Counting the cost of Labour’s national insurance hike

Insightful work from the FT’s Chris Giles, who has dug out a couple of academic articles – including one co-authored, in 2007, by George Osborne’s current chief of staff, Rupert Harrison – to work out how many jobs Labour’s national insurance rise might cost the economy.  The results?  Well, according to Giles, one says that 23,000 jobs will be lost, and the other comes up with 22,000.

Neither of these are figures that Labour will want to crow about.  But, as Giles points out, they are below the “57,000 jobs in small and medium-sized businesses alone” that the Conservatives predict in their manifesto.  And they suggest that the national insurance hike will have a smaller effect on private sector employment than the Conservatives’ planned efficiency savings will have on public sector employment.

Hang on a second, though.  There are a couple of important caveats to make.  First, that economics is a notoriously imprecise science: fact is, no formula or prediction made by an economist is ever watertight.  And the second is that the Tories intend to drive their efficiency savings not by sacking public sector workers, but by not filling “back room” vacancies as they become available.  Many would argue that the economy can bear that more easily than a swathe of private sector sector job losses, be they 22,000 or 100,000 in total.

To be fair, the Tories have been making something like that final point quite effectively over the past couple of weeks.  But they need to be prepared for Labour’s inevitable claims that the Tory policy would result in both money and jobs being, ahem, “taken out of the economy”.

UPDATE: Team Osborne get in touch to deny the FT story, saying that it misinterprets Harrison’s 2007 report.  And, besides, their 57,000 figure comes from the very reputable Centre for Economics and Business Research – while some research reports even have it hitting over 100,000.  My education in economics stopped at the end of my first year at uni, so I’ll leave the debate to wiser minds.  But it does seem like the Tories are extremely confident in their numbers here.