Fraser Nelson Fraser Nelson

How Brown’s stimulus will destroy jobs

So what will the Brown stimulus actually do? Suspiciously, we’ve never been told. In America, Obama has shown the public what they’ll get for their money – how his stimulus would boost employment and the economy. Seeing as no one in Britain has done this exercise, we at The Spectator commissioned Oxford Economics, perhaps the best economic modelers in the country, to have a look. It ran the Brown stimulus, which we define as the various measures taken in the 2008 Pre-Budget Report, through their computers – and the resultant graphs are fascinating. Here’s the first:

 

So, in year one, there’s an effect – but we pay for it everafter. This year, the stimulus package is expected to stem the fall in GDP by 0.4 percentage points. So, for example, rather than a 3.2% fall we’d have a 2.8% fall. But next year, when the VAT goes back up and there’s less capita spending, this would reduce GDP growth (or exacerbate GDP shrinkage) by 0.3 points. In 2011, nothing. Then the National Insurance rises and tax hikes for the higher earners kick in – these restrain GDP growth by 0.3% in 2012 and 0.1% in 2013.

And what does this mean for jobs? Oxford Economics produces a separate analysis for employment growth, below.

 

Shrinkage in employment this year would be 0.1 percentage points less than otherwise. Apart from 2011, where there is zero impact, it’s all bad after that. Unsurprisingly. Weigh down the economy with extra taxes, and you are destroying jobs – or, more accurately, hampering a job recovery.

Brown claimed in his Observer interview that the stimulus would save (or “create”) 100,000 jobs.

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