Mel Stride says he will ‘do what it takes’ when the Fund calls for radical measures to combat unemployment
The International Monetary Fund has urged Britain and other wealthy nations to reduce benefits and taxes in order to combat the crisis of unemployment.
Mel Stride pledged to “do what it takes to get Britain back to work” while the IMF stated that men would be more likely to seek employment if countries reduced taxes and benefits. The organisation stated that more training and childcare assistance would encourage women to work.
The IMF study, based on an analysis of 38 industrialised economies in the OECD, including the UK and Germany, suggested that a higher retirement age would keep people working longer.
These comments will likely fuel the debate between Conservative MPs about the reforms of benefits needed to increase work.
Mr Stride, Work and Pensions secretary, said that “the most radical welfare changes in a decade will help to end the scourge” of unemployment holding the country back.
He said: “While the inactivity rate of the United States is lower than that of many other economic heavyweights such as France, the USA and Italy, the tax cuts and welfare changes will increase the workforce by 300,000. This will help grow the economy and change lives.”
There are fears that Britain’s economy is being held back because 9.25 million adults in working age are not in the workforce or looking for work.
Of those, 2.7 millions are long-term ill . 2.6 million students, 1.6million are caring for their family or home, and 1.1million have taken an early retirement.
Other developed nations are in a similar position. The IMF warned of a global economic slump if radical measures to increase productivity were not taken.
In its World Economic Outlook, the IMF stated that “reduced unemployment benefits as well as lower labour taxes are associated to higher participation among men in prime working age.”
“For women, a growth in secondary enrollment has a positive relationship with future participation rates.” Similar, childcare and labour market programs are supportive.
Sir Iain Duncan Smith, former Tory leader, urged Rishi Sunak, Prime Minister of India to concentrate on the bill for sickness benefits.
He said: “We have to tell these people that they need to get to work. We will support and help you if you are suffering from any particular condition.
Sir Iain stated that the cost of supporting those who have been signed off with depression or anxiety is increasing.
He said, “These conditions are treatable and part of the treatment includes telling people to get back to work and supporting them in their work.”
Last month, Mr Stride announced plans to have 150,000 people with mild mental illness who were signed off from work look for jobs. He warned that “the normal ups and downs in human life” could be viewed as a medical diagnosis.
Sir Iain also said that it was important to “reduce the overall burden of taxes” by cutting income tax. He said: “That is where people see it on their pay slips and find that it makes sense to work longer hours.”
The IMF has said that global GDP growth will slow down to just 2.8pc annually at the end the decade. This is about a quarter lower than the average before the pandemic. The UK is expected to have a growth rate that will not exceed 2pc over any significant period.
The consequences could be severe for governments already under pressure from mounting debts, and the need to increase spending on healthcare and pensions.
To boost growth and prosperity, it is important to get more people working and ensure they are placed in the most productive companies and industries.
IMF says that more migration will help to boost the economy and counteract the effects of an ageing population.
IMF stated: “Policies to facilitate the flow of migrants and their integration, along with measures to boost the labour force participation of older workers in advanced countries – through retirement programs and labour market program – could reduce the increasing demographic pressures to labour supply.”
Diaa Noureldin is an economist with the IMF. She said that migration could be a good boost for growth as long as it’s done properly.
We want them to be fully integrated into the society, get high-paying jobs, have their skills recognised and participate in the labor market.
IMF: While the US has increased productivity, other countries are struggling to keep up and need new policies in order to grow faster.
The IMF stated that cutting subsidies and reducing red tape could help. Increasing international trade may also make companies more competitive.
In a separate document, the institution warned government against industrial strategies that include costly, wasteful subventions or risk starting trade battles by blocking foreign firms from their market.
IMF stated: “Industrial policies that direct innovation towards specific sectors, such as ‘green (low-carbon technologies) and AI are experiencing a revival in many major countries amid concerns over economic and national security. This is often at a heavy fiscal cost.
History shows industrial policy to be prone to mistakes. Even when projects transform an industry, they are often associated with high fiscal costs and negative spillovers across borders.
IMF: International disputes can be costly.
The report stated that “Policies discriminating foreign firms can be particularly self-defeating as a significant share of knowledge in advanced economies is imported, and can lead to costly retaliation.”
Both the EU and US have recently complained about the size of Chinese subsidies to manufacturers of solar panels, and electric cars. Washington and Brussels claim that these subsidies are flooding the market with cheap products.
Beijing has retaliated against what it calls discriminatory measures against Chinese companies.