Sunday, 4 January 2009

To create or not to create, that is the question

So, poor Gordon is going to create 100,000 new jobs, or so says the BBC. What caught my eye was the way the headline to the BBC's article is written, it says poor Gordon is `to create 100,000 new jobs', so I then looked through the article to find where that quote came from. Gordon is actually quoted as saying "I want to show how we are able ... to create probably 100,000 additional jobs over the next period of time ..." So, he did not say he will create any new jobs, he did not commit himself to the figure of 100,000 and everything he did say is hedged by the meaningless evasion "over the next period of time". Well done BBC, an utterly hopeless piece of hack journalism.

Leaving aside the incompetence of the editor who allowed the article to appear in that form, I want to look at what poor Gordon actually said. If I understand it correctly, his plan is to pump money into public works projects to provide continued employment for builders who might otherwise lose their jobs. In other words, he is not creating vast numbers of new jobs he is merely preserving jobs which currently exist. No doubt some additional people will be taken on but the clear thrust of the plan is to retain jobs not create new ones. In his usual confused and misleading way poor Gordon uses the term "additional jobs" without saying what they are additional to, the only explanation that makes any sense is that they are additional in that those employed to refurbish schools and hospitals would otherwise be on the dole yet that is hardly the meaning he hoped to convey.

The other aspect to the plan is to "invest" in various eco-wibble projects, such as research into electric cars and wind and wave power. It's hard to see any significant number of jobs being created in these fields because research is not very labour intensive. How, I wonder, will this "investment" take place?

Car manufacturers are already putting a lot of time and money into researching electric cars and they do so as people who know a bit about making cars. What can the government do to expand or speed that research? Very little, I would think. They do not have the wherewithal to set up their own research facilities so their involvement can only be by way of funding research which is currently paid for by the existing manufacturers. If I were in charge of Jaguar's current account I would be delighted to hear that government wants to pay my company to do what it is currently doing at its own expense. I would be faced with an overwhelming temptation to announce that research has to be pared-back due to the recession in the expectation that the UK taxpayer will then hand over vast slabs of cash to allow it to continue. How many jobs will be created by this sort of exercise? Probably very few, if any at all.

If it really is to be an investment rather than yet another example of pouring money down the drain, the government will look for a return, perhaps by way of interest or by having a defined right to share in the proceeds of future exploitation of the new technology. The task for the motor manufacturers will be to assess the cost of getting the government involved. If government wants to big a return, the companies only have to make clear they are not willing to play and the whole scheme collapses - unless the government then capitulates and gets such a feeble return that the money is, in effect, a gift. Poor Gordon's problem is that he has absolutely no bargaining strength. Couple that with his solid track record for throwing good money after bad and we get a pretty good idea of what will come of this "investment".

Then he wants to play with windmills and waves. Again, a great deal of research is already taking place into wind and wave power, most of it paid for by the taxpayer. What exactly does he have in mind? More people employed to do the same work as now? That's the thing about research, it can only move as fast as it can move. Ideas must be tested on paper, then on models then in real life and at every stage the results must be analysed and adjustments made to try to improve the outcome. You can't just say "here's an extra £1million, now you can produce an efficient windmill" because it is not a lack of money that causes current wind and wave power technology to be expensive and only modestly efficient. What is needed is time and an awful lot of trial-and-error. Of course extra money can allow additional experiments which might speed the path to a final product, but the difference it can make is only marginal.

Perhaps the most interesting thing about the plan is the money involved. It is said to be a bringing-forward of £10billion of expenditure. In other words, it's in the government's budget for future years but will be spent now rather than in 2010, 2011 or whenever. It seems to follow that the budget will be reduced in those future years. If this is so, spending it to preserve jobs in 2009 will simply result in jobs being shed later. That's a curious definition of "additional jobs".

£10billion looks like an awful lot of cash, probably because it is an awful lot of cash. But how much does it really buy? Say a school is to be refurbished to current Building Regulation standards. Perhaps it will need new windows and doors, new insulation, rewiring, new plumbing and all the rest of it, including upgrades to old language and science labs. Just the materials will cost a lot of money. New windows and doors for a single large classroom might easily cost £5,000, the materials for an average sized secondary school could top £1million in the blink of an eye. New roads cost millions per mile just in materials and plant hire, resurfacing is cheaper but still very expensive. Are the preserved jobs of the suppliers of materials to be included in the count? If so, how is anyone ever going to be able to tell whether those jobs would have remained safe even without this new business. No doubt the government will claim credit for keeping all sorts of people employed when their jobs were never under threat.

If £10billion is to sustain 100,000 jobs that is just £100,000 per job, yet that figure includes not just wages but materials too. It really is hard to see how 100,000 jobs can be either created or preserved for any significant period when the budget only allows £100,000 for the combination of each job and the materials that job requires. In any event, once a renovation is finished or a road resurfaced the jobs involved in that project necessarily cease. So what is "the next period of time"? Of course it is anything you want it to be. Logically it should relate to the bringing-forward of the money. So, if 2011's budget is spent in 2009-10, the relevant period is two years; if 2011's budget is to be spent in 2009, it is one year. But it won't be looked at in that way because then he would have to admit that he is planning lay-offs in 2011. And what if Joe the plumber is retained through the whole of 2009 and 2010, does that count as two jobs, one for each year? Will he have to be formally laid-off between projects so that he can be counted twice? In the world of statistical jiggery-pokery all sorts of tricks can be played to make it look as though the impact on employment is greater than it really is.

It's such a lovely catchy headline. Good old Gordon, not only saving the world but now creating enough jobs to keep the adult population of Reading employed for a year. His own explanation shows that he is planning nothing of the sort. He is hoping to cushion the effect of recession by keeping people employed now in the hope that by the time these works have been completed the economy will have picked up and their jobs will be safe again. I have no huge objection to that (although cushioning recession inevitably involves a cost for future years), but I do wish both the government and the BBC would tell the truth. This is nothing to do with creating jobs and it is nothing to do with additional jobs (in any syntactically accurate sense of that term). For poor Gordon I suspect it is really about trying to hide the true damage his decade in the Treasury has done.


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Elby the Beserk said...

Well, he did promise to create 500,0 new jobs in 2007. And don't forget, at the same time, he is building 3,000,000 new homes.

All this at the save time as saving the world. What a guy!