Britain's top civil servant has urged the Treasury to prepare contingency economic stimulus plans, including fresh capital spending on infrastructure, in case economic growth falters in the new year. The paper drawn up by Sir Gus O'Donnell, head of the home civil service, was prepared in the last few weeks and is circulating inside Downing Street.
It came as it was confirmed that the business secretary, Vince Cable, is concerned by the direction of Treasury policy, describing officials as "thirties fiscal fundamentalists". The Liberal Democrat's remarks suggest there may be an economic policy dispute developing inside the coalition.
The existence of O'Donnell's paper is embarrassing to a government that has repeatedly said the economy is "out of the danger zone" and on course to pull out of recession. A No 10 spokesman insisted no paper had been commissioned by ministers, suggesting the Treasury and the prime minister want to distance themselves from any hint that the coalition's public spending cuts might push the economy back towards recession.
Labour last night revealed details of a government document suggesting Britain will experience a doubling in youth unemployment among those out of work for almost a year as the public spending cuts bite next April. The expected spike is highlighted in a prospectus, issued by the Department for Work and Pensions (DWP), for companies and voluntary groups bidding to take part in the Work Programme to find jobs for the long-term unemployed.
An annex to the prospectus estimates that between 140,000 and 200,000 young people aged from 18 to 24 will be registered as having been unemployed for at least nine months or more between 2011-12. This is at least a doubling of the number of young long-term unemployed.
Latest figures from the Office for National Statistics showed that in October there were 77,700 people aged 18-24 who had been unemployed for at least six months . It is not possible to make an exact comparisons between the two sets of statistics because the ONS measures long-term unemployment from six months, in contrast to the nine months recorded in the DWP's Work Programme. The forecast by the DWP suggests that the government is bracing itself for young people to suffer disproportionately from public sector job cuts and from the slow level of overall economic growth forecast by the Office for Budget Responsibility.
Douglas Alexander, the shadow work and pensions secretary, said last night: "The government needs to come clean and say why they are warning the employment industry that the number of young people unemployed for almost a year will double next year. It's worrying figures like these that show why the country's top civil servant thinks George Osborne needs a Plan B on the economy."It also looks at different scenarios such as weaker than expected growth in turn weakened the economy's productive potential.
The Guardian
