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Unemployed People (Cost)

Volume 226: debated on Thursday 17 June 1993

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7.

To ask the Chancellor of the Exchequer if he will prepare an estimate of the average cost to the Treasury of one unemployed person in terms of (a) benefits paid and (b) tax revenue lost.

The net cost to the Exchequer of an individual unemployed person depends on a wide range of variables.

I am as pleasantly surprised as, no doubt, the Minister about today's slight decrease in the unemployment statistics—which prudent observers, I am sure, will distinguish from a reduction in those who are unemployed and seeking work—but does the hon. Gentleman agree that the cost of each unemployed person, which is authoritatively assessed at approximately £9,000 per year, is the single biggest cause of the ballooning public sector borrowing requirement? Does he agree that the best way to tackle the problem is not to punish unemployed people by reducing benefits but to take positive measures to put them back to work?

The best way of helping unemployed people is not to speculate on things that are unpredictable and unmeasurable but to create an economy that creates jobs and puts working people back to work. To achieve that, the best thing that the Government can do is to follow the precedent of their record of the 1980s, when manufacturing investment increased by 67 per cent., when the number of jobs created within the economy was 3 million and when manufacturing output rose by 30 per cent. That is the record of this Government between 1982 and 1990, which we wish to recreate.

Does my hon. Friend agree that the one sure-fire way of adding to the cost of unemployment is to sign the social chapter of the Maastricht treaty?

My hon. Friend is absolutely right. One of the interesting contrasts to be drawn is that between the record of this country in the late 1980s and that of France during the same period. Our growth rates were roughly the same, but the difference was that in this country we converted that growth into jobs and in France, whose socialist Government espoused the cause of the social chapter, they failed to do so. The House should draw conclusions from that contrast.

Will the Minister confirm that the Conservative Government, whose members constantly go on about sound money, are heading for a deficit of £1 billion a week—£50 billion a year—largely created by the incompetence of the previous three Chancellors?

My hon. Friend's views are just. Does the Minister accept that the way to cut the appalling deficit is not by slashing welfare payments or by charging the elderly VAT on energy, but by taking a knife to unemployment and getting this country back to work again?

The split between the two sides of the House is not over the desirability of creating extra jobs and getting unemployed people back to work—that is a shared ambition. The split is over how to achieve it. The hon. Gentleman is right to identify the budget deficit as one of the problems that have to be tackled if we are to deliver the objective that both sides of the House share. I look forward to hearing from him, and even more to hearing from his Front-Bench colleagues, how the Labour party proposes to deliver the reduction in the deficit that we all want.

Will my hon. Friend confirm that the only Governments since the first world war to reduce unemployment have been Conservative Governments? Does he agree that the way to reduce unemployment does not lie through a minimum wage, greater regulation of the labour market or the kind of socialism that has delivered 19 per cent. unemployment in socialist Spain?

My hon. Friend is right to draw attention to the interesting historical fact that it is Tory Governments who cut unemployment and Labour Governments who increase it—just as, incidentally, it is Tory Governments who cut hospital waiting lists and Labour Governments who increase them.

As I said earlier, the best way to get people back to work is to create a vigorous and competitive economy. One of the best bits of news in that regard is the fact that manufacturing productivity is now rising by 7·8 per cent. a year, which means that unit wage costs in manufacturing are falling, for the first time in living memory. Those costs are falling by 2·8 per cent. a year, and that holds out the prospect of improved competitiveness and, therefore, of improved job creation. One would like to think that the Labour party would welcome that.

Will the Financial Secretary confirm that the former Secretary of State for Employment put the cost to the Government of unemployment at £9,000 a year for each unemployed person? Is not the greatest cost of unemployment the cost to unemployed people and their families, and the waste to society of the wealth that their employment would otherwise generate? Are not those costs most corrosive in the case of the 1 million people who have been out of work for more than a year, who loom behind today's welcome fall in the headline unemployment figures? Will the Financial Secretary now tell us what new measures the Government will introduce to counter unemployment and, in particular, what they intend to do to bring work to the long-term unemployed? Will he also examine the case for rebates on national insurance contributions for employers who take on workers from among the long-term unemployed, to whom we must give help?

Yet again, we have the spectacle of the Labour party recognising that the budget deficit is a problem, although the only ideas that are announced from the Opposition Dispatch Box are those that would have the effect of increasing that deficit. Of course, it is true that unemployment imposes both a social cost on the individuals concerned and an economic cost on the economy as a whole. We have to address the problem of how to make unemployment fall. We believe that the way to do that is by creating a competitive and vigorous economy. That is what we are about and that is what we are constantly being obstructed in doing by the Opposition.

Will my hon. Friend give me an assurance that, while he is considering the cost of unemployment and other benefits during his public spending review, he will continue to do everything in his power to ensure that we continue to provide the most where the need is greatest?

My hon. Friend is quite right. That, of course, is precisely the purpose of the review of public expenditure on which my right hon. Friend the Chief Secretary is engaged, in order to ensure that, within the public spending total, expenditure reflects today's priorities.