As an economist working in politics, I’m sometimes shocked at some of the
arguments about the economy. But today’s statement on welfare reform is economically shocking.
Miliband argues that you can’t reform welfare until there are more jobs. Set aside the fact that this is another area where Miliband’s argument is Lord make me virtuous, but only
tomorrow. Team Brown delayed welfare reform for over a decade under Labour, and their position today is to call for yet more delay.
Let’s look at the economics.
First, Miliband falls for the classic lump of Labour fallacy. It’s as if he thinks there are a set number of jobs to go round. But when people get a job, they usually earn more, and so can
spend more, and so generate more jobs for others. Miliband in effect is arguing that getting a job harms the economy by taking away jobs from others. Nothing is further from the truth.
Second, the number of vacancies in the economy is rising – by 9 percent over the past three months. Not enough vacancies are being taken up because the welfare system holds people back. Under
Labour’s system, all too often work did not pay. Reforming welfare so work always pays will be crucial for turning potential jobs into jobs people actually take.
Miliband’s position smacks of political opportunism. Under the eminently sensible Dougie Alexander, Labour seemed to be moving to support IDS’s widely-praised welfare reforms. With
today’s crass positioning, he is once again setting Labour against reform, and against building a fairer welfare system that makes work pay.
Matthew Hancock is Conservative MP for Suffolk West.
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