U.K.’s Sunak Focuses on Jobs With $2.5 Billion for Young Workers
(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak is set to unveil a 2 billion-pound ($2.5 billion) program to pay the wages of more than 200,000 young workers as he tries to pull the U.K. economy out of the deepest slump in centuries.
It will be the centerpiece of the government’s three-point plan to protect, support and create jobs, the Treasury said in a statement late on Tuesday.
“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,” Sunak said. “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.”
With the U.K. immersed in possibly its deepest recession in 300 years, the chancellor will on Wednesday set out a package of measures to help the economy recover from more than three months of lockdown. While Sunak has made protecting jobs the core of his plan, he has repeatedly conceded he won’t be able to protect every role as he unwinds the unprecedented government aid that is funding the wages of more than 12 million workers.
Sunak will also announce a stamp duty holiday for homes costing up to 500,000 pounds in an effort to revive the housing market, according to The Sun newspaper, while the Financial Times has reported he is considering a temporary cut to value added tax to boost the hospitality industry.
“We do not comment on speculation about tax changes,” the Treasury said in a statement.
‘Build, Build, Build’
The chancellor plans to conduct a wider spending review and outline a further package of stimulus measures in the fall.
Over the past week, the Treasury has outlined more than 4 billion pounds of measures to promote jobs, skills and energy efficiency. They include:
|Grants to help homeowners insulate their properties|
|Funding to make schools and hospitals greener|
|Earmarked to scope out new ways of retrofitting social housing with heat pumps, insulation and double glazing|
|Green Jobs Challenge Fund, which will help environmental charities and local government plant trees, clean up rivers and improve green spaces|
|Funding to double the number of work coaches in U.K. job centers to 27,000 and help job-seekers get the support and skills they need to find work.|
|Promise to triple the number of traineeships for 16-24 year-olds. Businesses will get 1,000 pounds per trainee taken on for work experience|
|Funding for 30,000 new placements in work academies to provide those on benefits with skills needed for local jobs|
|Investment in the National Careers Service to offer careers advice to young people|
In addition, Prime Minister Boris Johnson has brought forward 5 billion pounds of infrastructure spending on schools, hospitals and roads, pledging the U.K. will “build, build, build” to emerge from the crisis. The government also outlined a 1.6-billion pound bailout earlier this week to help struggling theaters and music venues, which have yet to be allowed to reopen.
|From Bloomberg Economics|
|What Sunak Could Do to Support the Recovery|
Meanwhile, jobless claims have more than doubled to almost three million and economists say the unemployment rate could reach double figures from 3.9% currently. Those predictions are informing Sunak’s decisions as he tries to preserve jobs. The impact of the outbreak on the economy so far has been stark: Economic output shrank a record 20.4% in April, and the Office for Budget Responsibility estimates Sunak’s efforts to support businesses and workers through the crisis will cost more than 130 billion pounds. They have already pushed the national debt above the size of the country’s gross domestic product for the first time since the 1960s.
The measures to be outlined on Wednesday were billed by the Treasury as the biggest package to tackle youth unemployment in decades. Under the so-called Kickstart Scheme, the government will pay the wages of 16 to 24 year-olds who are claiming benefits while they undertake six-month placements. The state will pay the workers at the level of the national minimum wage for 25 hours a week, with employers able to top them up.
The program will open for applications next month, with the first placements starting in the fall, according to the Treasury. It’s due to run until Dec. 2021, with the option to extend it.
The Resolution Foundation, a London-based think tank, welcomed the measure, saying it could help around 350,000 young people into work -- but stressed it needs to be delivered quickly to be effective. Meanwhile, the Trades Union Congress said it was a “good first step” to prevent a spike in youth unemployment.
©2020 Bloomberg L.P.