Government unveils unemployment package

At an ‘employment summit’ on 12 January 2009, the UK government announced a package of measures aiming to help 500,000 people into work or training. The plans include subsidies for employers that recruit long-term unemployed people and enhanced training opportunities for those who are unemployed. Social partners welcomed the initiative but warned that more needs to be done to prevent people from losing their jobs and from becoming long-term unemployed.

Unemployment mounts

With the UK economy in recession – gross domestic product (GDP) contracted by 1.5% in the fourth quarter of 2008, following a 0.6% fall in the third quarter – unemployment has been rising since late 2007 (UK0812039I, UK0902039I). According to the Office for National Statistics, the unemployment rate stood at 6.1% in the three months to November 2008, up 0.4 percentage points on the previous quarter and 0.9 points on the same quarter of 2007. This represents the highest unemployment rate since 1999.

The number of unemployed people increased by 131,000 persons over September–November 2008 and by 290,000 individuals over the year to November 2008; by then, the total had reached 1.92 million people – the highest figure since 1997. Furthermore, the number of people claiming unemployment-related benefits stood at 1.16 million persons in December 2008 – the highest level since 2000 – representing an increase of 77,900 individuals on the previous month and 349,500 over the year.

New measures for long-term unemployed

The Labour Party government has launched a number of initiatives aiming to tackle rising unemployment, as part of a wider ‘fiscal stimulus’ worth GBP 10 billion (€11.16 billion as at 12 February 2009) that seeks to boost the economy, notably through increased public spending. On 12 January 2009, the government held an ‘employment summit’, attended by social partner and business representatives and labour market experts, at which it presented a package of specific measures – costed at GBP 500 million (€557.6 million) – designed to help 500,000 people into work or training over the next two years. The main provisions are as follows:

  • incentives of up to GBP 2,500 (€2,788) per person for employers that recruit and train people who have been unemployed for at least six months, known as ‘employers’ golden hellos’;
  • extra funds to enable the public employment services to provide all jobseekers who have been out of work for six months with more intensive and personalised support;
  • funding for additional training places to help unemployed people obtain new skills in order to maximise their chances of finding jobs from among the 500,000 unfilled vacancies in the economy;
  • opportunities for unemployed people to engage in voluntary work to help them back into work habits;
  • help for unemployed persons to set up a business, including advice on creating a business plan and funding for the first months of trading.

The Secretary of State for Work and Pensions, James Purnell, told the summit:

The half a billion pounds announced today will be used to guarantee extra support to everyone who reaches six months’ unemployment – we are determined to provide real help to people in these tough times. Our message is simple, the longer a person is out of work the harder we will work for them.

Views of social partners

The Deputy Director General of the Confederation of British Industry (CBI), John Cridland, commented:

These measures to help the unemployed are welcome and important, but we also need initiatives that will stop people being made unemployed in the first place. We believe that the best way to protect jobs and the economy is to target the credit crunch. If we do not get credit flowing through the economy again, good businesses will fail, causing more job losses and lasting damage to the economy.

Other business leaders echoed the view that government employment policy should focus more on helping companies to cope with the current economic crisis. The Head of Policy at the British Chambers of Commerce (BCC), Chris Hannant, stated:

It is right that the government thinks about measures to address long-term unemployment – but these will be more effective when a recovery starts. To help people back to work, the government should abandon plans to tax job creation; it has proposed to increase employer National Insurance contributions in 2011.

The government’s focus on long-term unemployed people is largely in line with the strategy of the Trades Union Congress (TUC) for tackling unemployment, which includes:

  • job creation programmes and other help for those facing long-term unemployment;
  • improved and comprehensive support for those facing redundancy, tailored to individual circumstances;
  • enhanced access to training and support for job search.

However, no move has been made so far on another key TUC demand – for a rise in statutory redundancy payments and an increase in the tax-free amount of such payments, with the aim of giving newly redundant workers funds that can help them to access training or find work.

Mark Carley, SPIRE Associates/IRRU, University of Warwick

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