The Chancellor’s Summer Statement set out plans to keep people afloat by protecting existing jobs, and creating new ones. But it was a missed opportunity to provide the urgent support families being swept into poverty by the financial pressures of the pandemic need.
The £30 billion of spending announced by the Chancellor is a significant and welcome intervention to support the economy. Many of the interventions announced draw on previous government schemes that have proven successful in creating jobs and opportunities. But there are still people missing out, particularly older workers, and there was little to boost immediate support for families whose income losses and rising costs are pulling them under.
The Kickstart scheme – which will fund six-month jobs at the minimum wage for young people at the highest risk of long-term unemployment – draws heavily on the evidence of the Future Jobs Fund, which was proven to improve employment outcomes and reduce social security claims among participants in the scheme. Combined with additional support for traineeships and apprenticeships, and an expanded Youth Offer delivered by DWP, the Government has announced a comprehensive package of measures aimed at avoiding the scarring effects of unemployment on a generation of young people.
Whilst the focus on young people is welcome and necessary, the lack of any additional support for those over 25 to re-skill and re-train is a notable omission. Experience from previous recessions points to adults with fewer formal qualifications, or those working in hard hit industries, as equally vulnerable to long-term unemployment as other groups. The Conservative’s 2019 manifesto committed to creating a £3 billion National Skills Fund, and it is a surprise that this wasn’t one of the interventions being brought forward in the Summer Statement. We’d encourage the Government to look at this closely before the Spending Review in the Autumn.
Several other initiatives announced by the Government in the last week, including the £5 billion investments in infrastructure and the Green Homes Grant, are well worn government interventions seeking to stimulate economic activity. Both have proven to be successful in the past at creating job opportunities. However, if they are to benefit those on low incomes, it’s vital that support for training and skills is made available to boost people’s prospects of accessing the newly created jobs. Work coaches in Jobcentre Plus, whose numbers will double thanks to £895 million of extra funding, should take note.
But whilst many of the announcements drew from government’s previous experiences, there were others that responded to the specific challenges facing the economy now. The lockdown’s heavy impact on businesses in hospitality, leisure and tourism has been widely recognised, not least by the Chancellor. He highlighted how 1.4 million jobs in hospitality were furloughed, by far the highest proportion of any sector. A cut in VAT and the more experimental ‘Eat Out to Help Out’ scheme are designed to encourage a return to spending to protect jobs.
These measures might protect some jobs in these sectors, but it is unlikely to be enough to stave off a big rise in unemployment in the next few months. Government will hope that it has done enough to increase sales and secure jobs that are disproportionately held by younger workers, women and people from Black, Asian and minority communities. Who works in these industries is particularly important, as many of the job creation schemes the Government has outlined to date are likely to be in sectors, such as construction, where male workers dominate.
The Chancellor sought to encourage other businesses who have furloughed workers to avoid making redundancies by offering a Job Retention Bonus of a £1,000. This rewards businesses for doing the ‘right’ thing, rather than recouping costs from those who make redundancies – a feature of similar schemes in European countries. But there’s a big risk in this policy. The financial incentive may be too low to alter a business’ decision on staff retention, and there’s a high chance that businesses who would have retained staff regardless benefit most. A key test will be how many businesses in those hardest hit sectors – non-food retail, hospitality, leisure and tourism – benefit from the scheme.
For all the welcome support for jobs and employment, there was nothing in the Summer Statement to provide an immediate lifeline for families struggling to stay afloat. The Government highlighted, correctly, that their interventions to date have benefited those on the lowest incomes the most. However, this doesn’t acknowledge the real financial pressures many families are facing through the coronavirus pandemic.
Our recent research with Save the Children found that the crisis is causing 7 in 10 families with children claiming Universal Credit or Tax Credits to cut back on essentials, 6 in 10 to borrow money and over 5 in 10 to be behind on rent or other essential bills. The Government should urgently extend its lifeline for families with children, with an urgent £20 per week increase to the child element of Universal Credit and Child Tax Credit to support those struggling to stay afloat and help prevent another wave of families being swept into hardship.