Labour’s assault on jobs will undermine growth
Rachel Reeves is engaged in a complicated dance with the Office for Budget Responsibility in the run up to her second Budget.
When the fiscal watchdog presents its scorecard on the Chancellor’s plans – and on wider government policies – the music will stop and we’ll see whether Reeves pulls off a surprising lift, or ends up on the floor.
In Opposition, Labour couldn’t have been more supportive of the OBR’s role, vowing to strengthen its remit and happily imbuing it with god-like authority as part of their relentless (and entirely justified) attacks on the Tory party’s Liz Truss experiment.
But life comes at you fast, and nearly 18 months into office it’s no secret that ministers are deeply frustrated with the OBR; the Chancellor has pledged to “defy” its gloomy forecasts. She’s also desperate for the bean-counters to give a big pro-growth thumbs up to recently inked trade deals and the mooted EU youth mobility scheme. She may be disappointed.
Meanwhile, on the other side of the ledger, the Tories are urging the watchdog to take into account the impact of the looming Employment Rights Bill. In a bit of pre-Budget parliamentary mischief-making, shadow Chancellor Mel Stride and shadow business secretary, Andrew Griffith, have written to the OBR asking “whether it will consider the indirect economic effects on growth, employment, or tax receipts” of Labour’s overhaul of workers’ rights.
This time last year the OBR suggested the proposed reforms “could pose downside risks” and now, with the Bill just days away from becoming law, the Tories think the inevitable mountain of red tape that will emerge from the shakeup should be formally quantified by the watchdog.
The government’s own impact assessment conceded the Bill’s measures will add around £5bn of additional annual costs to employers, and yet somehow they continue to claim – with a straight face – that a mass of expensive, restrictive and complicated new HR rules will be “good for growth.”
Since Labour came to power, the unemployment rate has nudged up from 4.4 per cent to 4.8 per cent, with economists at EY now expecting it to hit 5 per cent next year. Higher employment costs and weak business confidence have taken their toll, and the Employment Rights Act risks turning a chilly jobs market into a frozen one.
Frankly, we don’t need the OBR to tell us that.