Chancellor needs to ‘get ahead of the curve’ and shift focus away from COVID-19 wage subsidies and towards creating job opportunities

Urgent strategy is needed to prevent a spike in unemployment and save the prospects of a generation of young people, says Lords Committee

The Chancellor Rishi Sunak needs to 'get ahead of the curve' and shift focus away from COVID-19 wage subsidies and towards creating job opportunities, the House of Lords Economic Affairs Select Committee has warned.

In Employment and COVID-19: time for a new deal, the Select Committee highlights that the coronavirus pandemic - which has caused the largest economic shock in 300 years - has not impacted equally, and that the youngest and lowest-paid workers have experienced significant damage to their livelihoods and prospects.

In addition, the Committee says that, despite the government having provided economic support to keep people in work and businesses afloat during the pandemic, unemployment could nevertheless reach 7.5 per cent, or 2.6 million people, during 2021 as wage support is withdrawn.

As a result, while the government should be prepared to maintain spending, rather than withdraw support too early, the Committee say that it should now focus expenditure on policies that are more tightly focused on creating job opportunities, such as - 

• significantly expanding the number of social care workers by increasing funding in the sector with stipulations that funding should be used to raise wages and improve training and conditions;
• investing in the childcare sector by providing free entitlement funding to local authorities and childcare businesses at pre-pandemic occupancy rates, and also providing transitional funding to ensure providers can continue to operate during the pandemic;
• introducing a new job, skills and training guarantee, available to every young person not in full-time education or employment for one year - this should include public sector job creation and hiring incentives to create private sector job opportunities; and
• enhancing its existing skills, training and employment support policies, including within the Kickstart and the Restart programmes.

NB - in respect of the government's wage support schemes as they currently stand, the Committee expresses disappointment that the government did not make training a more integral part of the Job Retention Scheme; urges it to expedite the implementation of the Lifetime Skills Guarantee which is currently not due to start until April 2021; and says that the government should have targetted payments from the Self-employment Income Support Scheme more closely at those who have suffered genuine loss of income, highlighting that too many people have received significant payments despite being largely unaffected, while more than 500,000 have missed out.

Finally, pointing out that the pandemic has emphasised the need to improve the social security safety net, the Committee also recommends that the government should - 

• commit to making the temporary increases to universal credit permanent, including the £20 per week increase to the standard allowance;
• ensure that those on legacy benefits receive a comparable uplift;
• review the level of the benefit cap and increase the generosity of social security for struggling families; and
• raise the level of statutory sick pay and expand eligibility to the lowest paid.

Chair of the Committee Lord Forsyth of Drumlean said - 

'The Government has given the impression that the economic crisis will be short-lived and everything will be fine by the spring. It also assumes that the good news on the vaccine means that the economy and labour market will no longer need support. Both of these assumptions are wrong.

The sectors with jobs that historically lead labour market recoveries – hospitality, retail and leisure – have been flattened. They are likely to be in a worse state in the spring when wage support ends. Unemployment will spike.

The Government is sleepwalking into an unemployment crisis. The Chancellor needs to get ahead of the curve to avoid being in the same position as he was in the autumn. He needs a strategy urgently for what comes next and this report sets out a comprehensive plan to save the prospects of a generation of young people.'

For more information, see New job creation plan needed to prevent New Year spike in unemployment from parliament.uk

Update (1 March 2020) - the government has published its response to the Committee's report.