Aaron Jacob: Jobs, jobs, jobs. We need to talk about the damage of unemployment

Aaron Jacob is a solicitor, and former district councillor. He was the Conservative candidate for Sheffield Brightside and Hillsborough in 2024.

Unemployment. One word. But one which has the ability, perhaps like no other, to spark fear throughout Whitehall.

For what seems like an age, policymakers have seldom pondered what to do about unemployment because they have not needed to. However, the result of a confluence of factors, many of this Government’s own making, means that we may have to tackle unemployment on a scale not seen for the last 15 years or so.

Knowledge of history is always important and useful.

Prior to the First World War, unemployment was seen and dealt with as a local issue: in a certain sector perhaps or confined to specific geographic locations.

That changed following an explosion in unionisation following the Great War, not to mention the depression in heavy industry in the immediate aftermath of the war, as these industries encountered difficulties in re-discovering their exporting prowess. The growth of the Labour movement, together with the election of the first ever Labour Government, also ensured the growing political salience of this issue.

Unemployment in the interwar period was characterised by a persistence as much as its volume: unemployment in this period never fell below 1 million people. We are all aware, I hope, of the “Devil’s Decade” that followed in the 1930s, as the Great Depression leapfrogged from country to country at a pace not seen before in the industrialised world.

The Beveridge Report, published in 1942, was a reaction to the problem of unemployment. The “Butskellite consensus” that held in these years took as read that unemployment was the issue in British politics in the post Second World War period. This consensus ran until the 1970s, when pump-priming the economy no longer seemed to work as it once did. As then Prime Minister James Callaghan outlined to the party faithful in 1976:

“We used to think that you could spend your way out of a recession, and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of employment as the next step. Higher inflation followed by higher unemployment. That is the history of the last twenty years”.

Mrs Thatcher came to power seeking to actively overturn that consensus. Taming inflation became the explicit goal of macroeconomic policy. This was to be achieved, firstly, through monetarism, and then through more indirect means, as Britain decided to shadow the Deutsche Mark and then joined the Exchange Rate Mechanism (ERM). Direct inflation-targeting meant that the Blair-Brown axis had no option but to drink the Thatcherite Kool-Aid. Operational independence for the Bank of England and an explicit legal mandate to control inflation was the logical endpoint of the work that Thatcher had started many years before.

One of the least-cited but perhaps most consequential facts of the period of Conservative Government of 2010-2024 was the record levels of employment. The overall level of people in employment rose from 29 million to 33 million between 2010 and 2023. The employment rate reached 76 per cent in 2019. Whilst no one will give you credit for past success, it is notable that this feat was achieved while Europe seemed perennially stuck in a doom-loop of unemployment and crisis.

A quarter of Greece’s workforce was unemployed throughout some of the early part of that period. But it was not just Greece: France, Spain and Italy all had unenviable unemployment records, particularly amongst the young, with all the attendant economic scarring that goes with it. That Britain avoided such a fate was a success.

There is no elixir to end the stagflation we are now living through.

However, at the very least, what you do not do is tax employment further.

Perhaps the worst and most self-defeating thing that this Government has done so far is a whack a huge tax on jobs (especially when you said you would not). Corporate Britain has the clout the shout the loudest: witness the views from the likes of Tesco, Next and Greggs, amongst others, that job losses are “inevitable”. These howls of execration may indeed be trying to call the Government’s bluff.

Nevertheless, when the economy is weak, it would be foolish to put your foot on the accelerator, particularly since there are millions of smaller enterprises feeling the pinch but whose voice is not as loud. The national insurance increase must be reversed.

Economics 101 says that if you tax something, you get less of it.

For nearly 50 years, between 1920s-1970s, unemployment exercised the minds of policymakers. Economic tumult and an upending of orthodoxy meant that for the next 50 years, 1970s-2020s, inflation was the economic variable that kept policymakers up at night. Today, the Labour government appears to be leaning into and accelerating an economic denouement that Labour governments are supposedly there to avoid: unemployment.

A prophet of doom I hope not to be, but with the tax burden set to increase yet higher still, it is difficult to envisage how this Government’s actions will not produce what they had hoped, and were elected, to avoid.