Osborne’s key growth policy: the NI holiday, has also failed
11:30 am - August 1st 2011
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Figures released over the weekend show that the government’s National Insurance Contributions ‘holiday‘ has been a damp squib.
The scheme was supposed to help 400,000 new businesses and create 800,000 new jobs in worse-off regions; the results so far: 5,137 firms have been helped to create just over 10,000 jobs. Of the £940 million set aside for the scheme, the government has so far needed to spend … £10.3 million.
Now, it’s not good form to shout “told you so”, but this comes as no surprise.
Before the general election, when it became clear that this was going to be an important element of Conservative economic policy, we argued that it “isn’t actually evil, it’s just that it is too small for it to make much difference.
It’s a position we’ve argued again, after it was announced in the June 2010 Budget, when it began operating and when the first statistics were published.
The holiday lets new small businesses in regions outside the South East off the first year’s employer National Insurance Contributions for their first ten employees. The idea behind it is that one reason we face high unemployment is that employers are put off hiring by costs like NICs.
The most important problem with the thinking behind this policy is that we are in a classic Keynesian recession, where the most important problem is the lack of demand, not structural reasons.
But there are specific reasons to doubt the effectiveness of this policy. As we’ve pointed out before, the last Tory government introduced a very similar policy – it too was a flop and research later found that it had the same problems as the current incarnation of not being noticed by employers.
The important point about this policy – and the reason why Ed Balls has been right to sneer at it – isn’t so much that it’s doing any harm. It has done some good.
It’s just that, measured against the scale of the damage being inflicted by the cuts, it’s nowhere near enough to bring down the ratio of more than five unemployed people for every job vacancy.
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Richard is an regular contributor. He is the TUC’s Senior Policy Officer covering social security, tax credits and labour market issues.
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Story Filed Under: Blog ,Economy
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Reader comments
There aren’t any cuts. Government spending is still increasing. Please get the facts right.
Govt spending isn’t just central spending – it also includes local govt spending, which a lot of you seem to be very keen to pretend doesn’t exist.
Council tax falling is it, Sunny?
IanB stop deliberately ignoring the “costs of the crisis” – the higher unemployment benefit payments, higher interest payments and so on.
This is why departmental spend is being hacked by 20pc and more.
Your intellectual deceit is easy to spot.
@1
Is this one of those things where you pretend that inflation doesn’t exist?
@3
No, but in a recession – it’s likely that business rates are.
Spending is rising, not being cut. Much of it is now going on paying back the excessive debts run up by the previous administration.
But hell, you voted for them (presumably). We did warn you, and you ignored us.
*shrugs*
@1 – Really? So there haven’t been slashes to many departmental budgets, and to external organisations like Universities? Wait, there have. On a massive scale.
Simply because the money’s gone into pet projects and tax cuts for large business doesn’t mean for a second that those cuts are not real. It’s a mark of the incompetence involved in killing growth that borrowing is higher, no more and no less.
You’re YELLING that incompetence is good. gg.
Leon, “the money” is going into paying off the debts you ran up- or rather, stopping the out of control debt rising even faster.
Look, I’m not a Keynesian. But, even Keynes advised a cyclical spending policy of reducing deficits during the boom to have room to expand during the bust. You expanded during the bust. Now, you’ve got the consequences. We (the taxpayers) are already taking on more debt. Spending is still rising.
And you want even more money? No. Fuck off. You’ve had it all. We’re skint. There’s nothing left to give you. You’re the sponger who keeps borrowing from his friends until they have no more left to give, then whines that he can’t afford a beer any more.
Do something positive. Start a business, a productive one. Create some wealth. We are sick to death of hearing you complain that nobody else will lend you another tenner they know they’ll never get back. Buy your own fucking beer for once.
Reactions: Twitter, blogs
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Liberal Conspiracy
Osborne's key growth policy: the NI holiday, has also failed http://bit.ly/r0FinN
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Max
RT @libcon: Osborne's key growth policy: the NI holiday, has also failed http://bit.ly/r0FinN
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Alfred Camp
@libcon: Osborne's key growth policy the NI holiday has also failed http://bit.ly/r0FinN ~ The economy is suffering from #TheWrongTypeOfGovt
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azulbuho
Osborne's key growth policy: the NI holiday, has also failed http://bit.ly/r0FinN
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ieuanferrer
Osborne's key growth policy: the NI holiday, has also failed http://bit.ly/r0FinN
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Pucci Dellanno
Osborne's key growth policy: the NI holiday, has also failed http://bit.ly/r0FinN
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