Katie Schmuecker, associate director of IPPR North, looks at the impact of George Osborne’s budget on the north of England.
The chancellor began his statement with a forecast that unemployment is set to peak at nearly nine per cent in 2012 before falling back to around 6 per cent by 2016.
This is cold comfort for those areas which already have unemployment rates that far exceed this forecast peak – places like Middlesbrough, Manchester, Liverpool and Hull. Furthermore, recent IPPR North analysis finds the north is already experiencing a jobs double dip recession.
The Budget had quite a lot to say about changing tax thresholds and investment in infrastructure, but it had little direct to say about the problem of unemployment.
Of course, some of the tax and investment measures are welcome, and may help boost growth and employment. Indeed, Osborne’s admission that under-investment in transport infrastructure in the north has been chronic is right.
What he didn’t mention is his own government’s planned investment in infrastructure perpetuates the imbalance, with £2,700 per head committed to forthcoming projects in London and the South East compared to just £5 per head in the north east.
In this context the commitment to extend the Northern Hub rail project to improve transport connections between towns and cities in the north of England is very welcome. But we need many more projects like this (pdf) in order to even begin to tip the balance.
Projects like Northern Hub are important because they create jobs in the short term and create the conditions for growth in the longer term. But when considered alongside the north’s high unemployment rate we have to ask whether it is sufficient.
The problem is particularly acute in a number of cold spots, where the number of unemployed people far exceeds the number of jobs being advertised locally – in the most severely affected areas there are up to 35 job seekers chasing each vacancy advertised with the job centre.
In these areas, people that have been out of work for more than a year face a double whammy.
Not only do they find themselves in a group of people whose future work and earnings prospects are scarred by the experience of long term unemployment, they also find themselves competing in a fiercely competitive local jobs market.
This is why IPPR North has been calling for a targeted jobs guarantee that would apply in areas with the highest jobseekers to vacancies ratio – for example those with a ratio that is twice the national average.
It would work in a similar way to the government’s ‘Youth Contract’: individuals out of work for more than 12 months in designated areas would be offered a minimum wage job, which they would be obliged to take up or provide their own alternative.
Such a measure would have done a number of things for the chancellor.
It would address a political problem by demonstrating his concern for some of the most economically hard pressed areas. More importantly, it would help to combat the negative effects of long term unemployment for individuals living in some of the most economically challenged places, as well as avoid storing up greater problems for the future.
This has to be chalked up as a missed opportunity.