The coalition is failing to deliver

By Allister Heath, February 24, 2011

You wouldn't believe it if your only source of news was the BBC, but the number of jobs in Britain actually went up last year.

Too many of the new positions were part-time, and young people are finding it horribly tough - but there was nevertheless a decent amount of job creation, a trend which is likely to continue this year.

Economics specialises in apparent paradoxes. The total number of people in employment rose by 218,000 to 29.12 million last year - but unemployment also went up by 40,000. The reason for this, of course, is that the number of people looking for work grew faster than the amount of new jobs. Insufficient job creation, rather than a jobless recovery, is the real danger.

The private sector created an extra 296,000 jobs last year, easily mopping up the 77,000 lost by the state.

But instead of doing more to encourage firms, the coalition is still increasing taxes and red tape. For all the claims that it is scrapping "Labour's tax on jobs", National Insurance is going up again in April. When one speaks to companies, especially small ones, the verdict is clear: the government is making it more expensive to hire people, so they are doing all they can to avoid committing to new staff.

The government must take an axe to tax and cut the red tape

The British Chamber of Commerce (BCC) calculates that new red tape - including regulations from the EU - will cost firms an extra £23 billion over the next four years. Seven major new rules are coming in this year alone. The coalition promised a bonfire of red tape, yet as a devastating report from the National Audit Office points out, it has utterly failed to deliver. David Cameron's "one in, one out" pledge on regulation is a major broken promise.

One issue the coalition is trying to tackle is the cost to firms of employment tribunals, now £1.6 billion a year. Employment legislation has become so complex that just one in twenty HR professionals fully understands the 'tribunal process. The average cost of settling is £5,400; employers who defend themselves pay £8,500.

The reforms proposed will redress the balance and reassure firms that the system is no longer open to abuse - but they are just one small step in the right direction.

Much more is required: unless the coalition takes an axe to the tax and red tape crippling employers, there is no way UK plc will be able or willing to create enough jobs for all.

Allister Heath is Editor of City A.M.

Last updated: 10:25am, February 24 2011