Vindicated Balls gives absent Osborne an economics lesson

Small wonder George Osborne chose to hide last night rather than be grilled on Newsnight following yesterday’s disastrous unemployment figures; we can but hope he tuned in anyway to listen to his shadow Ed Balls explaining why the economy’s flatlining and what can be done to right it.

Balls repeated his clarion call for a 2.5% cut in VAT to help families “that are suffering and worrying about their jobs”, cautioned against cutting the 50% top rate of tax and urged the reinstatement of the Building Schools for the Future programme – describing as “lunacy” the government’s refusal to even countenance a Plan B.

He explained:

“If you want to act now to get this economy moving what you do is you have a temporary cut in VAT, you move to a more balanced approach to the deficit. You reinstate Building Schools for the Future. Today we had a speech from Nick Clegg which was an insult to the intelligence because after all the hype, what did he say? Absolutely nothing at all.

“There is no Plan B from this government and the longer they put politics before substance and just come along with these parroted lines the more people will lose their jobs, the more our economy is going to suffer and we’ll not get the deficit down if unemployment is rising. This is lunacy.”

Adding:

“Of course there have to be tough decisions, of course we’ve got to get the deficit down but fundamentally if the economy is not growing and unemployment rises, if there’s fewer people paying tax, more people are on benefits, that means billions of pounds more in spending, the deficit is higher not lower.

“This is not working and what we’ve got is a government which wants to use political language but it flies in the face of economic reality. We see that in the evidence…”

Watch the key exchanges:

And there was further grim news for the government today, with the OECD’s latest Economic Outlook (pdf), comaparing the UK’s performance to that of other economies, finding:

The economic recovery to date has reduced the UK unemployment rate only modestly from its 2010 peak and there is a risk that the fall in joblessness may stall. The UK unemployment rate (ILO definition) rose by 2.8 percentage points between December 2007 and March 2010 to reach 7.9%, an increase that is similar to the rise for the OECD area as a whole.

While labour market conditions showed some improvement over the following year, the decline in UK unemployment was small by comparison to past recoveries and to the decline in the OECD average in the current recovery. The recent weakening of output growth in the UK and many other OECD countries suggests that unemployment will remain significantly above its pre-crisis level for some time to come.

Low-skilled workers and youth bore the brunt of the recent fall in UK employment. The number of low-skilled workers in employment fell by close to 18% between 2007Q4 and 2010Q4, even as employment rose by 10.5% for high-skilled workers. This divergence across skill levels was much sharper than in other OECD countries.

Youth employment also fell sharply in the UK during this period, but this decline was close to the OECD average. Despite the crisis, employment grew for older workers in most OECD countries, but recorded a small decline in the UK.

Long-term unemployment is on the rise in the UK. The share of the unemployed who have been out of work for one year or more rose by about 10 percentage points over the past three years, from 24.5% in 2007Q4 to 34.1% in 2010Q4. This increase is far larger than the OECD average rise, which was just 3 percentage points.