Government ‘sleepwalking’ into jobs crisis, warn peers

Britain risks “sleepwalking into an unemployment crisis” unless the Government urgently ramps up support for employment and training, an influential group of peers has warned.

The stark message comes as new figures out this week are expected to show redundancies rocketing to a fresh record high after the jobs market was ravaged by the second lockdown and botched furlough extension.

Measures proposed by the House of Lords’ economic affairs committee include a jobs and training guarantee for the young unemployed, higher benefits, a hiring spree to take on more care workers, support for heavily indebted businesses, and extra investment in green projects.

“We formed the impression that the Government is thinking the economic crisis will be short-lived and everything will be fine by spring. That is wrong,” said Lord Forsyth, the committee’s chairman. “The Government is sleepwalking into an unemployment crisis, and it needs a strategy urgently for what comes next.”

The Office for Budget Responsibility (OBR) last month warned that unemployment could surge to a peak of 7.5pc next year, meaning almost 3m Britons would be jobless by the second quarter of 2021.

Economists warned payroll and claimants data for November are expected to reveal the “downturn in employment regained momentum” despite the Chancellor extending his support for wages until March.

George Buckley, economist at Nomura, warned layoffs “stepped up again in November”, predicting a 125,000 decline in payroll numbers.

More historic figures covering the three months to October are set to show unemployment climbing from 4.8pc to 5.1pc, the highest level since 2016, as the Covid blow slowly feeds through to the labour market.

Redundancies will hit a record high of between 400,000 to 450,000 in the three months to October, up from 314,000 the previous month, warned Tony Wilson, director of the Institute for Employment Studies.

“That’s the impact of lockdown one and the massive shake out in the middle part of the year now feeding through into redundancies,” he explained.

Separately, CIPD, the body which represents HR professionals, has written to the Chancellor demanding the furlough scheme be extended to the end of June.

“Jobs that are lost over this period are also likely to feed into long-term unemployment as recruitment and onboarding costs will mean cash-strapped employers will hesitate to hire permanent staff again until they are certain about the strength of the economy,” said Peter Cheese, CIPD chief.

Lord Forsyth called for a “spring economic plan” to follow Rishi Sunak’s winter plan, and said it should be much more focused on the recovery, including getting people into sustainable jobs.

The proposals, outlined in a 132-page report titled “Employment and Covid: time for a new deal’, in an echo of Franklin D Roosevelt’s projects of the Thirties, will not be cheap, but the peers argue this is preferable to the costs of higher unemployment.

“The £280bn Government response is unprecedented, but it is not enough,” said Lord Forsyth. “Some of it has been spent where it didn’t need to be spent, and others have been left out.”

Lord Forsyth, a financier and former secretary of state in John Major’s Government, said the extent of the economic crisis demands radical action.

“I am a Thatcherite Conservative and I wouldn’t ever have expected to be arguing this case,” he said. “But this crisis is unlike any other. The sectors that historically lead labour market recoveries – hospitality, retail and leisure – have been flattened.”

The Treasury was approached for comment.