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Lack of growth continues to make things difficult
By Steve Besley

30 April 2012


Last week’s ‘disappointing’ growth figures came at the same time as the Treasury extended its grip on public spending and further debate took off about youth unemployment. It continues to provide a difficult backcloth for the world of education and skills

The latest growth figures

Growth is one of the key indicators of the health of the economy and a source of employment opportunities and is therefore watched very closely. The Government’s hope is that it will pick up during the year with the Chancellor for instance forecasting in his latest Budget, growth of 0.8% for this year and 2.0% the year after. Last week’s figures, however, which cover the first quarter of the year, saw the economy contracting by 0.2% which, coming on the back of a 0.3% contraction in the previous quarter, means technically we face the prospect of a going back into recession, the first double dip since 1975.

Part of the problem seems to have been the construction sector which experienced a 3.0% drop over the quarter although even the normally vibrant service sector grew by only 0.1%. It is, however, important to note three things. First that these figures are only preliminary, two further revisions follow; second that there is some uncertainty about some of the sector profiles, the CBI, for instance, produced some more positive figures for manufacturing on the same day and third, the ONS figures tend towards the downbeat

The Treasury grip

This emerged in an important speech by Danny Alexander at the start of last week. With spending restrictions set to continue until at least 2016 and only 30% of planned savings achieved so far, he set out some new rules to ensure that there’s no slipping back into bad, old habits. From now on, all Whitehall Depts face two new requirements: first they will have to provide monthly spending reports to the Treasury and second, they will have to set aside 5% of their resource budget as ‘insurance’ against any new pressures or policies. So even in advance of the next Spending Review, things look like remaining very tight for an area like education

Youth unemployment

Recent alarming headlines about youth unemployment in parts of the EU have heightened concerns about how far things are improving in the UK. The latest figures, published last month, saw a welcome 9,000 drop in the number of unemployed 16-24 year olds. However the claimant count, that’s the number of 18-24 yr olds claiming JSA was up, the number of people generally working part-time continues to increase and regional variations remain strong. As Richard Lambert’s recent FT article ‘Why no British staff at Pret?’ indicated, a lot depends on how you read the figures. The hope is that, as with growth, employment will pick up later this year but for the moment, debate continues about how well young people are being prepared for work, whether the incentives for work are right and, as the FT article indicated, why employers prefer to recruit foreign labour.

© Steve Besley, Head of Policy, The Pearson Centre for Policy and Learning 2012.