The PM’s been fibbing and the Coalition’s labour market policies are ruled by prejudice

Forget the evidence, ministers know the answer that will buy them votes

Source: ONS

Today is the day to stand up for the truth. I watched David Cameron at Prime Minister’s Questions last week tell big fat pork pies. He claimed, at least twice, that employment in the UK was now 1 million higher than it was compared to when the Coalition was formed. A nice soundbite, but sadly totally untrue.

The number of jobs created since the Coalition was formed is well below a million, so he needs to apologise for misleading the House of Commons. The table contains the official Office for National Statistics data, in thousands. Readers of this column will be familiar with how the official statistics are calculated as an average of the single month data. The latest estimate of 29,869 is the average of the three monthly numbers for June to August, which should then be compared with the equivalent numbers from April to June 2010 (given the Coalition was formed in May 2010).

So based on the three-month averages, employment was up by 891,000, not a million. The most recent estimate is to compare May 2010 with the latest data we have for August 2013, which implies an increase of 642,000. This is how every other advanced country – other than Latvia and Greece – counts employment growth, based on single month survey evidence. Again, well below Mr Cameron’s entirely false claim of 1 million jobs created.

In a Tweet to me, Tory Party Chairman Grant Schapps claimed that there was a million job increase from February to April 2010 even though these data relate to March 2010, well before the coalition took office in May. So he wants to take credit for the 133,000 jobs created under Labour between March and May 2010.

Note too that the single month data suggests that employment is falling steadily. Moreover we have also seen a rise over the last three months in the unemployment rate from 7.4 per cent in June to 7.7 per cent in July and 8 per cent in the latest August 2013 survey. Plus wage growth continues to decline to 0.4 per cent on the month and has even became negative in the public sector: -1.6 per cent, which means rapidly falling real living standards.

There were a couple of papers published last week that also cast further doubt on Coalition spin and its non-evidence based policymaking around the labour market: forget the evidence, we know the answer that will buy us votes and appeal to people’s worst prejudices. It’s all the fault of scroungers and foreigners claiming our benefits. Except it isn’t.

The first was a paper from Rebecca Tunstall* casting doubt on the claims made by the Department for Work and Pensions (DWP) on the likely revenues from the bedroom tax. The tax reduces housing benefit paid to tenants deemed to be under-occupying their homes, with the main aim of reducing UK housing benefit expenditure. It is also intended to increase mobility among social tenants, to reduce under-occupation and overcrowding and to help house people on waiting lists.

A DWP model based on assumptions predicted savings of £480m in 2013/14; however, Professor Tunstall used real data obtained from four housing organisations, which does not appear to match key the assumptions about claimant behaviour underlying the DWP’s model. Of particular relevance is that she was able to obtain details of DWP’s model from a Freedom of Information request. She found, using real world data alongside regional variations in impact, the total savings the DWP’s model predicts is reduced by a third, or by £160m. Typically, rather than engage in a serious debate over the sensitivity of their estimates and the appropriateness of Professor Tunstall’s estimates and methods, the Coalition sent out an inexperienced DWP junior minister to shoot the messenger. Esther McVey in a car-crash interview on Radio 4’s The World at One dismissed the report as not credible, even though she could not identify a single thing of substance wrong with it. Oops.

Then there was a very important new report on the numbers of housing benefit seekers from the European Union** that suggested the Coalition’s claims of hundreds of thousands of benefit seekers from the EU are entirely unfounded.

The main finding of the study was that employment is the key driver for intra-EU migration flows and had little or nothing to do with seeking out benefits. Income differentials alongside employment opportunities were found to be the main drivers of intra-EU mobility: “The possibility of earning more money is currently the main reason EU unemployed citizens consider when moving to certain countries.” The study found little evidence to suggest that the main motivation of EU citizens to migrate and reside in a different member state is benefit-related as opposed to work or family-related. This was also borne out by evidence gathered for the UK case study prepared for the report. Work was the main reason for migrants coming from other EU countries to move to the UK between 2002 and 2011.

The study found that non-active EU migrants represent a very small share of the total population in each member state. They account for between 0.7 per cent and 1 per cent of the overall EU population. On average EU migrants are more likely to be in employment than nationals living in the same country. This gap can be partly explained by differences in the age composition between EU migrants and nationals, with more migrants than nationals falling in the 15 to 64 age bracket.

The authors also found that the expenditures associated with healthcare provided to non-active EU migrants are very small relative to the size of total health spending in, or the size of the economy of, the host countries. Estimated median values of the costs are 0.2 per cent of the total health spending and 0.01 per cent of GDP. Of course these include pensioners, the children and spouses of EU-migrants. The Home Office response followed the regular pattern of denial and obfuscation – “We consider that these questions place too much emphasis on quantitative evidence.”

So prejudice rules OK? It’s hard for me to take seriously anything the Coalition has to say about the labour market.

*Rebecca Tunstall, “Testing DWP’s assessment of the impact of the social rented sector size criterion on housing benefit costs and other factors”, Centre for Housing Policy, University of York, October 2013

** Analysis of member states’ social security systems of the entitlements of non-active intra-EU migrants report, submitted by ICF GHK in association with Milieu Ltd, October 2013