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Dealing with the UK's Employment Crisis

Brendan Chilton
February 22, 2021

We need our Government to create the conditions for employment and growth, trusting the people and businesses to work hard and innovate, argues Brendan Chilton.

Boris Johnson has promised to provide a roadmap to recovery on 22nd February. It is widely expected that restrictions will lift fairly quickly due to the remarkable success of the vaccine rollout in the UK. The return to normal cannot come soon enough, as the British economy has experienced its biggest drop in GDP in 300 years. The economy contracted by 9.9% in 2020 and it is expected that the economy will shrink by up to 4% more in the first quarter of 2021. The devastation wreaked upon the private sector is unprecedented in British history. Although it is anticipated that the economy will recover fairly quickly, unemployment will be a hot political issue and pressures on businesses will continue. Unemployment currently stands at 5% and it is expected that this will continue rising throughout 2021.

The Government must employ radical measures immediately to get the country back to work, and crucially, to prevent a generation of young people being driven into the welfare system. The worst thing the Government could do at this crucial moment is increase taxation and return to the failed policies of austerity. The UK pursued these policies under the Coalition Government and were followed by a decade of low growth, with annual increases fluctuating between 1.5%-2%. If the Government wishes to deliver on its commitment to "levelling up" the British economy, a different course must be followed to encourage areas outside of London and the South East to be more competitive and productive. The agenda must be one of lifting burdens and restrictions on business and providing direct Government support to individuals. 

In order to encourage family-run and family-owned businesses to take on new staff and mitigate against the risk of looming mass unemployment, the Government should look to cut Corporation Tax to 15 % this year, as well as cancelling business rates for a second year. These combined measures would provide businesses with £26.46 billion to create an additional 735,000 new jobs in the private sector, especially in hospitality and help to alleviate the burden on the public purse in regards to welfare payments. Alternatively, businesses could invest in new premises or consider business expansion, providing vital local contracts and employment opportunities. This would be one of the biggest stimulus packages for business in British history and the scale of the support would meet the challenges we are facing as a country.

Outside of the European Union, we need to ensure that our workforce is as adaptable and as flexible as possible, to guarantee that the UK can maximize its profitability, productivity and competitiveness. The Government is right to review EU regulations passed into UK law and to reevaluate their necessity and impact on growth. Any unnecessary regulations should be scrapped, and others streamlined. The Government must also reverse cuts to training budgets and incentivise firms to increase training through the tax system.  British workers must become more adaptable and skilled to ensure they can complete with their counterparts in Europe and across the world.

In order to create jobs, the Government needs to pursue a radical policy for growth.  In the post-Covid world, securing our supply chains will also support employment creation. To grow the economy, we need to have a competitive rate of exchange to make it affordable and indeed, profitable for firms to increase investment into units of high return, particularly in high-level and low-level manufacturing. Such a move would increase our exports, generating employment and will support the Government's "levelling up" agenda and rebalance the economy. We need to reduce our dependency on services and become an economy more in line with that of Germany, where there is a sizeable manufacturing sector. Manufacturing jobs are, on the whole, higher paid than jobs in the services industry.

As part of the "levelling up" agenda and in order to increase employment, the Government must bring forward infrastructure spending. In line with this, the Government should speed up the procurement process and favour British firms where it is economical to do so.  Last year, the UK enjoyed a small housing boom due to the stamp duty holiday, something the Government should extend in 2021. The pandemic has left many commercial buildings empty or at a greatly reduced occupancy. The Government should urgently reform planning laws to allow for a huge commercial property conversion programme. Both of these measures would increase support for construction and property, with the benefits of a stimulus in that sector, as well as helping to deal with the UK's chronic housing shortage.

The economy and job creation will pose the most significant challenges facing the UK. In order to demonstrate the success of Brexit and to recover from the pandemic, this must be addressed urgently. To renew confidence in the Union, the Government must ensure all parts of the UK are indeed "levelled up" and tackling the employment crisis is central to that aim. The UK also needs to pay its way in the world and so rebalancing the structure of the economy will be key to increasing our exports. We have faced crises in the past and the British nation has always risen to the challenge. We need our Government to create the conditions for employment and growth, trusting the people and businesses to work hard and innovate. The future can be better than yesterday if we have the courage to be bold and seize the opportunities our new freedoms provide.

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Brendan Chilton is Leader of the Labour Group on Ashford Borough Council, Director of Labour Future and Chief Executive of the Foundation for Independence.
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