The Chancellor will unveil what the government claims is the biggest young unemployment package in decades as part of a multi-billion pound economic stimulus, with the Treasury not ruling out measures including a cut in VAT for hospitality businesses and a voucher scheme to boost spending on the high street.
With the coronavirus crisis already adding £120bn to public spending, Boris Johnson yesterday recommitted to a manifesto pledge not to raise income tax, national insurance or VAT, closing off one potential avenue for the Chancellor to pay for his giveaways.
The “Kickstarter” jobs fund will support anyone between the ages of 16 and 24 who is receiving Universal Credit, covering 100 per cent of the cost of the national minimum wage up to 25 hours per week for a six-month work placement. Companies would be able to top up the payments.
UK ministers hope the fund will push companies to hire some of the 700,000 young people claiming benefits, a quarter of a million of whom have found themselves out of work since the start of the coronavirus lockdown.
“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,” the Chancellor will say.
“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.
“So we’ve got a bold plan to protect, support and create jobs – a Plan for Jobs.”
The announcement was welcomed by the Federation of Small Businesses, whose members disproportionately employ young people, with National Chairman Mike Cherry saying that “a focus on jobs is absolutely essential to lift the country out of the economic hardship caused by the Covid crisis”.
Trades Union Congress general secretary Frances O’Grady also welcomed the measure as a “good first step” to prevent mass youth unemployment.
But Liberal Democrat leadership candidate Layla Moran said the package “will sadly be too little too late for many of the corona class of 2020”.
“Eighteen-year-olds could be left being paid just £161 a week under this scheme, which in some parts of the country would barely cover rent and transport costs,” she added.
Today’s statement represents the second phase in a three-part plan to rescue the economy from the worst effects of coronavirus, after the emergency furlough and grant schemes for employees and self-employed workers announced at the start of the crisis.
The third phase will come with the budget and Spending Review in the autumn, when the Chancellor is expected to be forced into tax rises and spending cuts to cover the cost of an unprecedented bailout programme.
But on a visit to Yorkshire on Monday, the Prime Minister was asked whether a manifesto commitment not to raise income tax, national insure and VAT still stood, and replied: “Yes, it stands.”
“I don’t normally talk about fiscal stuff because I leave that to Rishi [Sunak] the Chancellor but what is in the manifesto is in the manifesto,” Mr Johnson said.
“We were elected, we got a big majority from the British people to deliver on that manifesto and we are very, very sincere in wanting to do that. All other fiscal questions you’ll have to direct to the Chancellor.”
It comes as new research suggests the UK economy will not recover to pre-pandemic levels until 2024 even without a second wave.
A report by accountants BDO and the Centre for Economics and Business Research forecasts gross domestic product will fall 11 per cent this year - but only if there is no large-scale second wave of coronavirus or another national lockdown.
It warns that another peak in the pandemic and lockdown would send Britain’s GDP tumbling 19 per cent this year and see exports fall by 23 per cent.
And new estimtes from the Organisation for Economic Co-operation and Development (OECD) suggest one in seven people in the UK might be unemployed by the end of this year if a second wave of the pandemic washes over the country.
The OECD said the UK’s unemployment rate could reach 14.8 per cent as its experts warned that global job losses could take unemployment rates to levels more comparable to the 1930s than 2008.
Ahead of Mr Sunak’s statement, the finance ministers of the three devolved administrations issued a joint call for additional fiscal powers in response to the unprecedented economic downturn.
Scotland’s finance secretary Kate Forbes joined Northern Ireland’s Conor Murphy and Wales’ Rebecca Evans to demand the right to shift funds earmarked for capital spending into day-to-day budgets, and the power to borrow to invest.
“The powers we are seeking will enable the Scottish Government to respond to Covid-19 more effectively and reboot our economy,” Ms Forbes said.
“They are relatively limited powers, but would ease some of the immense pressures on our budget and give us more tools to kick-start our recovery.
“At the moment, any extra money spent bolstering services and supporting the economic recovery must be taken from other areas.
“That creates risks for our essential public services, jobs and businesses. I am therefore calling on the Chancellor to ease these rigid fiscal rules and give us the flexibility we need to properly address the monumental challenges our economy is facing.”
Following the publication of a Scottish Government blueprint for an £80bn coronavirus stimulus, Ms Forbes also asked for “greater ambition in the level of investment in our economy”, calling for “bold and practical policies that will boost consumption, promote investment and protect jobs”.
Mr Sunak is also facing calls from across the opposition benches to close loopholes in existing wage guarantee schemes that have seen millions of freelancers and self-employed workers miss out on government aid.
Yesterday the Caithness Lib Dem MP Jamie Stone chaired the first meeting of an all-party parliamentary group for Excluded UK, a campaign for those unable to access support schemes, and called on the Chancellor to meet those affected to hear their “heart-breaking stories”.
Labour Shadow Chancellor Anneliese Dodds said the government had “yet to rise to the scale of the unemployment crisis”.
She said: “The urgent priority right now is to prevent additional unnecessary unemployment in the first place by abandoning the Government’s ‘one-size-fits-all’ approach,”