UK’s Sunak focuses on jobs with $2.5 billion for young workers

UK is facing its deepest recession in 300 years.
Britain's Chancellor of the Exchequer Rishi Sunak speaks during question period to the Chancellor of the Exchequer in London.(via REUTERS)
Britain's Chancellor of the Exchequer Rishi Sunak speaks during question period to the Chancellor of the Exchequer in London.(via REUTERS)
Updated on Jul 08, 2020 11:33 AM IST
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By Bloomberg | Posted by: Shankhyaneel Sarkar

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 UK 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 UK 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:

In addition, Prime Minister Boris Johnson has brought forward 5 billion pounds of infrastructure spending on schools, hospitals and roads, pledging the UK 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.

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.

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Monday, October 25, 2021