U.K. Chancellor of the Exchequer George Osborne will be forced to defend his economic strategy today after unemployment rose to its highest rate for 15 years.
Ed Balls, Treasury spokesman for the opposition Labour Party, will use a debate in Parliament in London to renew his call for emergency tax cuts to spur the recovery. Unemployment jumped to 8.1 percent in the three months through August, the highest since 1996, government figures showed today.
“With families feeling the squeeze, no growth in our economy since last autumn and unemployment rising again, it’s clear that Britain now faces a real jobs and growth crisis,” Balls’s deputy, Rachel Reeves, said in e-mailed comments today.
Unemployment rose by 114,000 to 2.57 million, the most since 1994, the Office for National Statistics said in London today. Youth unemployment increased to 991,000, the highest since records began in 1992. The jobless rate in that category was 21.3 percent.
The government will today announce a program offering training and a guaranteed job interview for as many as 50,000 people, part of initiatives to support more than a quarter of a million young people over the next two years, Employment minister Chris Grayling told BBC radio.
‘First Step’
“It’s all designed to give people under 24 who have not been in employment the chance to take that first step into the workplace, to show an employer what they can do and hopefully then move on into an apprenticeship,” Grayling said.
Activists from Youth Fight for Jobs are recreating the demonstration of 1936, when marchers walked 300 miles (483 kilometers) from the town of Jarrow in northeast England to London to protest against unemployment and poverty. The union- backed campaign will stage a protest in Sheffield, northern England, today to mark the latest unemployment figures.
“Unemployment potentially is going to be a major economic and political problem,” said Peter Dixon, an economist at Commerzbank AG in London. “The government would be unwise not to have some alternatives. Between now and the spring, there’s little economic light at end of the tunnel.”
Bank of England policy makers restarted their asset-buying program last week as Europe’s debt crisis and slowing global growth threatened the recovery. Governor Mervyn King said the move was a response to what may be the worst financial crisis ever.
Labour Plan
Balls will argue today that government spending cuts are crushing confidence and destroying the growth needed to bring down the budget deficit. He will urge the government to slow the pace of deficit reduction and boost growth by reinstating a tax on bank bonuses to fund homebuilding, bringing forward infrastructure spending, cutting sales tax and offering a tax break for small firms taking on new staff.
Osborne has pledged to stick to his plan to eliminate the structural deficit by 2015, saying the commitment has earned Britain credibility with markets where 10-year gilts yield 2.6 percent, less than half the rate on same-maturity Italian bonds.
Responding to mounting concerns over the economy, Osborne outlined plans last week to ease the credit strains continuing to hamper small and medium-sized companies by using billions of pounds of public money to buy or guarantee their debt.
Credit Easing
“In the short run, it’s about sustaining demand, getting out credit to SMEs,” Business Secretary Vince Cable said in an interview in London yesterday. “Credit easing will be part of that.”
The National Institute of Economic and Social Research said yesterday the recovery is the weakest Britain has seen for almost a century, with output in the third quarter estimated to be 4 percent below its pre-recession peak in early 2008.
The economy has barely expanded over the past year as high inflation and low wage growth squeeze household budgets. Britons’ median income is expected to fall by about 7 percent in real terms in the three years through March 2013, the biggest three-year drop for 35 years, the Institute for Fiscal Studies said yesterday.
Speaking after today’s jobless figures, Goldman Sachs Asset Management Chairman Jim O’Neill said it would be “dangerous” to rule out the possibility the economy could weaken further. “It might be because of the fiscal tightening that is coming home to roost,” he said in an interview with Maryam Nemazee on Bloomberg Television’s “The Pulse” program in London.
BAE Systems Plc said on Sept. 27 that it will cut 3,000 jobs in the U.K. and end a century of aircraft manufacturing at a site in northern England as global defense cuts hit orders for its fighter jets.
“The private sector so far has done a reasonable job at filling the gap,” said Dixon. “But given that the bulk of the fiscal onslaught is beginning next year, there are clearly causes for concern.”
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