Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 5:20 pm on 7th July 1997.

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Photo of Stephen Dorrell Stephen Dorrell Shadow Secretary of State for Education 5:20 pm, 7th July 1997

Paternity leave is not a cost-free activity. That is how it will raise costs. Secondly, the Government made a commitment to introducing a minimum wage. Presumably, even the hon. Member for Delyn (Mr. Hanson) can understand that a minimum wage will either have no effect at all, or raise the cost of employing people and therefore reduce the number of jobs in the economy. The third element of the Government's three-legged strategy for boosting employment was the Chancellor's announcement last week that he will raise £5 billion from pension funds, which can only increase the cost of employing people.

Against that background, we are asked to judge the benefits of the welfare-to-work proposals in the Chancellor's Budget speech. The truth is that his welfare-to-work proposals are a pale attempt to temper the damage that will be done by the Government's other policies. This country's recent record on youth unemployment stands comparison with that of any other European country. In the past four years, the number of unemployed aged between 18 and 25 has halved. It has fallen from just over 800,000 to just tinder 400,000—a reduction in youth unemployment of 100,000 every year for four years. The number of 18 to 25-year-olds unemployed for more than six months has fallen from 417,000 to 178,000.

I welcome the fact that the Government have focused their attention on the need to ensure that youth unemployment in Britain continues on the downward trend that the previous Government established. I also welcome the fact that the Government regard that as a serious and important policy objective. In the Budget, the Government committed £3.5 billion of public expenditure to enhancing that downward trend of youth unemployment. I look forward to seeing whether their public spending programme achieves a greater reduction than 100,000 a year in the next four years: they cannot do so after that, because they will have run out of unemployed people in five years. We shall see whether that £3.5 billion enhances the rate of job creation for young people, or whether it is money being burnt. That money may be burnt in an attempt to deliver a desirable objective, but it will be wholly ineffective.

The Chancellor of the Exchequer is clearly unconvinced by the logic of his own argument. In the Budget forecasts, he used the estimates of my right hon. and learned Friend the Member for Rushcliffe, the previous Chancellor, for the analysis of the black hole that he asked us to believe in. The Chancellor made it clear that he does not believe that unemployment will continue to fall, because he reinstated the traditional basis of forecasting, which is flat unemployment. He clearly does not believe that unemployment will fall faster as a result of the welfare-to-work proposals.

We then come to the Chancellor's fourth objective.