Compulsory Jobs Guarantee will be in Labour’s election manifesto and funded for whole of next Parliament.
Every young person out of work for more than 12 months will be given a paid starter job which they will have to take up or lose benefits if Labour wins the next election, Ed Miliband, Ed Balls and Rachel Reeves will announce today.
They will say that thousands of young people still struggling to find work are not seeing any economic recovery at all.
Under David Cameron’s government the number of young people aged 18-24 claiming Jobseeker’s Allowance for over a year has doubled - from 28,300 in May 2010 to 56,100 today.
Today’s announcement sets out for the first time that a Compulsory Jobs Guarantee will be in Labour’s manifesto next year and that it will be funded for the whole of the next Parliament – not just one year.
Speaking on a visit to a building project in South London which is employing and training dozens of local young people, Ed Balls MP, Labour’s Shadow Chancellor, is expected to say:
“It’s shocking that the number of young people stuck on the dole for more than a year has doubled under David Cameron. For tens of thousands of young people who cannot find work this is no recovery at all.
“We’ve got to put this right. So if Labour wins the next election we will get young people and the long-term unemployed off benefits and into work.
“The government will work with employers to help fund paid work with training for six months. It will mean paid starter jobs for over 50,000 young people who have been left on the dole for over a year by this government.
“But it will be a tough contract – those who can work will be required to take up the jobs on offer or lose their benefits. A life on benefits will simply not be an option.
“After the global banking crisis and with bank bonuses soaring again this year, it’s fair to pay for our jobs plan with a repeat of Labour’s tax on bank bonuses. We need a recovery for the many, not just a few at the top.
“As a country we simply cannot afford to be wasting the talents of thousands of young people and leaving them stuck on the dole for years on end. It’s bad for them, it’s bad for our economy and it’s bad for taxpayers who have to pay the bill.”
The Compulsory Jobs Guarantee will also apply to adults aged 25 or over claiming Jobseeker’s Allowance for two years or more and will be funded for the whole of the next Parliament by:
• a repeat of Labour’s successful tax on bank bonuses at the start of the next Parliament;
• and restricting pensions tax relief for people earning over £150,000 to the same rate as basic rate taxpayers.
The bank bonus tax will help to fund the first year of the Compulsory Jobs Guarantee when there will be a large number of long-term unemployed people to help and the changes to pensions tax relief will ensure an annual revenue stream to fund the policy throughout the next Parliament.
The Compulsory Jobs Guarantee is the only policy which will be funded by the bank bonus tax and the proposed changes to pension tax relief.
Rachel Reeves MP, Labour’s Shadow Work and Pensions Secretary, will say:
“Under David Cameron’s government young people are missing out on the recovery with long-term youth unemployment doubling since the General Election.
“The cost of long-term youth unemployment is £350 million a year and £3.2 billion over the lifetime of the young unemployed. It’s completely unacceptable that taxpayers face such huge costs to pay for the government’s failure to get young people off benefits and into jobs.
“Labour will bring welfare spending under control with a Compulsory Jobs Guarantee to get more young people and long-term unemployed off benefits and into work. A Labour government would also introduce a Basic Skills Test to assess every new Jobseeker’s Allowance claimant within six weeks of claiming benefits. Anyone who doesn’t have basic English, maths or IT skills will have to take up training or risk losing their benefits.
“Our Basic Skills Test and Compulsory Jobs Guarantee will give young and long-term unemployed people the chance to work and will help us to earn our way out of David Cameron’s cost-of-living crisis.”
The Compulsory Jobs Guarantee
Building on the success of the Future Jobs Fund, government will work with the private and voluntary sectors to ensure there is a paid job for 18-24 year olds claiming Jobseeker’s Allowance for 12 months or more and adults aged 25 or over claiming Jobseeker’s Allowance for over 24 months.
The government will pay for the wage and employer’s national insurance contributions for 25 hours over six months at the national minimum wage. The government will also provide an extra £500 per employee to pay towards training and admin costs.
Participants will be required to undergo training provided by the employer as well as intensive job-search activity for a permanent opportunity at the end of the six months. Those jobseekers who refuse to take up the offer of a job would risk losing their benefits, in line with the existing sanctions regime.
Businesses bidding for funds would need to demonstrate that the jobs are additional and would not lead to someone else losing their job or having their hours reduced, in line with the process used for the Future Jobs Fund.
Based on current claimant count levels the House of Commons Library estimates the cost of the policy will be £1.9bn in the first year and £900m a year in the following years.
These costings do not include the savings to the benefits bill which we believe can be made as a result or the savings from existing government schemes which will be superseded by the Compulsory Jobs Guarantee.
We are establishing an expert group to advise on the implementation of the policy and will announce further details in due course.
Bank bonus tax
Labour’s tax on bank bonuses in 2010 raised £3.4bn, according to the Office for Budget Responsibility. On a cautious estimate, a repeat of the tax will raise £1.5bn-£2bn.
Bonuses at a number of the big banks are significantly higher this year than last year: up 10 per cent at Barclays to £2.4bn, up 8 per cent at Lloyds to £395m and up 6 per cent at HSBC to £2.3bn. RBS also announced a bonus pool of £588m this year.
Details of how the original tax on bank bonuses worked can be found here: http://webarchive.nationalarchives.gov.uk/20120207221855/http:/www.hmrc.gov.uk/pbr2009/bank-pay-tech-note.pdf The repeated tax will also include allowances paid by banks which attempt to get round the EU bonus cap.
Combined with revenues from our proposed changes to pension tax relief even the lower estimate of what the tax on bank bonuses would raise more than covers the cost of the policy in the first year.
Pensions tax relief
For people earning over £150,000 we will reduce the rate of pension tax relief to 20 per cent - the same rate as basic rate taxpayers. The House of Commons Library estimates this will raise £900m-£1.3bn.
Even on the lower estimate of revenues the changes to pensions tax relief will cover the costs of the Compulsory Jobs Guarantee after the first year.