Encourage those with an enterprising spirit

Columnist

Monday 20 August 2012

It's not surprising that a report from the Prince's Trust and RBS should find that 73% of young people in Scotland think that life is harder than ever for the unemployed, though their great-grandparents' generation might beg to differ.

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Andrew McKie

Even if it is preposterous to compare today's welfare state with the kind of world my grandfather grew up in, where families of 12 lived in couple of rooms up a close with a shared cludgie, the figures are stark enough. The jobless may not face the absolute poverty of the Depression of the 1930s, but this is nonetheless on many indices the worst economic crisis since.

Some, like the economist Paul Krugman, argue that the New Deal which America introduced then cured the problem, and this shows austerity doesn't work. The facts say otherwise. The United Kingdom's growth in the 1930s bounced back fairly quickly after it introduced severe cuts. Although – or one might more rationally conclude, because – it threw money at the problem, America did not begin to reduce unemployment during that decade, nor indeed until it entered the war in 1942.But George Osborne, despite his mantra that you can't pay down debt by borrowing more, has unfortunately ignored those lessons and done just that, which may explain why the current recession looks like having the slowest recovery for more than a century, and why debt and Government spending are in fact rising. Yet there was, in the unemployment figures released last week, an apparent anomaly – and it's one which rather supports the Prince's Trust's campaign, which argues that one of the most hopeful routes out of unemployment is for young people to set up their own businesses.The oddity is this: early estimates of the second quarter of this year suggested we had gone into a double-dip recession, with negative GDP growth of 0.7% which, to put it in context, is as bad as Italy and worse than Spain. Yet during the same period, more than 201,000 new jobs were created, a much better showing than almost any other Western country. In fact, there have been just short of 500,000 new jobs created in the past two years, and there are very nearly as many people employed as there were at the high point of employment before the recession began. Though still slightly up on last year, unemployment actually fell by 48,000 in the second quarter, and youth unemployment fell, too. Of course, one can reasonably object that many jobs (8 million of the 29.5m total) are part-time and many of those are low-paid positions. Even so, it is still obviously better than people drawing the dole. It is also true that some parts of the economy are still struggling – Scotland's retail sector is hard hit, with figures today suggesting footfall from May to July was down 8.2% on the previous year. Only London suffered worse.But the general trend, even for retail, is improving (retail is up year on year by just under 3%, or slightly over, if one excludes petrol and diesel) while the early estimates for construction and manufacturing during the second quarter seem to have been too pessimistic. We probably didn't quite make it out of negative territory, but things may have been better than the ONS figures suggested.Some conclusions may be drawn. The first is that the private sector can create jobs faster than they are being reduced in the public sector. Indeed, the fact that the north-west of England created proportionately more jobs than London during that quarter, despite the boost the latter had from the Olympics, rather backs the theory that high public sector employment actively undermines job creation by private firms.The second is that the Chancellor's rhetoric about removing red tape and restrictions on employers really does increase employment – and that more could be done if he would put those pronouncements into practice and cut red tape yet more aggressively. The effect of loosening employment law, though always described as making it easier to sack people, is actually more often to make it less daunting to hire new workers, and much easier to keep them on during tough times. In that context, it's worth remembering that, contrary to the myth that manufacturing industry was destroyed in the 1980s, Britain now makes considerably more than it did when Mrs Thatcher was first elected in 1979.But the really interesting point is that more than 300,000 new businesses have been registered in Britain since the beginning of the year, something the Prince of Wales is keen to encourage among young people. He is quite right, though I am far from starry-eyed about that. Most unemployed young people from a Glasgow scheme trying to set up, say, an organic biscuit company, will find it trickier than the average Duke of Cornwall who owns a number of organic estates and farms and has a man to put the toothpaste on his brush each morning, freeing up vital minutes to devote to business planning. The regrettable snobbery of the Great British Public may even mean that Drumchapel Originals have less cachet than Duchy Originals.We can be confident, too, that a good percentage of new firms will not last the course. But failure is a risk of entrepreneurship and an essential one. Despite the complaints that we are a dependency culture, I strongly suspect the working classes are, on the whole, much more resourceful and entrepreneurial than, for example, young middle-class graduates. Those who are prepared to hustle, such as the tradesmen working cash in hand, to whom the Treasury minister David Gauke (previous job: lawyer with firm specialising in minimising tax liability) took exception, should be encouraged at every step. For anyone who can work, it is infinitely preferable to claiming benefits or, even worse, drawing a good salary in a public-sector job which ought not to exist. Scots were once noted for these enterprising, self-reliant qualities; thought, indeed, to be emblematic of them. There's no reason we cannot again be. Perhaps, as a first step, the Prince's Trust should hand out copies of Shoes Were for Sunday, Mollie Weir's memoir of growing up in the Great Depression.

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