Responses to the worst recession since World War II and how to cut unemployment sit at the core of this General Election debate and dominate the party manifestos. Each of the three main UK political parties reckons it has the best plan to support the economic recovery, aid job creation and tackle the record fiscal deficit.

Cutting the debt
Labour and the Liberal Democrats have decided against action to cut the fiscal deficit in 2010-11 while the economy remains weak. The Conservatives by contrast would push ahead immediately with £6bn of public spending cuts, having identified scope for £12bn of public sector efficiency savings, including restrictions on public sector recruitment. Tightening the public purse strings looks risky at such an early phase in the economic cycle and could well result in higher unemployment later this year. But the Conservatives are pledged to reduce by half the hike in employers’ National Insurance Contributions which a re-elected Labour government would introduce in April 2011 - a welcome move by the Conservatives that would support hiring as the economy recovers.

However, it is clear that for all the parties the truly critical decisions on how to cut the fiscal deficit are being deferred to post-election reviews. Assuming that deficit reduction will be mainly brought about by spending cuts rather than higher taxes the likelihood, therefore, is that the squeeze on spending will be considerably greater than any of the parties is prepared to admit to this side of 6 May. In the absence of further detail a 10% reduction in the 5.8m core public sector workforce seems a reasonable expectation - the likelihood of 500,000 jobs being shed in the next five years dwarfing figures any of the parties have been prepared to acknowledge in their manifestos.

Private sector promises
As for private sector employment, Labour claims that its economic recovery plan, activist industrial policy and skills policies will combine to create at least 1m skilled jobs by 2015, mostly in new growth sectors (low-carbon, digital and creative industries) and business and professional services. The Conservatives meanwhile talk of Britain becoming a ’European hub’ for high-tech, digital and creative industries, with a super-fast broadband network helping to generate 600,000 new jobs. And the Liberal Democrats have a long-term strategy for growth and employment designed to promote a green economy, kick-started with a one-year economic stimulus package said to create 100,000 jobs.

This all sounds positive, although the suggestion that a particular policy will result in a given number of jobs should be considered purely speculative. What will ultimately matter is the overall effectiveness of macroeconomic policy and measures designed to boost enterprise, skills and employability.

All three main parties also aim to direct as much recruitment as possible toward UK-born people and pledge some method or other for controlling the number of economic migrants from outside the EU allowed to work here. The Liberal Democrats would add a regional dimension to the Labour government’s existing points-based migration system - enabling migrants to work only in localities with identifiable labour shortages - while the Conservatives would each year determine a precise cap on migrant numbers with access limited ’only to those who will bring the most value to the UK economy’.

Implicit in all such approaches, however, is an assumption that migration controls will be accompanied by wider policy measures to improve the supply of home-grown talent. Without such measures it is likely that any truly tough curbs on immigration that amount to more than a gesture to voters will result in recruitment difficulties and higher pay inflation as employers struggle to fill vacancies. This would not be good news for business or a recipe for wider economic prosperity.

Key facts

• Conservative highlight Aim to generate 600,000 new jobs by making Britain the European hub for high-tech digital and creative industries
• Labour highlight Claims that its economic recovery plan, and industrial and skills policies will create at least 1m skilled jobs by 2015
• Liberal Democrat highlight Long-term green economy strategy kick-started with a one-year economic stimulus package aimed at creating 100,000 new jobs