Unemployment Costs (Hansard, 29 January 1981)

§ 14. Mr. Ashton
asked the Chancellor of the Exchequer what is his estimate of the cost to public funds if unemployment were to rise to 2½ million.

§ Mr. Brittan
The cost to public funds associated with increases in the level of unemployment depends on the factors causing the increase, on the characteristics of the unemployed and on subsequent developments in the economy. I regret, therefore, that I cannot provide an estimate which would cover every eventuality.

§ Mr. Ashton
Is the Minister saying that he cannot do his sums and that he does not know the cost of unemployment? Is it not the Government's policy to cut public spending? How can they cut public spending if they are paying out about £12,000 million a year in unemployment benefit?

§ Mr. Brittan
The hon. Gentleman should listen to the answer before reading his prepared supplementary question. The cost of unemployment in the sense of the hon. Gentleman's question varies according to different factors. If the hon. Gentleman will specify particular circumstances and particular sections of the economy that are affected, I shall attempt to give an answer. There is no general answer.

§ Mr. Straw
Why is the Chief Secretary being so coy about this? Is he saying that within the Treasury there is no model of the labour market and no estimate of the total cost to the Treasury and this country of unemployment? If he is saying that, why, in a celebrated speech at Warwick last July, did the Minister of Agriculture, Fisheries and Food estimate that the cost of 1½ million unemployed was £7 billion a year. Is he aware that on that basis the cost today of 2½ million unemployed, at last year's prices would be £11½ billion? Was the Minister of Agriculture telling lies when he developed that estimate, or did it come from within the Treasury and from Cabinet papers?

§ Mr. Brittan
What I said in answer to the question was quite simply that the cost varies according to the particular characteristics of the unemployed. Nobody is denying the fact, as I made clear in answer to a much earlier question this afternoon, that the cost to the Exchequer per unemployed person is very substantial. I indicated that the average figure was closer to £3,500 than to the £6,000 that had been mentioned. The total figure depends upon distribution and a whole variety of factors. But that in itself does not lead one to any conclusions as to the policy implications, as I also made clear earlier.