Is full employment just another of George Osborne’s political stunts?

‘Full employment’ usually means the lowest achievable rate of unemployment — somewhere south of 5 per cent compared with 7.2 per cent today, or to put it in numbers, fewer than 1.5 million compared with 2.3 million last month. You might think it ought to be a target of every Chancellor of the Exchequer. Only Norman Lamont ever said otherwise in public, telling the House of Commons in 1991 that ‘rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying.’ Now George Osborne has embraced the full employment target, taking a little more wind out of Labour’s sails as he did so, and has said he wants us to have the highest employment rate in the G7.

Given the rate at which our supposedly moribund economy created private-sector jobs over the past three years, and the flexibility of our labour market compared with at least the European members of G7, it’s not unreasonable to think we might creep in the direction of that target if current trends continue. But given our shrunken manufacturing base, our skills deficit, our intake of working-age migrants, our notorious habit of misallocating capital to bricks and mortar rather than productive enterprise, and the fact that higher-growth businesses typically create relatively few jobs — all combined with Osborne’s continuing determination to shrink the public-sector workforce — this is still a very big aspiration.

So big, indeed, that we can only wonder whether, as so often chez Osborne, it’s just another political squib. Everything depends on the level of business investment, which has lagged far behind jobs growth. But again the trend is in the right direction, if belatedly, helped by increased tax allowances in the Budget. The Monetary Policy Committee has observed that a recovery built around consumer spending is also at last evident in the business sector.