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Monday, 11th October 2010

UK: Filling the Jobs Gap: Why enterprise-based regeneration is not working

Filling the Jobs Gap: Why enterprise-based regeneration is not working

Source: New Econmics Foundation

In the recent emergency Budget, the Chancellor, George Osborne, introduced an employers’ National Insurance contributions waiver for new businesses outside London, the South East and East of England. The aim of this tax break is to create jobs to offset public spending cuts. The report finds that this approach will barely begin to fill the jobs gap in low performing regions.

Four times as many new businesses have emerged in the affluent areas as in deprived areas since 2002. The government is at best naïve, and at worse reckless, if it cuts public sector jobs in the most deprived areas without any new jobs to replace them. Deprived areas have already suffered disproportionately from the recession and, because they are more dependent on public sector spending, cuts could see their relative position fall further, heightening levels of spatial inequality.

The government needs to be much more realistic about what short-term tax breaks can achieve. It must recognise that public sector cuts in deprived areas could be counter-productive, resulting in mass unemployment and hence an increase in the welfare bill and increase the likelihood of a double-dip recession. Bold actions in the form of green industrial policy is what is needed if the government is indeed serious about the need to ‘rebalance’ the economy away from London and the South East and lower our dependence on the service sector.

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