Every unemployed person costs taxpayers pounds 10,000 a year in benefit

Every unemployed person costs taxpayers pounds 10,000 a year in benefit payments and lost tax revenues, according to a study published today by three Cambridge economists. Calculations based on a detailed assessment of the likely changes in taxes and benefits following the creation of 1 million public-sector jobs suggest that they would offset more than half the cost to the Exchequer.

The research, by Michael Kitson, Jonathan Michie and Holly Sutherland, will provide useful ammunition to those who would like to see a Labour government take an active approach to cutting unemployment. But direct job creation by government differs in spirit from proposals by the shadow Chancellor, Gordon Brown, to reduce tax on the low paid in order to improve incentives to work.