Nick Clegg has announced that what the economy needs is for the VAT cut to be reversed NOW, and the £billion or so be spent on providing paid internships to 16-24 year olds.  In the email, he claims that “Under our plans more than 800,000 young people will be given a leg-up into industry via paid internships.” They have announced it on Lib Dem Voice, too.

I am not a fan.  Here’s why:

– I like the VAT cut.  I’ve blogged on this at Freethink before.  The VAT cut might be working spectacularly well, as the CEBR research suggests.  What is amazing is that we have not really had a retail recession. July’s retail sales are 3.3% above last July’s.   Now, you may be a manufacturing-snob who thinks retail activity does not matter, but since this is a crisis-of-demand recession, the non-collapse of retail sales has probably prevented tens of thousands of real job losses.

– I also like the way the VAT cut is an unselfish act, politically.  It doesn’t come with a big “look what the government’s done for you” tag on it – as the people who sneered at it at the time said, who will notice?  Well, £12bn lower prices, hundreds of pounds through the income effect (hat-tip, Dillow) – it DOES make a difference, it just produces zero political credit.  A selfless act, costing the government billions and the ability to do something far more noticeable, spectacular and PR-easy . . .

– . . . . like promising to ‘save’ tens of thousands of youths through your own whizzy idea.  Face it – if this were possible, Brown would have announced it, and re-announced it, thousands of times over the last few years.   NEETS have been a problem for longer than this recession.  If in a booming economy it was not possible or desirable to bribe people to take on employees of some sort that they would not have wanted without the bribe, then why should it be possible now? Normally, only the likes of Brown think they can plan things so cleverly from the centre . . .

–  which is what bothers me the most about it.  It smacks of central-planning-fabian thinking – jumping into the youth employment market with a big central scheme that promises everything from skills for kids to green-infrastructure.

Do you think that having this on the CV will really look good for the kids somehow taken on?  With the past history of YTS kids and all its successors, I suspect not.  Alison Wolf, who is great, thinks such schemes  have not worked.  Nick has highlighted a problem – good – but let’s not go thinking that a few central government schemes will solve it so cheaply.

I rate Nick highly, so this is all kindly meant.  There are no easy answers here. VAT cuts have done the trick -let’s keep them during this fragile recovery.


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