The post you are reporting:
One of the coalition's key assumptions on the economy is based on flawed maths, according to think tank the New Economics Foundation in a new report called Filling the Jobs Gap. The government is banking on the private sector to create jobs to offset the loss of employment in the public sector.
To encourage this, Chancellor George Osborne introduced an employers' National Insurance waiver for new businesses outside London and the south east. But NEF says: "The likely job creation to be created from such a tax break is not even close to the size of the current jobs gap."
The jobs gap is the difference between the size of the population of working age and the number of jobs available. In the report, subtitled Why enterprise-based regeneration isn't working, NEF found that for every 100 people able to work in the north east, there are only 72 jobs. In the south east there are 86 jobs for every 100 people able to work. Across England as a whole the jobs gap is currently 5.3 million.
NEF says it is "totally unrealistic" to expect the private sector to create that number of jobs just by offering a temporary NI waiver. Entrepreneurs are much more likely to start businesses in parts of the country that are growing rapidly and where there is strong consumer demand.
Dr Faiza Shaheen, who wrote the report, said: "While the government's Office of Budget Responsibility optimistically forecasts that 1.3 million new jobs are likely to be created by 2014, our research shows that the private sector is highly unlikely to emerge and absorb those pushed out of the public sector, particularly in already deprived areas."
Writing on the Left Foot Forward blog a great favourite of mine, she added: "In the short term, the Government must at least consider the spatial impacts of any austerity measures, protecting jobs in those areas where a private sector is unlikely to emerge. If they fail to do this, cuts now are likely to be counterproductive."
NEF proposes several measures for the Government to implement.
•Protect the most deprived areas from public sector cuts.
•Extend the NI waiver to firms in London and the south east that want to invest in deprived areas
•Develop an industrial policy targeting deprived areas with manufacturing in the renewable energy and green jobs sector
•Introduce more highly-focussed, longer-term programmes to support enterprises in deprived areas.
It seems unlikely this Government will listen to any of this. The Conservatives are wedded to an ideological assumption that the private sector can and should step in to provide when the state is rolled back. And the Lib Dems will go along with it to stay in power.
We are in the midst of a vast experiment to see if the ideological assumption works. Just as we were in the 1980s when the Thatcher government insisted something called 'trickle-down would work. It didn't. Let's hope the results are not as disastrous as they were then.