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Government must to do more to get Britain back to work, says ippr

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15 July 2009

Embargoed: 00:01 Wednesday 15 July 2009

Ahead of today’s unemployment figures released by the ONS, which are expected to show that Britain is facing a joblessness crisis and that unemployment is on track to reach 3 million by the end of the recession, a new report published today (Wednesday) by leading think tank the Institute for Public Policy Research (ippr), argues that the Government must urgently address the need for new sources of jobs to assist the UK’s economic recovery.

The new report Building a better balanced UK economy: Where will jobs be created in the next economic cycle? argues that we need to find new sources of growth in the future because the industrial make-up of the economy is changing. In the past decade the UK has been heavily reliant on the public sector, retail, housing and finance as sources of employment growth. Almost two-thirds of all jobs are in these sectors, but they cannot be relied upon for growth in the future. Nor is manufacturing employment likely to reverse its recent trend and start to expand.

Rachel Reeves, report co-author former Bank of England economist and Labour’s Prospective Parliamentary Candidate for Leeds West, said:
"As a nation we can no longer rely on banking, retail and the public sector to create the jobs we need. If we are to get Britain back to work, there will have to be large increases in the jobs available in high-tech manufacturing and private service sectors such as the creative industries. This could happen, but only with the right combination of entrepreneurship and government action."

ippr’s Senior Economist Tony Dolphin said:
"Our strategy will help build a stronger, more sustainable economy, with high-skilled jobs. It will also establish a less precarious tax base with a financial services sector that supports the wider economy on its path back to full employment and beyond."

The report sets out a number of new areas for employment growth in the future. These include:

Knowledge industries
High-tech manufacturing
The creative industries
Pharmaceuticals
Care services

However, these sectors will need government support in the areas of innovation, training, infrastructure spending and finance. Recent Government rhetoric has been positive, but needs to be backed up with the creation of institutions to embed an activist approach into the economy. Indeed, if Government fails to take action there is a real possibility that unemployment could remain at elevated levels for many years to come.

The report’s authors call for action in six areas:

Improving access to finance for business innovation, for example through the creation of a Government-backed Ideas Bank.
Investing more in skills and training so as to encourage life-long learning, for example by introducing a nationally recognised transferable credit-system for all FE and HE courses.
Encouraging investment in research and business start-up, for example supporting universities to buy-in support for spinning out companies.
Supporting infrastructure costs through the creation of an infrastructure bank.
Giving regions more control over their own economies, through Regional Development Agencies and city-regional bodies.
Building a financial services sector to work with and support business, especially to support new green industries.

Notes for editors

ippr’s report Building a better balanced UK economy: Where will jobs be created in the next economic cycle? is published today Wednesday 15 July 2009. It is co-authored by Jonathan Clifton and Tony Dolphin, ippr and Rachel Reeves, Labour PPC for Leeds West and former Bank of England Economist. Embargoed copies of the report are available upon request from the ippr press office.

Key figures from the report:

In the seven years to the peak in employment in 2008Q2 over 2 million jobs were created in the public sector, finance, business services and construction, but almost 1 million jobs were lost in manufacturing.
So far in the recession, most jobs have been lost in manufacturing (196,000), finance and business services (185,000) and distribution, hotels and restaurants (180,000). Employment in health, education and public administration has continued to increase.
After the last two recessions it took eight years for employment to return to its previous peak. If this pattern is repeated, the UK will not again see the levels of employment reached in the middle of last year until the middle of 2016.
Employment in the public sector is around 25% of the total; in wholesaling, retailing, hotels and restaurants it is 24%; in manufacturing 10%; in construction and real estate 6% and in financial intermediation 4%.

This paper is one of a number published through ippr’s Tomorrow’s Capitalism series http://www.ippr.org/tomorrowscapitalism/

Other papers published as part of this series include:

Global Dimensions of the Financial Crisis by Gerry Holtham, Managing Partner, Cadwyn Capital LLP

All analyses of the current crisis have been incomplete. They deal with symptoms, not causes. There has been a focus on financial sector institutions and regulation, on the operation of monetary policy and on alleged policy errors. These things were important in shaping the way that the crisis evolved but they are not at its root. The truth is that the world and its economy have changed in ways that are likely to lead to periodic instability.

Addressing the Psychology of Financial Markets by Professor David Tuckett, Psychoanalysis Unit, University College, London

Professor Tuckett suggests the key to understanding financial markets is the co-evolution of human nature and financial institutions. He explains the role of stories centred on ‘phantastic objects’ and groupthink in helping to create asset price bubbles. He concludes that measures to prevent bubbles in the future will be ineffective if they do not include a collective re-examination of the ways savings are managed and a deeper understanding of the emotional nature of the situation financial markets make us all confront.

These reports are available to download from the ippr website at www.ippr.org/publicationsandreports

Contact:

Kelly O’Sullivan, 020 7470 6125 / 07753 719 289 / k.osullivan@ippr.org