This was supposed to be a white collar recession in which the middle classes in the financial sector would be feeling the pain first. Hasn’t happened. The biggest increases in people claiming jobseekers allowance have been in old industrial areas like Glasgow, where the number of people unemployed and claiming benefit has increased by nearly a third in the past year. There, the unemployment rate is now 5.2%; whereas in Edinburgh, home of stricken RBS and HBOS, only 2.8% are without work. There really is no justice in this recession. The non-financial areas of Britain didn’t cause the crisis, but are suffering disproportionately from the results.
You might have thought this would make the government think of subsidising jobs for a change instead of banks, but no chance. The Treasury has ruled out subsidising short time work or giving help to companies to retain skilled workers. There’s nothing left in the kitty for job creation, we’re told. Except in the most bizarre form, which is the proposal to pay people to scrap perfectly usable cars. The government is apparently planning to pay £2,000 to owners of vehicles over nine years of age if they buy a new one
The propose ‘scrappage’ scheme has been widely criticised by economists – the Financial Times said it was like paying people to break windows in order to keep glaziers employed. It is supposed to boost the UK car industry, but the vast majority of new cars sold in Britain are imported, so most of the money will go abroad. It is supposed to help the environment, but most of the pollution created in a a vehicle’s lifetime happens during its production, so scrapping serviceable cars will only contribute to environmental degradation. People who can’t afford new cars will be unable to take advantage of the scheme, which is wide open to fraud and profit taking by car dealers.
The scrappage scheme – like the bank rescues – shows that the government really has no coherent philosophy of how to deal with the economic crisis in the real world, as opposed to the fantasy world of finance. Ministers spend most of their time with bankers and the lobbyists from special interest groups like the car dealers, which makes them acutely vulnerable to expensive schemes which benefit the few at the expense of the many. The Chancellor should be investing in job-creating public works, like house building and renewable energy. And he should be addressing income inequality to boost consumer demand.