Conservative commitments - 15, 14 fails

Achieving full employment by helping businesses create two million extra jobs over the course of the next Parliament

This aspiration is actually a summary of a number of commitments which are better addressed separately.

Let’s focus on the manifesto: ‘To achieve this, we will back British businesses: cutting red tape, lowering taxes on jobs and enterprise, getting young people into work, boosting apprenticeships and investing in science and technology. With the Conservatives, Britain will be the best place in Europe to innovate, patent new ideas and set up and expand a business… Backing business also means helping our farmers and our rural communities.’

This doesn’t say anything about how farmers will be helped. Is this referring back, again, to rural broadband (an ongoing, mismanaged and not wholly Conservative project)? Is it about the Common Agricultural Policy of the EU, which the Conservatives want to leave or renegotiate?

Is Britain the best place to patent new ideas? This must refer to the patent box, a tax loophole the size of the Marianas Trench which will ensure that innovators and lots of other people too pay no tax while big administrative burdens from tax paperwork pile on their accountants and HMRC. Or perhaps HMRC won’t be able to do it all, and will not fully investigate everything, ensuring that it is a bigger loophole. Germany agrees with me, and the government has agreed to close it.

 Apprenticeships come up later, as do specific tax proposals. For now, let’s note that lowering income tax (tax on employment?) is unlikely to affect employment. There are not lots of people who could earn over £12,500 but have chosen to be unemployed. The unemployed are often looking for starting or low-wage jobs and would take them no matter the tax rate.

But really, it’s the red tape that annoys me, and here we do get down to unprovable differences in economic belief. The Conservatives think that regulation is a bulwark holding back the unstoppable and inexorable tide of business growth, and they think that business growth inevitably leads to job creation. I think that if these powerful forces were so keen on job creation, they’d do it with or without regulation. I also think that regulation is appropriate to prevent and control market distortions and prevent undesirable behaviour. For example, it might be profitable to employ workers for 16 unbroken hours a day, and a company that did so might grow and want to employ more. But those working conditions are not healthy, so we prevent them even though that prevents growth of that business.

It’s a long economic argument, and I think the Conservatives are wrong for a number of reasons, the most basic being that you need to create demand for what businesses are offering before they will choose to expand. Focussing on minor barriers to expansion demonstrates considerable doubt about the power of markets to overcome obstacles; a doubt that is curiously absent in other right-wing beliefs which trumpet the markets as the solution to most problems. We should be focussing on creating demand, not barriers to supply. Alternatively, if red tape is such a problem, the Conservatives should try cutting red tape for government and see how much more efficient it gets. With over 1,000 tax reliefs, HMRC has a lot of red tape. Perhaps we should get rid of all those and see the efficiency of tax collection improve. But let’s be honest, at least this one actually needs an argument before we conclude that it’s wrong.

If we return to full employment, it’s worth noting that economists don’t use this to mean 100% of people in work. Although people use it differently, we can have ‘full employment’ and still have qualified people who can’t find appropriate jobs. Full employment is used to mean a situation when increases in aggregate demand don’t increase supply, but instead increase prices. Some people fear that full employment would therefore lead to high inflation. It would be nice if the Conservatives mentioned such arguments and their rebuttals, or gave any indication that they understand and want to explain the technical meaning.

    Nonetheless, the supporting policies for this aspiration are minor even if one does think that they push in the right direction, and we know that we’ll never get full employment, so in that sense the promise to abolish unemployment is another public relations policy that is fundamentally dishonest. So although the economics supporting it is wrong rather than utterly wrongheaded, it’s another failure.