Two posts here, do spend the time to read them both, they show the fiscal mess and immigration mess that Gordon has landed us in.
From
The Spectator, which shows how Gordon set out to create a boom based on smoke and mirrors.As promised, here’s the full story of those immigration statistics that I obtained from the ONS. In our new e-world, I can pass on all the results to you – and they’re worth discussing. The figures show the extent to which Brown’s “boom” was a mirage built not just on debt, but foreign labour.
Most seriously, we can see a deep dysfunctionality in the UK labour market. Our system keeps millions on benefits (never less than 5 million have been on some kind of benefits since 1997) while meeting the needs of expanding the economy with a limitless supply of industrious immigrant labour. This means that the direct link between a growing economy and combating poverty is broken – and this is a serious development that demands attention.
The ONS results are
here, in a pdf*. The key finding: there are fewer British-born workers in the first quarter of 2009 than Q1 of 1997. The trend of employers preferring immigrants, which we saw during the boom, has become more marked still during the bust.
Without a doubt, immigration has been the largest change of the Labour years – the ratio of immigrant workers has almost doubled in the private sector and the economy overall as the below graph shows. This means the UK’s the overall mix of immigrants is up there with that of America – a change not taken deliberately, or with any debate, but something that happened by accident and which ministers are still struggling to understand.
I count myself as a supporter of immigration. But there is no doubt that mass immigration has given ministers the option of ignoring our own unemployed. If we didn’t have this unending tap of motivated workers then Britain would be forced to confront the fact that so many of its workers are being incentivised to do nothing by the welfare state. Here’s what the benefit tally, including ‘hidden unemployment’, has looked like in the last decade – using the DWP’s definition of out-of-work benefits.
At no point in the boom did the number on out-of-work benefits fall below five million souls. Almost half have been on welfare for five years or more – and are, therefore, statistically more likely to die than to work again. As I say, were it not for immigration, we’d be forced to confront this problem or our economy would not grow. When I was a business journalist in the late 1990s, I remember writing stories about how bus companies were recruiting in homeless shelters because they couldn’t find the staff. The people in those shelters were being offered structure to their lives, from an employer forced by economic conditions to deal with the greater risk they pose. It was a sign of economic growth addressing social problems – as it should be.
But mass immigration has broken this link. It meant Gordon Brown could actually afford to keep so many million on benefits, as tax receipts were being generated by comparative newcomers. It was a lot easier than trying to reform welfare. Scandalously, that’s what Brown did. To my mind, it is the most contemptible failure of his time as Chancellor. He had the money, the economic boom, to sort out the welfare dependency that afflicts so many communities in Britain. But he took the easy, short term route.
To use that analogy the Prime Minister is so fond of deploying, he walked on by on the other side. Why get your hands (and poll ratings) dirty with welfare reform when you can rely on immigrants to keep the economy growing and tax receipts flowing? And who wants to end up with disabled people chaining themselves to the railings of parliament, as happened when Blair tried welfare reform? Brown took the easy option. And his short-termism has condemned millions to worklessness and poverty who might otherwise have escaped it.
This matters for Cameron, because he will inherit Brown’s dysfunctional labour market – one distinguished by its striking failure to provide that now-notorious Brown slogan “British jobs for British workers”. What if, when the recovery comes, the economy just sucks in more immigrants and the huge surge in dole numbers is never properly reversed?
That’s why immigration matters. You can’t understand the UK labour market, or the pernicious nature of the UK welfare state, without it.
The Brown economic model has spectacularly failed to provide British jobs for British workers – this is yet another one of his empty promises that a Tory government will have to fulfill. But unless the Tories work out how employment, welfare and immigration are interlinked they will be destined to repeat the same scandalous failure of the Brown years.
PS All immigration data is from the Labour Force Survey, a Eurostat-mandated study conducted by the ONS which defines immigrant in its most basic sense – ie, ‘foreign born’. No categoriation is perfect, and this of course captures some Brits like Boris Johnson who were born abroad. I also exclude pension-aged people from the study - it's working-age only. The trend of pensioners returning to work is a topic all by itself.
I covered his boom and bust before when I
pointed out that in fact it
started on Gordons watch....Shocked by the parliamentary expenses scandal and suffering from the recession, British voters have shown their displeasure with Gordon Brown's government. Labour was trounced in local and European elections earlier this month.
Despite this electoral drubbing, Labour lawmakers expressed their confidence in the prime minister on June 8. Given his supposedly successful management of the economy while chancellor of the exchequer, the majority felt that he was best qualified to lead Britain out of the recession, which, they claim, was caused by external forces, not by Mr. Brown's policies.
The facts show otherwise. Britain's economic downturn began when its house price and household debt bubbles inevitably burst, beginning with the run on Northern Rock in September 2007. These bubbles had swollen to higher levels, relative to average price and income levels respectively, than in the U.S. and other major economies.
In relation to their long-term average, British house prices soared by 88.5% between 1997 and 2007, according to the OECD. In the U.S. the rise was 64.5%. Britain's household debt rose to 176.9% of disposable income in 2007 from 104.8% in 1997. During the same period, U.S. household debt rose only to 105.8% of disposable income from 64.3% in 1997. The increases in Germany and France were considerably lower.
Gordon Brown tolerated and even encouraged the formation of these bubbles for several reasons. The traditional sources of Britain's economic strength, the mining and manufacturing industries, shrank during his term as chancellor. Total mining sector output, including oil and natural gas, dropped by 31% between 2000 and 2007. Total manufacturing production was stagnant during this period.
The gross value, in inflation-adjusted prices, of output from all production industries combined fell by 3% between 2000 and 2007. Their employment level dropped by nearly 1.1 million over the same period. These trends were not an inevitable result of shifts in comparative advantages that are said to occur in advanced economies. Real manufacturing output rose at an average annual rate of 2.2% in the U.S., 1.2% in Germany and 1.1% in France between 2000 and 2006, according to the World Bank.
Eager to achieve the illusion of steady progress in the overall economy, Mr. Brown needed the rapid expansion of financial services, and the real estate and business services industries. Their output soared by 48% and 33% respectively from 2000 to 2007, compared with 19% for the overall economy. Their combined employment level reached nearly 6.7 million in 2007, an increase of more than one million.
Rapid expansion of consumer credit in turn boosted demand for wholesale and retail products and services. The booming financial and real estate sectors, with their inflated salaries, bonuses, and profits generated by unsustainably rapid credit growth, also filled Mr. Brown's tax coffers.
Thus, despite the decline in corporate and personal income and national insurance tax revenues from the production industries, he was able to fulfill Labour's 1997 election promise of expanding public services. The output of health and social services increased by 26.3% from 2000 to 2007. Employment in the category "other service activities," which includes public administration and government services, grew by 1.3 million between 2000 and 2007, reaching almost 10 million -- nearly a third of all British jobs.
So the boom in the financial and real estate sectors served Mr. Brown's political interests well. And he was by no means a passive bystander to their growth. He urged them along in several policy speeches. Introducing on April 1, 2005, a policy document entitled "Homebuy: Expanding the Opportunity to Own," he insisted that "this Britain of ambition and aspiration is a Britain where more and more people must and will have the chance to own their own homes."
Ignoring the inability of many house buyers to pay their mortgages, he touted this message to City bankers in successive annual speeches at the Mansion House in London, promising them "light-touch regulation." Already in 1997 he transferred the responsibility for bank regulation from the Bank of England to the inexperienced Financial Services Authority. He also curbed the central bank's ability to keep asset inflation in check by removing housing costs from the price index.
Mr. Brown also repeatedly praised the City's "innovative skills," bragging in 2006 that it was responsible for 40% of the world's over-the-counter derivatives trade -- which includes the now infamous repackaged subprime mortgages. He gave financial institutions a false sense of security by telling them on June 16, 2004, that "I am determined to ensure that we can lock in greater stability not just for a year, or for an economic cycle, but in this generation."
With this assurance from the chancellor, how could anyone expect bankers to forego juicy profits and bonuses by avoiding innovative but unduly risky practices? Because of the large size and global reach of Britain's financial sector, and the many newfangled financial instruments it created and marketed, Mr. Brown cannot honestly deny all responsibility for Britain's recession.
Given these historic facts, Britain's Labour legislators should think again about sticking with the prime minister. Choosing a new leader with integrity and managerial competence is the party's best chance to win greater respect from voters.
Mr. Marsden, a member of the Council of the Centre for Policy Studies, was formerly an operations adviser at the World Bank and senior economist at the International Labor Organization.
Here is another little gem that shows there are parts of the UK which have now become
more dependent on state spending than Cuba!Around two out of every three pounds spent in the North East and Wales will come from the taxpayer next year. And only the southern half of England will rely on private business and enterprise for most of its spending.
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