The full scale of Britain’s jobs crisis is being underestimated because hundreds of thousands of people are being missed by official unemployment figures, Gordon Brown has warned.
At least 300,000 out-of-work people across the UK are being missed by official figures, according to a study backed by the former prime minister. He warned that it meant Rishi Sunak, the chancellor, was at risk of drawing up a financial rescue package that failed to address the impact of the pandemic’s economic fallout.
Analysis by the Alliance for Full Employment calls for an urgent review of official measures of employment and unemployment. It comes as new jobless figures are published this week.
The unemployment rate stands at 4.9%, or 1.7 million people. However, analysts said that other data sources, such as tax records, the benefit claimant count and business surveys, suggested unemployment was already more than 2 million and likely to rise to 3.5 million later this year.
Brown warned that the discrepancy between the official figure and the numbers out of a job was potentially a “massive error” and called on Boris Johnson to demand a review of the data before the March budget.
“It has devastating real-world consequences,” he said. “By underestimating the true scale of unemployment, the government has underplayed the steps needed to help people back into work.
“The true picture revealed in our report shows beyond any shadow of doubt the government has to totally rethink the timid and inadequate steps it has taken so far to support full employment in Britain.
“It is spending too little this year on employment programmes like Restart and Kickstart for the young and on encouraging firms to take on apprentices and deliver traineeships. This new evidence means government must launch a far more ambitious and extensive job-creation programme to avert an unemployment tsunami.”
The official figure for unemployment is based on the Labour Force Survey conducted by the Office for National Statistics. The AFFE says the pandemic “has presented severe challenges to [the ONS] conceptual definition and method. This means that, by themselves, they do not currently provide a reliable guide for economic assessment of developments in the labour market and policy”.
It points to PAYE tax records that count the number of paid employees and finds that the number of paid jobs is now 785,000 lower than the official employment figure. It claims that tax details show that just under 300,000 jobs in hospitality, 160,000 in wholesale and retail, and 89,000 in arts, entertainment and recreation are not accounted for in official figures. It says not all of the falls can be accounted for by foreign nationals losing work and leaving the country.
Rises in the benefits claimant count was likely to have added 643,000 jobless since last February, implying total unemployment of 6%. It also cited the Workforce Jobs (WFJ) business survey, suggesting it, too, implied an unemployment rate of 6%. The report calls for the extension of the furlough scheme beyond March, a reversal of the plan to cut universal credit and a widening of the Kickstart programme designed to help young people find work.
The government said that more than 120,000 jobs for 16- to 24-year-olds had been created through its Kickstart scheme, which has been under way since September.
Officials at the ONS said that the Labour Force Survey remained a reliable measure of unemployment. They said that under the definition of unemployment used, only those who were out of work but available for work in the next two weeks were deemed as unemployed. A third group who are out of work but not available for work are described as “inactive”. This group includes retired people, students and those looking after children.
The ONS said: “The pandemic has brought unprecedented challenges of measurement, but the ONS remains confident that the key headline rates we report in our labour market statistics release provide reliable and timely insight on what is happening in the economy.
“In collaboration with HM Revenue and Customs, we have improved the timeliness and the level of detail of data published from the PAYE Real Time Information system, as the report notes, and are widening what we publish from this source. It is only because the Office for National Statistics publishes a wide range of labour market measures that the analysis in this report is possible and, as the report also notes, we have ourselves drawn attention to some of the differences between these measures.”