Rishi Sunak will respond to growing fears of a surge in youth unemployment from Britain’s pandemic-scarred economy on Wednesday with a £2bn temporary job creation scheme for the under-25s.
Amid evidence that the fallout from the Covid-19-enforced lockdown has hit vulnerable young workers harder than other age groups, the chancellor will use his summer statement to announce that the government will fund six-month job placements for an estimated 350,000 18 to 24-year-olds.
Sunak will announce a three-point strategy to support, protect and retain jobs but Whitehall’s concern about an imminent 1980s-style increase in youth unemployment was reflected in the government’s willingness to revive an idea used by Labour during the global financial crisis, and in the rapid timetable for the “kickstart scheme” to become operational.
The Treasury said companies could start making applications for the jobs subsidies within a month and the first young people would be employed in the autumn.
Although the economy is starting to open up gradually after its pandemic-enforced quarantining, Sunak has decided it is too risky to wait for his autumn budget to come up with a jobs package to help the heavy concentrations of young people working in the retail, leisure and hospitality sectors.
The chancellor’s statement is an attempt to stem the damage from a forecast 14% slump in GDP this year, according to the Bank of England, and a potential rise in the the unemployment rate from 3.9% to 15%, according to the Organisation for Economic Cooperation and Development.
Alongside the youth scheme, the chancellor will announce a £3bn programme to make homes and public buildings more environmentally friendly. According to reports, he will announce an immediate stamp duty holiday for homes at the lower end of the market, and cuts to VAT are also reportedly under consideration.
The chancellor said: “Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.
“We also know that youth unemployment has a long-term impact on jobs and wages and we don’t want to see that happen to this generation. So we’ve got a bold plan to protect, support and create jobs – a Plan for Jobs.”
The Treasury said employers will be able to offer a six-month work placement for young people aged between 16 and 24 who are claiming universal credit and at risk of long-term unemployment. The state will fund each “kickstarter” job, covering 100% of the national minimum wage for 25 hours a week and with employers able to provide wage top-ups.
People under 25 receive a lower national minimum wage, starting at £4.55 an hour for someone under 18, rising to £6.45 an hour for 18 to 20-year-olds and £8.20 an hour for 21 to 24-year-olds. The scheme is mainly aimed at people aged 18 and above because most 16 and 17-year-olds are in education or apprenticeships.
The chancellor’s proposal received a cautious welcome from UK trade union body the TUC. Its general secretary, Frances O’Grady, said: “Unions have been pushing hard for a jobs guarantee for young workers who lose their jobs during this crisis.
“The chancellor has made a good first step. But we’ll be checking the small print to ensure every job provides proper training and a bridge to steady employment.
“Employers must do the right thing. They should work with unions to avoid job displacement, create good opportunities for all young workers and guarantee they are paid at least the real living wage.
“We must do all we can to avoid the misery of mass unemployment. The government should bring business and unions together in a national recovery council so working people are not made to pay the price of this crisis and ensure we build back better, right across the country.”
In the first two months of the Covid-19 crisis the number of 18 to 24-year-olds claiming universal credit rose by a quarter of a million to almost 500,000, while 700,000 school leavers and university graduates will enter a depressed jobs market this summer.
The Treasury said the subsidised jobs would give young people the opportunity to build their skills in the workplace, and to gain experience that will improve their chances of going on to find long-term sustainable work. Sunak is also expected to announce a £111m investment to triple the scale of traineeships in 2020-21, and an extra £32m for the National Careers Service.
Kathleen Henehan, an economist at the Resolution Foundation thinktank, said: “It is very welcome that the government has opted for a bold and ambitious scheme, with £2bn potentially meaning jobs for around 350,000 young people. This is exactly the kind of approach needed, learning the lessons of what worked in the financial crisis.
“History also shows that it is crucial that these jobs are created quickly, with local authorities crucial in making that happen at anything like the scale the government intends. Three hundred and fifty thousand new jobs would be three times as many as were created under the Future Jobs Fund following the financial crisis, so delivery on this scale will be a huge challenge.”
Young people are more likely to be furloughed, but Sunak made it clear in the Commons on Tuesday that he had no plans to extend the scheme beyond the end of October – which is expected to trigger a spike in unemployment. Currently, there are 9.4 million people on the furlough programme, which covers 80% of the wages of people temporarily laid off from their jobs.
The chancellor rebuffed calls from Labour to leave the scheme in place for the hardest-hit industries, saying it would remain a nationwide “general subsidy” and would be scaled back next month before closing in October as previously announced.
He also resisted pressure to offer extra help to the 1 million self-employed workers who miss out on all of the government’s subsidy schemes. “In terms of the design and the duration with which it lasts, the breadth of its coverage and the generosity of its support, it remains the most generous self-employment support scheme in the world,” he said.
Conservative backbenchers have largely welcomed the government’s big-spending approach to tackling the Covid-19 downturn, though some traditionalists are beginning to sound the alarm.
Speaking in the House of Commons on Tuesday, the veteran Tory MP Sir Edward Leigh said: “Can we hear from the chancellor and the prime minister less about high-spending lefties like President Roosevelt and more about good Conservatives like Ronald Reagan and Margaret Thatcher – less about subsidies and more about tax cuts and tax simplification?”
Johnson appeared to hint last week that taxes could rise to pay for his spending plans, but he told the Yorkshire Post on Monday he has not abandoned a manifesto pledge not to raise the rates of national insurance, income tax or VAT.
Other measures expected to be announced by the chancellor on Wednesday include a £3bn plan to green the economy.