The central problem in Britain today is the relentless rise in unemployment and where it is heading – and what should be done about it. The pace of the downturn has been faster than in the worst recent recession in 1979-82 when unemployment eventually 4 years later peaked at well over 3 million. It is disproportionately hitting the younger generation, nearly a million of whom are now out of work, and who as we know from historical experience could be scarred for life. It is also disproportionately hitting the lowest paid: unemployment over the last two years has nearly tripled from 3% to 8% for classes D-E, while for the A-B classes it has risen from 1.2% to only 1.8%. And on the profile of the downturn so far, estimates are already being made that, long after a so-called recovery is under way, unemployment will continue to climb almost to 4 million, the highest level since the 1930s. This is not an act of God. What is deplorable is that almost every economic decision taken over the last two years is now worsening the unemployment trap.

First, a flawed regulatory system (mainly but not only the FSA) failed to see the crisis building up over toxic credit derivatives and failed to restrain the orgy of leveraged buyouts based on unduly low interest rates.
Second, when the credit crunch bit deep, choking off lending to the real economy, Government refused to nationalise the leading banks in order to keep credit flowing.
Third, the Government has so far spent some £60-80bn bailing out the banks, and has put at the banks’ disposal a further eye-watering £585bn for their asset protection scheme – money which would have been far better spent, having taken the banks into public ownership, on ensuring the flow of funding to businesses, protecting existing jobs and generating new ones, and funding the housing market for first-time buyers.
Fourth, the M4 money supply figures for lending to businesses and home-owners have collapsed over the last 2 years from a healthy annual 20% growth in 2007 to virtually zero now, but the Government has not taken powers to force the banks to lend at 2007 levels, despite requesting this from the banks at the outset.
Fifth, most seriously of all from the point of view of the jobs market, if (as all 3 major parties now seem united in demanding) swingeing cuts of some 10% of total public expenditure are put into effect after the election before the recovery is firmly in place, there is a very real risk that the cutbacks will push a faltering upturn back into recession and the pro-cyclical fiscal tightening of the Healey-Howe era cannot be ruled out, with devastating consequences for employment.
Every one of these macro-economic decisions has been bad for jobs, and the one remedy that would really have kept unemployment down – a massive public investment programme of job creation in construction (especially housing), infrastructure (especially railways), manufacturing (especially in the green energy sector), and services (especially social care of the elderly) – has not been tried.

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