UK Inflation Figures Make A Mockery Of The Economic Assumptions Of Old

News emerged last week that during August, UK inflation went up. Again. The consumer price index (CPI) index last month showed that prices were 4.5pc higher than the same month in 2010.












It is noteworthy, also, that UK construction orders plunged 16pc during the second quarter – to their lowest level since 1980. So the outlook for construction is now worse, even, than during the "credit crunch" proper.

Given the growing sense that a tumultuous "euro-quake" end-game may soon be upon us, or at least the still traumatic acknowledgement of an explicit Greek default, the newsflow from Europe last week was almost overwhelming. So there was, perhaps, less comment than there should have been on the fact that UK inflation had just equalled its three-year high.

It used to be reasonable to assume that when the economy slowed, and unemployment rose, then inflation was likely to fall. Well, the UK has just endured its worst recession in more than 60 years. The economy shrank, peak to trough, by more than 6pc. Despite this historic drop, growth has failed to bounce back, remaining as low as 0.2pc during the second quarter.

Yet still, price pressures have been rising. Not so long ago, the publication of data showing that CPI inflation had overshot the Bank of England's 2pc target by more than 1 percentage point would have dominated the news agenda. The Bank's resulting public letter to the Chancellor, triggered by the 3pc breach and designed to explain the divergence, would have been forensically analysed by the commentariat. Such letters are now so common that hardly anyone reads them.

Over the past three years, monthly CPI growth has averaged – yes, averaged – 3.3pc. Those of us who've raised objections, pointing out that this might become a problem, have been dubbed "inflation nutters". It's as if the British economics profession has contracted collective amnesia, immune to the lessons of history, failing to highlight the danger that inflation in the 4pc to 5pc range can very quickly spiral out of control, as high and self-fulfilling inflation expectations become entrenched.

The UK's economic outlook weakened markedly in August. Survey data suggest the risk of the British economy re-entering recession, the dreaded "double-dip", has grown considerably. All three of the main CIPS survey measures fell last month, the main services index dropping at its fastest rate for 10 years.

It is noteworthy, also, that UK construction orders plunged 16pc during the second quarter – to their lowest level since 1980. So the outlook for construction is now worse, even, than during the "credit crunch" proper. This matters not only because the sector accounts for a chunky 7pc of the UK economy and employs millions of people. Construction is also a reliable "bellwether", with trends in the industry often pointing to what the economic future holds.

It looks likely, then, that we'll see virtually no growth in Britain for the rest of this year, even if global financial markets avoid meltdown.

It's also likely, though, that inflation will keep rising from 4.5pc over the coming months, above 5pc and beyond. The old retail prices index (RPI), more realistic than the CPI that replaced it, is already at 5.2pc. Such inflation numbers, amid a ghastly slowdown, make of mockery of the usual economic assumptions.

A big reason still higher UK inflation looks inevitable in the coming months is the price of energy and other commodities. Utility bills are soaring, as are UK food prices – which rose 6.2pc during the year to August. These miserable outcomes have their origins in the fact that global energy prices, to the surprise of many, have remained remarkably firm despite the latest Western slowdown. As such, another economic assumption of old has been upended.

Until recently, a slump in the "advanced countries", most of which are oil importers, was enough to generate a fall – expected, actual or both – in world oil prices, due to the impact of weaker Western energy demand. This was very useful for the developed world because the lower oil prices that resulted when our economies slowed helped to bring about our recovery. Cheaper fuel and heat would cut household and industry costs, boosting disposable incomes, profits and growth itself. Lower oil prices also helped tame inflation, giving our central banks the room to cut rates, so consolidating recovery.

Global oil markets, then, have long provided a crucial "self-correction" mechanism for the Western world. In light of the cardinal importance weaker crude prices have played in bringing about previous Western recoveries, it's worth examining their recent path.

Last month, amid fears relating to Europe's banks and Western sovereign debts, financial markets obviously took a big hit. The S&P 500 index of US stocks gave up all its 2011 gains, ending August 4pc down since the start of the year. Analysts slashed their growth forecasts for the US, the UK and mainland Europe. Yet, incredibly, the price of oil, while it has oscillated, has stayed pretty much where it was. Brent Crude remains up more than 21pc since the start of 2011, averaging no less than $112 (£71)/barrel so far this year.

Why is this happening? Typically, signs that the West is slowing, on cue, bring oil prices down too. But the markets now judge that the fundamentals suggest crude prices should stay roughly where they are, even if the West is struggling, not least because the bulk of oil demand in the world now derives from elsewhere.

The non-Western world today accounts for 55pc of global oil use. The insatiable energy appetite of China, India and the other large emerging economies – most of which are still growing by pc to 8pc – means they now set the tone on world commodity markets. The numbers are truly incredible.

The US Energy Information Agency (EIA )has just released estimates that the world will use 88.2m barrels of oil daily during 2011 – an all-time high, despite sluggish Western growth. As the emerging markets have expanded, engaging in massive infrastructure building, while their huge populations have become richer and adopted more energy-intensive lifestyles, global oil use has risen no less than 15pc over the past 10 years.

The EIA forecasts oil demand of 99m barrels daily by 2015, another 15pc rise from today, but this time in five years. Even in 2009, when the world economy contracted, world oil demand fell just 2pc, then grew 4pc the following year. So the oil market's long-held assumption of "demand destruction" when Europe or America slumps, is now being seriously tested.

The supply-side of the oil market also looks tight. The credit-crunch cut investment in exploration and well-development. The EIA sees a short-term deficit of 1.4m barrels per day in the fourth quarter of this year. Looking forward, oil traders are now showing a lot more interest in rapid depletion and falling yields at Ghawar, Cantarell and the world's other giants fields.

The politics of Opec have also recently been turned upside-down. Just a few years ago, Saudi Arabia made sure the exporters' cartel targeted $25 a barrel, so as to keep the Western world buoyant and oil demand strong. But now the Middle East can sell crude, as fast as it can pump it, to the emerging giants of the East. Meanwhile, the "Arab Spring", and resulting social expenditures to placate restive populations, mean that Saudi, and other oil exporters in the Gulf, need oil above $100 just to balance their budgets.

Like so much in economics these days, our usual assumptions about the oil market, in place for decades and reassuring for the West, are being revised before our eyes. The implications of these revisions we'll ultimately find impossible to ignore, even if so many continue to dismiss the inflationary dangers we face.

PMQs: Ed Miliband Lashes Chancellor Over Childcare

During Prime Minister's questions the Labour leader slipped a cheeky reference to George Osborne's alleged links to dominatrix Natalie Rowe.



Ed Miliband used his time at the Dispatch box to criticise the Government's plans to cut support for childcare at a time of rising unemployment for women. He then accused Chancellor George Osborne of "lashing himself to the mast" in his refusal to change course over the economy.

The apparently deliberate reference produced laughter from the Labour benches.

Lest anyone be in any doubt what the meant, Mr Miliband added after a pause: "not for the first time, perhaps".

On Monday, old – and strongly denied – allegations resurfaced about George Osborne's links to an escort agency charging clients for sadomasochistic sex.

David Cameron Under Pressure To Soften Hardline Deficit Strategy

Institute of Directors, the Prince's Trust and the TUC join the opposition in demanding action to boost the flagging economy.












David Cameron has been urged to take urgent action to boost the economy.

David Cameron is under growing pressure to soften his hardline deficit reduction strategy after a wave of redundancies in central and local government sent unemployment surging beyond 2.5m.

With the City predicting joblessness would hit 2.75m next year, the Institute of Directors, the Prince's Trust and the TUC joined the opposition in demanding urgent action to boost the flagging economy.

Cameron admitted the official figures – which included the highest female unemployment in 23 years and almost a million young people shut out of the labour market – were "disappointing".

But he insisted that the coalition would not do a U-turn as it attempted to repair Britain's public finances over the course of the current parliament. He said: "All governments are having to take difficult decisions about cutting public spending. Anyone standing here would have to make those decisions. This government is reducing the welfare bill and reforming public sector pensions. If we weren't taking those steps you would have to make deeper cuts in the rest of the public sector."

Ed Miliband, the Labour leader, said the government's plan for an expanding private sector to replace jobs lost as a result of the austerity programme was not working after the Office for National Statistics reported on Tuesday that 111,000 jobs were lost in the public sector in the three months to June 2011, against 41,000 created in the rest of the economy.

"The message to all those people who have lost their jobs is the prime minister is not going to change course," he said. "For every two jobs being cut in the public sector, less than one is being created in the private sector. Isn't that the clearest sign yet that your policy just isn't working?"

Ministers had been preparing for poor unemployment figures after evidence emerged in recent months to show the economy's recovery from the deep recession of 2008-09 had almost stalled.

The ONS said joblessness was rising on both measures used by the government, the internationally agreed Labour Force Survey (LFS) and the more narrowly based claimant count.

Using the LFS yardstick, unemployment stood at 7.9% in the three months to July, while a 20,300 jump to 1.58m in August left the claimant count jobless rate at 4.9%. Unemployment among the under-25s rose by 77,000 in the three months to July, taking the total of unemployed 16-24 year olds to 972,000.

A spokeswoman from The Prince's Trust youth charity said: "It is deeply concerning that youth unemployment has risen sharply, with young people hit hardest and those out of work for more than a year increasing by nearly a fifth. To tackle this downward spiral of youth unemployment, government, businesses and charities need to work together on schemes that work. More than three in four young people supported by The Prince's Trust last year moved into work, education or training."

Scotland was the one region of the UK to see a fall in unemployment between May and July. Alex Salmond, the first minister, said the decline was due to extra spending on infrastructure projects and support for small and medium sized companies.

Analysts said the weakness of the labour market was highlighted by a fall in vacancies, a 40% jump in redundancies and a record number of people working part-time but in search of full-time jobs.

Scott Corfe, senior economist at the Centre for Economic and Business Research, said: "The UK government will now be under immense pressure to deal with unemployment, especially given President Obama's announcement of a $450bn (£280bn) job creation package in the US last week. The focus of a UK jobs creation package would almost certainly be on private sector deregulation and measures aimed at reducing the risk associated with hiring new workers – rather than a slowdown in the pace of deficit reduction – given the political costs of moving away from plan A."

Graeme Leach, chief economist at the IoD, said it was time for the Bank of England to announce a second round of quantitative easing (QE), with the Bank of England buying bonds in order to create money. He said: "The storm clouds are gathering, with falling employment and rising unemployment at a time when it is difficult to see how this might reverse. Today's figures reinforce our belief that we need to launch QE2 as soon as possible."

The TUC general secretary, Brendan Barber, said: "These are terrible figures. They are further evidence that the recovery has been choked off by a self-defeating rush to austerity. Government policies are hurting, but they aren't working."

Nigel Meager, Director of the Institute for Employment Studies, said: ""It's hard to avoid the conclusion that policy-makers now need to stop sitting on their hands and start looking for ways to get spending power into the economy quickly."

Jobless Households In Liverpool, Nottingham And Glasgow: One In Three

Figures show Liverpool with the highest number of workless households in five of the last seven years.












Inside a Jobcentre. Around a third of unemployed people are sick or disabled.

Almost a third of households in Liverpool, Nottingham and Glasgow were classed as workless in 2010, against one in nine in other regions, the Office for National Statistics has said. For Liverpool and Glasgow the figure fell from 32.1% and 31.1% to 31.9% and 30.7%, while for Nottingham it rose from 31.3% to 31.6%. Liverpool has had the highest number of workless households in five of the past seven years. Around a third not working in Liverpool and Glasgow were sick or disabled, the same as the national figure., while 43% of people in workless households in Nottingham gave study as their main reason, compared with 12% nationally. Areas with the fewest workless households were Oxfordshire, Surrey and Aberdeen, and north-east Moray, all around 11%. The national figure for workless households is 18.9%.

Childcare Costs Mean A Choice Of Debt Or Unemployment For Many Parents

Rather than facilitating work, the huge cost of childcare in the UK is a daunting obstacle – and government cuts worsen the bind.












David Cameron visits a nursery in London. His government's reduction of tax credits has made childcare even more costly for working parents.

I could understand why my bank manager was looking at me like that. It did sound a bit stupid. "You're about to start a job, and that means you need to extend your overdraft?" he said, dubiously. After years of scratching around as a student, I was finally about to draw a wage – but first, I needed to get myself just a bit deeper in debt.

I have two children, so before I could set foot in my office, I needed somewhere to put them, and childcare has to be paid for in advance. That's no minor outlay here in the UK, where we have the highest childcare costs relative to household income of anywhere in the world. A survey by the Daycare Trust and Save the Children explains how much of a barrier and a burden this can be, particularly to families on low incomes. Of the parents questioned, a quarter said that the cost of childcare had caused them to get into debt, but it's the poorest families (those with a household income of less than £12,000 a year) who experience the most crippling effects.

While the better off may have to compromise on swimming lessons or music tuition to cope with higher-than-inflation rises in nursery fees, the more impoverished are often forced to cut back on essentials such as food or heating to make up the difference. And sometimes, ends simply can't be met: a quarter of those in severe poverty said that they had given up work because of childcare costs. A third of them had passed on a job offer for the same reason, and a quarter reported that the expense of childcare had prevented them from taking up education or training.

Rather than facilitating work, childcare becomes a daunting obstacle, keeping parents out of the workplace – and the poorer a family is, the more likely it is to remain in poverty for the lack of money to cover nursery fees. Single-parent families without savings or access to credit are effectively shut out of work.

The government likes to talk about getting people off welfare and into the workplace. "Over the last decade, thousands of people were simply abandoned to a lifetime on benefits, and a staggering 1.84 million children are living in homes where no one works," said employment minister Chris Grayling last week. Rightwing analyses talk about the "lack of work ethic … helping to fuel levels of unemployment".

But it's practical, financial limitations more than nebulous psychological causes that are often keeping parents from becoming employees, and the government's actions so far seem likely to worsen the childcare bind. Working tax credit was sliced in this year's budget, so that it now covers only 70% rather than 80% of childcare costs – a huge difference in the finances of those who need help the most. As the cuts agenda combines with a sneering rhetoric of disdain for the unemployed, this just seems like one more way of keeping the poorest poor, from cradle to grave.

No work, No Money, No Security - What Would Life Be Like If I Lost My Job?

For Jon Robins it's a hypothetical question, but what he learns about that possible future reveals the devastating situation that an increasing number of credit crunch victims and their families are facing.









The small waiting room at Brighton and Hove Citizens Advice bureau, based in Hove town hall, is heaving. The network of bureaux is at the sharp end of the credit crunch and reports a 52 per cent rise in the number of inquiries relating to redundancy in the past six months.

Cash is here to examine the catastrophic impact that job loss can have on a family's financial wellbeing. What happens when a breadwinner suddenly loses his or her job and there are young children to clothe and feed, not to mention the mortgage and bills to pay?

'It isn't just the fact that people lose their job, but that their whole lives can unravel. Everything can fall apart - that's what is so terrible,' says Sheelagh Reid, a 61-year-old adviser who has volunteered at Brighton Citizens Advice for 15 years. The experience can be as upsetting for advisers as it is devastating for clients, she adds. 'I enjoy my work but I wouldn't want to do more than one day a week. It's draining.'

She is considering the financial fate of a fairly typical household that has been abruptly deprived of a £40,000 salary. For the purpose of this exercise, I am playing the part of a breadwinner who's been comfortable in his well-remunerated job for 14 years prior to falling victim to a tanking economy. My (fictional) family has, by today's standards, an unremarkable level of indebtedness: £80,000 to pay on the mortgage and £4,000 outstanding on the credit cards.

Even so, the prognosis is grim. A person 'like the hypothetical you', as Reid puts it, 'is unlikely to have much put by the way of savings. People just don't save any more ... so, sadly, redundancy can destroy marriages and the whole fabric of lives can fall apart.'

It is a view shared by Beccy Boden Wilks from National Debtline, who advises me over the phone before I set off. She reckons the average Briton's savings would only last 52 days if they were to lose their job. According to the Yorkshire building society, average monthly outgoings are £1,445 and the average accessible savings are £2,474. 'Losing a job leaves us incredibly exposed,' she says. 'Few of us would be immune.'

These are questions I asked Citizens Advice:
How much would my employer have to pay if he sacks me after 14 years' faithful service?

Reid wants to know if I have contractual rights exceeding the bare legal requirements. No, I don't.

People are often shocked at how little statutory redundancy pay is, she says. 'You don't get anything until you have been working there for two years and there is a maximum amount you can be paid' - one week for each year's service up to the age of 41 and then one and a half weeks per year, capped at £330 a week.

For the hypothetical me, with my 14 years' service, that adds up to £4,620. If my redundancy pay was meant to be a cushion to soften the blow, then, as Emily Ballantyne, the specialist advice unit manager at Brighton CAB, says it's rather threadbare.
How much will we have to live on?

The answer is £140.38 a week. OK, that's an estimate, but it's likely to be as little as that. According to National Debtline, we would get Jobseeker's Allowance (£94.95 for a couple), £14.08 in tax credits (because I have been working and just lost my job, they are lower than they would have been if I hadn't been working for the past two years), and £31.35 child benefit. 'From that sum you'd have to pay your mortgage, utilities, telephone, car, insurance - everything,' says Boden Wilks. 'The only thing you aren't going to pay out for is council tax' - apparently, I'm entitled to council tax benefit.
How am I going to be able to pay our mortgage?

I'm probably not. It's easy to see that without payment protection insurance (which neither I nor my fictional self have), I'm not going to be able to cover my monthly mortgage payments of £550. 'You need to contact your lender if you have no insurance. Say that you are on Jobseeker's Allowance, you can't afford your mortgage but you're looking for work and hoping to get work,' advises Boden Wilks.

From 5 January, the government will step in to help homeowners with their mortgage interest after 13 weeks of unemployment. The maximum size of mortgage qualifying for help will also rise, from £100,000 to £200,000. But although my £80,000 mortgage is the right size to qualify for help now, because the hypothetical me was made redundant before 5 January, I won't qualify for help for 39 weeks.

So what do the mortgage companies have to say? Lenders can begin court action when homeowners are two months in arrears (though the pre-Budget report wants them to wait three months at least). The sooner I contact my lender, the more options I have, Sarah Robson from the Council of Mortgage Lenders tells me. 'There's no one-size-fits-all approach. The lender will assess the individual situation the borrower is in and try to find a reasonable repayment option.'

This could mean moving on to an interest-only loan, taking a payment holiday or extending the length of the mortgage. As Ballantyne is quick to point out, an £80,000 interest-only mortgage with a 5 per cent interest rate would still cost me £333 a month. The best scenario is a payment holiday, she adds.

Unfortunately, my notional mortgage company (the Halifax) tells me that it doesn't offer them in the event of redundancy. A spokesman says they might agree 'a reduced payment or a nil payment for a period of time' (apparently not the same as a payment holiday). I have not missed a mortgage payment for 14 years; could I have a nil-payment period? That will depend on my circumstances, he tells me.
What about my £4,000 credit card bill?

Sort out your priority from your non-priority debts, advises Ballantyne - and remember that 'credit cards aren't priority debts. Most people don't understand that. Priority debts are your rent or mortgage, fuel bills and council tax. Non-priorities are unsecured loans - credit cards, store cards, and catalogues.'

Creditors with non-priority debts will scream loudest, ring you up at home and deluge you with red-letter demands, says Boden Wilks. The reason for that is that their money isn't secured against anything you own, so they're worried they won't get it back.

She recommends I start by filling out National Debtline's budget sheet which enables me to calculate my available income after we've paid mortgage, council tax, gas and electricity. If there's any money left for my creditors, we can work out what we can afford to pay and contact creditors making 'pro rata' offers.

I ring up Barclaycard: 'Will you cut me some slack on my £4,000 until I get back on my feet?' Not exactly; but, as the spokesman puts it, they can 'guarantee that we'll be sympathetic'. He goes on to explain they might use a number of options, 'such as accepting reduced repayments for a period of time or looking to agree a repayment plan'.
What about fuel bills?

Payments can be recalculated and direct debits reset on a lower tariff, says Patricia Ockenden of new watchdog Consumer Focus. 'It all depends on your level of consumption, the property and the amount of difficulty you're in. It's always possible for consumers to renegotiate their tariff and look at other ways of paying for their energy.' She warns me to stay clear of prepayment meters, which suppliers might suggest as a means of economising: 'You have to be very cautious. You could end up paying a tariff far greater than you would be if you paid by a different means and moving back to the standard meter can be costly as well.' Ballantyne agrees - she calls them 'debt recovery machines'. Consumer Focus has good advice if you are having problems paying your bills (consumerfocus.org).

I ask EDF what it can do for me. For its 'most in need' customers, it offers a long-term social tariff. This would include someone on Jobseeker's Allowance if they spend more than 10 per cent of their income on their energy bills (more than likely if I'm on benefits). 'Our customers - including those on prepayment meters - can access our social tariff,' a spokesman says. He reckons that EDF's 'Energy Assist' represents an annual saving on an average bill of up to £184.90, assuming a dual-fuel tariff.
How am I going to feed my family?

Boden Wilks says the guideline for housekeeping for two adults and two children is around £500 a month, a figure agreed between the debt advice sector and credit industry: 'You're not going to be spending that much, though,' she warns. 'Your monthly income on Jobseeker's is only £608.31. You're going to shop as cheaply as possible.'
What you need to know

Is the rule 'last in, first out' still used?
Some businesses may still operate on this basis, but they have to be careful. If all the people made redundant are young, the employees could claim against their employer on the grounds of age discrimination.

How quickly can I sign on?
It depends on your particular circumstances and how your final payoff is regarded by your Jobcentre Plus. The best thing is to ring up (0800 0556688) and provide your details immediately. You will then be given an appointment to see an adviser who can determine when, and if, you qualify.

How much money will I get?
The standard Jobseeker's Allowance (JSA) is £47.95 a week for people under the age of 25, and £60.50 a week for over-25s, and lone parents aged 18 or more. You may also qualify for other benefits, so check, either with your local Jobcentre Plus or Citizens Advice. If you are unable to work, you may be able to claim Income Support (the same amount of money) instead. You can claim by calling 0800 0556688 or online at www.jobcentreplus.gov.uk. In Northern Ireland, you claim JSA at a Jobs and Benefits Office or Social Security Office.

Will the money be cut off if I refuse to take a job?
It could be. To claim JSA you must be capable of working, below state pension age, available for work and actively seeking it. If you fail to take up a job offer, or follow up chances of work, you may be penalised. Your JSA could be reduced or stopped for between one and 26 weeks. You can also be penalised because of the circumstances in which you left your last job, for example, if you left voluntarily or were dismissed because of misconduct.

Will I get help with my mortgage?
If you are eligible for JSA or income support, you can claim help with the monthly interest, but not repayment of the loan itself.

When you get help depends on its size (help is only extended to loans up to £100,000) and when you took out your mortgage: if it was before 2 October 1995, you will get nothing for eight weeks, then 50 per cent for the next 18, and the full amount after 26; if you took out your loan on or after that date, you will have to wait for 39 weeks. From 5 January, the waiting period will be reduced to 13 weeks, and the maximum limit raised to £200,000.

Should I use my redundancy payment to reduce or pay off my mortgage?
It depends how much money you get. If you receive a huge amount, then why not pay off at least part of your mortgage? But if you get tens of thousands of pounds or less, you should probably hold onto a large part of the cash to meet bills and in case of an emergency.

I can't afford to pay all my bills - which ones should I concentrate on?
Mortgage or rent, council tax and utilities, and anything affected by a judgement order or bailiff action. If you fail to pay these, you could end up homeless.

I can't manage my debts now I've lost my salary - should I take out one of those plans advertised on TV?
Definitely not. Although they purport to cut your debts, they will charge a large amount to set up the plan. Instead, seek free advice from one of the debt-counselling charities, such as Citizens Advice (www.citizensadvice.org.uk), National Debtline (0808 808 4000), Capitalise (in London - 020 7392 2953) or Consumer Credit Counselling Service (0800 138 1111).

David Cameron Admits Job Programmes 'Aren't Working'

Nearly 2.5 million 16 to 24-year-olds are out of work, according to the latest official figures.

It's the highest number of jobless young people since records began in the early 90s.












One youth charity says there are now enough young unemployed people to fill every football stadium in the Premier League, with almost 200,000 left queuing outside.

We've been to the Cabinet Office at Number 10 Downing Street putting your worries about joblessness to the prime minister.


PM: "These are bad figures. Youth unemployment has been going up for the last 10 years in good years and bad."

NEWSBEAT: "You're in charge now though."

PM: "Absolutely and we have to take a really deep look at what's been going wrong.

"I think it's partly the welfare system that doesn't encourage people into work.

"The work programmes we've been running have been churning people through a programme but not getting them a proper job.

"And frankly, education hasn't been good enough. Now what are we going to do about it?"










NEWSBEAT: "One thing you've done is you've cut the Future Jobs Fund..."

PM: "The Future Jobs Fund was one of the most ineffective jobs funds there have been. It cost five times as much as other schemes."

NEWSBEAT: "Before the election you said it was a good thing."

PM: "Well, I've looked at the figures now, and in some cities only 3% of the jobs were actually in the private sector.

"The really damning evidence is it's a six month programme but one month after the programme half the people on it were back on the dole. It failed, it didn't work."

David Cameron's also been telling Newsbeat about his plans for school-leavers in their holidays.

He wants 11,000 people doing their GCSEs this summer to sign up on Facebook for a two month stint of community service and outdoor activities in the summer.

School-leavers in Birmingham weren't sure about the idea, saying things like: "Eight weeks is a really long time," "I want to enjoy my summer - go on holiday. This is just something I just wouldn't do - ever."

But the Prime Minister told Newsbeat: "This is an exciting challenge. This is one period in your life where you go out, leave your home environment, mix with different people and do something different."

"I pretty much bet you," he added "that young people will come forward in huge numbers and do it, and enjoy it".