Unemployment Costs (Hansard, 17 April 1986)

§ 2. Mr. Hardy
asked the Chancellor of the Exchequer what is his estimate of the cost of unemployment in 1986–87; and what proportion of the yield of income taxation this represents.

§ The Financial Secretary to the Treasury (Mr. John Moore)
The overall cost to the Exchequer of unemployment and supplementary benefit paid to the unemployed is estimated to be about £5.6 billion in 1986–87. In addition, about £1.5 billion is paid in housing benefit—a benefit which can continue to be paid if the recipient finds employment. This in total is 17½ per cent. of forecast income tax revenue for 1986–87.

§ Mr. Hardy
Does not that answer, which touches on part of the cost of unemployment, illustrate the sheer scale of the failure of the Government's economic policies? For how much longer does the Minister think the country can tolerate that?

§ Mr. Moore
The answer certainly illustrates the problems and costs of unemployment. However, as the hon. Gentleman will notice from the employment and unemployment data published yesterday, alongside the tragic levels of unemployment there has been a rise in employment of 1 million new jobs since June 1983.

§ Mr. Maples
Does my right hon. Friend agree that if we added to the benefits paid to the unemployed the tax revenue lost as a result of their not being in work the total cost would be considerably greater? For a married man on average earnings, it could be as high as £8,000 a year. Does that not provide an excellent justification for the various job subsidy schemes introduced by the Government? Will my right hon. Friend consider extending the principle of job subsidies more generally?

§ Mr. Moore
My hon. Friend knows the difficulty of trying to extrapolate the potential additional tax and other revenues from people whom we obviously want to see in full employment. I am sure that he welcomes the additions to the programmes to help the long-term unemployed, which were added to in the Budget.

Mr. J. Enoch Powell
Is it not real that the true economic cost of unemployment could well be less, not more, than the total of transfer payments made to unemployed persons?

§ Mr. Moore
Clearly, that is correct.

§ Mr. John Townend
Does my right hon. Friend agree that the unemployment figures are grossly overstated, especially in the south of England, due to the expanding black economy? How much would the Exchequer save if 500,000 people were forced out of the black economy into the legitimate economy?

§ Mr. Moore
Without notice I cannot give my hon. Friend the specific cost, but anything that we can do to lower taxes and further deregulate the economy to reduce the attraction for people to go into what we would all deplore—the black economy—will be of benefit to all.

§ Dr. McDonald
In view of the sharp rise of 37,000 in the underlying jobless trend last month, will the Government now consider using the money spent on unemployment benefit and the tax revenue forgone through unemployment on job creation instead of on maintaining the ever-growing army of unemployed?

§ Mr. Moore
The hon. Lady would want the House to be reminded of the happy increase in the long-term employed as well as the tragic increase in those who are unemployed. I am sure that she will never begin to grasp the fact that real long-term jobs come not from state expenditure but from the underlying success of enterprise in the economy.