What is the point of growth if it misses out young people?

Kate Thick on why the jigsaw pieces of the British economy do not fit together

George Osborne visits Nifco's factory in Eaglescliffe
George Osborne visits Nifco's factory in Eaglescliffe

I like jigsaw puzzles but forming a coherent picture of the economy is beyond me.

The Journal recently reported a survey placing the North East as the region least resilient to austerity cuts and, last week, company leaders here said their biggest challenge is overcoming a skills shortage.

Step back and we see that the UK, the fifth richest country in the world, is one of the most unequal developed nations. Hardest to factor in is that the health and wellbeing of children growing up in the UK are worse than in most of the rest of Europe. Inequality stunts economic growth and damages the fabric of society.

Last week, our bullish chancellor announced the government was still running a deficit, necessitating an immediate start on phase two of his deficit reduction programme; government departments were ordered to find £3bn in savings this year.

Osborne is planning further savings of £30bn by 2017-18, including cutting the welfare bill by£12bn; half the £250bn welfare bill goes to pensioners and is off limits. The NHS and schools are so far protected but the social care budget is not ringfenced. Osborne promised to champion working families but welfare cuts may have to focus on tax credits and housing benefits which help low paid workers.

Urging by the Organisation for Economic Cooperation and Development, to spread the cuts over five years to help protect the poor and not stifle growth, fell on deaf ears. The OECD also reported that the skills of British youth – where one in eight 16 to 18 year olds are not in employment, education or training – are dismally low compared with other countries.

A lack of skills must in part explain slowing growth and weak productivity.

The OECD says countries such as Britain should abandon debt reduction and dismantling the state as key targets. How about tax rises to help address the deficit and stronger investment in education, housing and infrastructure to boost productivity? And bear in mind that a remedy for inequality is wage control and a global tax on wealth.

By the nature of capitalism, a deficit has, and probably always will be, lurking. Debt interest payments rise as does the cost of the state pension. Britain’s population is ageing, putting extra strain on health and social care budgets; councils in England spend 35% of their annual budget on adult social care and those with learning difficulties and mental health problems. In 2015/16 local authorities have budgeted to cut this by £1.1bn.

Jobless benefit claims are at a 35-year low; what we need now is as much effort to eradicate in-work poverty as has been done to tackle unemployment. So, to add to the picture, we have one in five employees in the UK earning less than the Living Wage and two-thirds of children living in poverty are in a family in work.

The government is expected to announce it will raise the earnings threshold for which people begin paying income tax but this is unlikely to be fully implemented before 2020 and – a fact that amazed me - the UK lags behind many countries when it comes to the highest minimum wage.

The UK then is the most unequal country in the EU. Only people already on the property ladder or with good pensions are accumulating personal wealth. Almost a third of the UK population experienced income poverty in at least one year between 2010 and 2013; across the EU as a whole, the figure was a quarter.

A global shift to more insecure jobs since the financial crisis is fuelling growing inequality. For many people, poverty is not a permanent state but rather a constant threat. One misfortune can push them below the breadline so a strong and responsive welfare system is essential.

Thousands of children – many of whom are British citizens – are subsisting on as little as £1 a day because their parents are migrants with no recourse to public funds. Children must be treated first and foremost as children, not immigration statistics. Only about £2bn of the £30bn spent on tax credits goes to non-UK working EU citizens, citizens who make a vital contribution to our economy.

Stamped across the jigsaw puzzle is a question: What is the point of growth if it doesn’t give young people a stake in the system and ensure their wellbeing?


David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer