Six tests for the government’s not-a-budget next month

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26 Jun 2020

Tony Wilson, Institute Director

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First it was a mini-budget, then not-a-budget, but what’s now looking certain is that the Chancellor will announce in the next few weeks a package of measures to help to head off an unemployment crisis over the summer.  With this potentially as soon as next week and a lot of speculation as to what might be in it, here’s six tests that I think the government will need to meet.

1. Can we minimise job losses and maintain labour demand over the next few months?

The Job Retention Scheme has successfully protected up to nine million jobs, but it will start to unwind from August – before the economy has fully recovered.  So top of the list will surely be new measures to support firms to retain more workers over the next few months.  I’ve said before that the best way to do this would be to increase the threshold at which employer National Insurance starts to be paid – which would cut labour costs across the board, lift more low paid workers out of tax altogether, and give firms an excuse to keep more people on for longer.  The worst ways to do it would be through more fiddling with the Employment Allowance, or a complicated new NICs rebate.

2. Does it create the capacity to respond to job losses this summer?

While we can do more to support demand, it’s pretty clear now that even in a best-case scenario there will be significant job losses as the JRS unwinds.  Around 3 million people have been ‘furloughed’ in either hospitality or retail – where output just won’t return to pre-crisis levels – and 1.5 million are in construction and manufacturing, where redundancies are highly cyclical.  We’ve published a short paper this morning with others including Learning and Work Institute setting out how we can do this – including through strong local co-ordination; careers, employment and skills support; and giving equal access to all those out of work already (not just those facing redundancy).  This may not get top billing in any announcements, but hopefully in the detail there’ll be firm commitments to building and supporting rapid, local responses to job losses.

3. Will everyone who is unemployed be guaranteed access to help to prepare for and find work?

While in many ways the government acted quickly in its economic response to the crisis, my one criticism has been the painfully slow progress in putting in place immediate support for those newly unemployed.  We set out back on 8 April how this could be done, building on approaches in previous recessions and a well-established evidence base on what works (with even more research from the US this month showing that it’s employment counselling and support that matters – not just applying ‘conditionality’).  This morning’s paper reiterates those calls.  We need to pretty much double the capacity in our employment services, and this could have been done within 6-8 weeks by mobilising furloughed staff in recruitment agencies.  

However while Jobcentre Plus has started to get back to work in the last month and is now actively recruiting new work coaches, we’ve missed the window to have new capacity in place for the start of August when the JRS will begin to wind up.  Next week, the Chancellor can rectify this by committing to the investment needed to ensure that all of those out of work who want to work can access employment services.

4. Is there a credible, long-term plan to tackle unemployment?

Our April report set out that in each of the last three recessions it has taken at least seven years for unemployment to return to pre-crisis levels.  This time won’t be any different. So beyond the short-term measures to deal with the next few months, we need a credible plan for the next few years.  This needs to include specialist support for the long-term unemployed, alongside investment in work-related training, rehabilitation support, basic skills and other services to help people return to work.  A key test will be whether this builds capacity in contracted-out employment services – where spending is at a 20-year low, and just one sixth of where it was on the eve of the last crisis.  We called for this to be brought together as a single ‘Back to Work Service’, with access to a £3,000 hiring subsidy for taking on long-term unemployed people.

Beyond this, a longer-term plan also needs to include measures to support people to retrain for new jobs (building on successful models like Sector Based Work Academies), targeted investment in job creation and a greater focus on supporting growth in areas with higher unemployment and weaker demand (in particular ex-industrial, inner city and coastal areas).  The government will surely major on green jobs, infrastructure and investment – but let’s hope that underneath this, there’s credible plans for tackling unemployment.

5. Will there be a jobs and training guarantee for young people?

We know that recessions are particularly damaging for young people, and that prolonged unemployment when young can cause lasting harm.  So preventing youth long-term unemployment – through access to education, training or a guaranteed job – will surely be a top priority, as it has been in previous downturns in the UK and internationally.  The Prime Minister has made clear that he’s attracted to an ‘apprenticeship guarantee’ for young people, although this seems impossible to achieve without stretching to breaking point the definition of ‘apprentice’ and/ or ‘guarantee’.  The Youth Employment Group secretariat set out specific proposals for how a jobs and training guarantee could be done well, and I hope that we’ll see something like this being announced.  The litmus test will be simple: does it guarantee that no young person will reach long-term unemployment without having had the offer of a good job, training or education place?

6. Does it share power, or centralise it?

My old boss, Dave Simmonds, said right at the start of this crisis that one thing every recession has had in common is that central government couldn’t deal with it on its own.  This will likely be more important than ever this time – both because of the complexity of the challenges and the limited bandwidth within any one bit of government to deal with them alone.  So the labour market response this time is going to need to mobilise national and local government, public agencies, employers, the voluntary and community sector, education and training providers and wider industry.  The good news is that there’s a lot of goodwill and appetite to collaborate, particularly (but not only) in our major cities.  So a key test will be whether the government looks to harness that goodwill or bypass it.

So those are my six tests.  My hope is that the Chancellor’s announcements next month – potentially next week – can meet most of these even if it doesn’t meet all of them.  And if it can’t meet them all, then let’s hope that this will be the start rather than the sum of our response.  We’ve a long road back.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.