April 5, 2011 • 4:11 pm

“Unemployment is higher, 200,000 higher by the end of the forecast period. That costs £12.6 billion just in paying benefits to people to do nothing.” Angela Eagle, Newsnight, 23 March 2011

 

Yesterday Full Fact took a look at some of the estimates that have cropped up since last month’s Budget for the number of extra people expected to be made unemployed due to a worsening economic outlook.

Whilst we found that the Mirror had been somewhat selective in its analysis by claiming that one million more would be joining the dole queues up and down the country, we couldn’t track down the numbers behind Labour’s claim that 200,000 more would be jobless and that this would cost the taxpayer £12.6 billion.

The claim was made by the Shadow Chief Secretary to the Treasury Angela Eagle on a Budget-night edition of Newsnight, and was reportedly repeated by her boss in the Shadow Treasury team Ed Balls.

However today we are able to offer some insight into the claim after an adviser to Mr Balls provided us with the figures being referenced.

Comparing the economic forecasts made by the Office for Budget Responsibility in November 2010 and March 2011, we can see that unemployment has been revised upwards in every quarter from Q3 2011 onwards. Whilst in most quarters the revision has added 100,000 to the jobless total, in Q1 and Q4 2013 the increase does peak at 200,000.

Whereas it can therefore be said that unemployment may have been revised upwards by “up to” 200,000 – as Ed Miliband did when he touched on the matter in the Commons last week – it is stretching credulity to claim, as Ms Eagle does, that unemployment is “200,000 higher by the end of the forecast period.” In fact, in the last quarter which is forecast – Q1 2016 – the estimate is 100,000 higher in the March estimates than it was in November.

Similarly Labour have provided us with their calculations when it comes to the cost of the rise in unemployment estimates. They highlight the fact that the forecast social security expenditure has risen by £12.6 billion between November and March, as the table below demonstrates.

However when you probe these figures a little further it becomes apparent that this increase cannot be entirely attributed to the rise in unemployment predicted. A look at the supplementary tables attached to the OBR’s forecasts (table 4.18) shows that in fact, only £1.9 billion of the £12.6 billion upward revision was due to more people claiming out-of-work benefits. Far more important was changes to the inflation estimates, and their consequent impact upon pensions policy.

According to the Press Association, this was not a distinction made by the Shadow Chancellor: “Labour pointed to OBR figures suggesting unemployment would be up to 200,000 higher every year than previously predicted, which shadow chancellor Ed Balls said could cost an additional £12.6 billion in benefits over the next four years.” As we don’t have the verbatim quote in question, we don’t know whether the mistake was on the part of the PA reporter or Mr Balls himself.

However the causal link drawn by Angela Eagle between the rise in unemployment estimates and the extra £12.6 billion in benefits payments on Newsnight is unambiguous, and is not one supported by the figures.

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