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Coronavirus: Three former chancellors warn of 1980s-level unemployment

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Former chancellor Alistair Darling. (Dan Kitwood/Getty Images)

Three former British chancellors have warned that the UK could face levels of unemployment not seen since the 1980s.

Lord Alistair Darling, George Osborne, and Philip Hammond all raised the alarm about a sharp rise in unemployment in the wake of the COVID-19 pandemic during a joint appearance in front of the Treasury Select Committee on Wednesday.

“We need to get ourselves into the frame of mind where we’re thinking about 1980s levels of unemployment,” Lord Darling, who was chancellor between 2007 and 2010, told the committee.

Unemployment surged to a high of almost 12% in the 1980s, with over three million people out of work.

The unemployment rate stood at 3.9% going into the COVID-19 pandemic but jobless claims have already surged to over two million. Companies in travel and hospitality have already announced plans to lay off tens of thousands of workers as demand collapses.

Darling said the jobless rate was likely to rise further as the government’s job retention scheme was wound up over the coming months.

“The government will need to introduce measures, firstly, to deal with a wave of unemployment that I think will come once the furlough scheme starts being phased out,” Darling said.

Former chancellor George Osborne, who is now editor of the London Evening Standard. (Dave Benett/Getty Images)

Osborne, who succeeded Darling and ran the Treasury until 2016, said chancellor Rishi Sunak should think carefully about the end of the scheme.

“Trapping people on a scheme that is generous to them in the short term but actually prevents them re-entering the labour force to get the new job they need is potentially very damaging,” he said.

“We have to be honest and say quite a lot of those businesses will not come back.”

Osborne said he feared a return of levels of structural unemployment not seen since the 1980s. Many of the people who lost their jobs in the decade struggled to re-enter the workforce, with unemployment remaining above 8% for most of the decade.

“Getting people back into the labour market, making sure they’re not out for a long time… is critical,” Osborne said.

He warned there “may be a large number of human casualties out there” as a result of the pandemic and said unemployment was likely to be a “big social challenge” in the coming years.

All three former chancellors said the government should launch large scale re-training programmes for the thousands of people likely to lose their jobs.

Britain's former chancellor Philip Hammond. (Kirsty Wigglesworth/AP Photo)

“What we all would want to focus on is maximising employment,” Hammond, who was chancellor from 2016 to 2019, said. “Where people lose jobs, we need to get them as quickly as possible into new jobs.”

Lord Darling highlighted the aviation and hospitality industries were two obvious examples where re-training would be needed. The sectors are likely facing a severe downturn that could last years, meaning those who lose their jobs will struggle to find new roles unless they change industry.

The Bank of England’s chief economist Andy Haldane last month said he feared a return of structural unemployment at levels not seen since the 1980s.