has been under the coalition’s first 15 months (3.1 per cent against 0.1 per cent, respectively).

The latest data released shows that from June 2010 to December 2011, public-sector employment fell by 30,000 more than private-sector employment increased. 

In contrast, between December 2009 and June 2010, over the last six months of the Labour government, the private sector created 300,000 additional jobs over and above the 60,000 public-sector job losses. 

The Tory chancellor, George Osborne said that the private sector would create jobs to replace the jobs lost in the public sector. But this has not happened.

The decision by the chancellor to reduce the top rate of income tax from 50p to 45p for those earning more than £150,000 is being deeply unfair as it is paid for by tax increases for pensioners and families. And all of this at a time when child benefit and working tax credits are being cut. Paying the poor less so that they work harder and paying the rich more so that they work harder does seem something of a contradiction.

On April 6, Osborne's policies are going to impact thousands of working couples earning around £18,000, who will lose as much as £4,000 a year in tax credits. This could affect roughly 470,000 children, whose family income will drop by about £74 a week. Previously, someone in the family had to work 16 hours in order to qualify for these benefits but now they will have to work 24 hours a week or lose tax credits, which looks impossible when large numbers of workers want more hours and 1.4 million are in part-time jobs because they can't find full-time jobs. 
I met staff in Asda who work 16 hours per week and who will lose their tax credits unless Asda puts them on 24 hours per week. Asda can’t guarantee the extra hours and the staff can’t always do as many as 24 hours because they have to pick children up from school and shift patterns are not arranged around school hours.

Osborne's plan to cut the pay of public-sector workers in the poorest parts of the country with the highest unemployment rates will widen regional differences even further. This is unlikely to save money and will simply deepen inequality and worsen public-sector labour relations. So, Sefton will suffer more than most as we have had the biggest cuts in funding from the government to the council and staff will be paid less. Then there are the cuts to Merseyside police, fire and rescue and NHS, all of which are bigger than in more prosperous parts of the country.

Given that the government is putting emphasis on a one-size-fits-all monetary policy, this means, in effect, that it has no regional policy and hence no plans to do anything about the growing north-south divide. The new credit-easing plan that is intended to make it more straightforward for banks to give loans to small businesses, for example, could be targeted on deprived regions with greater loan subsidies than in the more prosperous south-east but this is not going to happen.

The chancellor should have left the 50p tax rate in place on grounds of fairness and instead could have incentivised firms to hire more staff through substantial National Insurance cuts.

To reduce the youth unemployment rate from 23 per cent, one idea would be to give a two-year National Insurance holiday for every employed youngster under the age of 25. This idea could easily be extended to jobs created in deprived regions and to small firms and would likely gain broad support from employers' associations, the unions and the public.

Labour would bring back the tax on bankers bonuses to create 100,000 jobs for young people and to help the construction industry. We would also cut VAT to help business and consumers alike not least as this would shave 3p off a litre of fuel. These are measures which the government could take right now and which would help to kickstart the economy. 
Instead, we have a government which is borrowing £150 billion more than they said they would because their policies have failed. The economy is flatlining when we need jobs and growth. Unless the economy grows, the deficit will be bigger. 
The coalition promised to cut the deficit but have spectacularly failed to do so. The broken promise on the deficit is one of many broken promises, just like their broken promises on the NHS, on student fees and on cuts to front line police numbers.

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