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Budget 2009: Chancellor moves on unemployment to avoid another ‘lost generation’

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Alistair Darling has promised not to allow short-term job losses to become long-term unemployment, announcing a raft of new measures aimed at helping the jobless gain skills and find work.

Under new proposals revealed in the Chancellor’s 2009 budget speech, the government said that people under 25 who had been unemployed for over 12 months would be offered either a job or a place in training. “We are acting decisively to prevent a new generation of young people becoming a lost generation,” he said.

The measures would not just protect people but also reduce the length and severity of the downturn and its impact on public finances in the medium term, he added.

The speech came just hours after figures were revealed showing that unemployment in the UK is continuing to rise, having gone beyond the 2 million mark earlier last month, and now stands at 2.1 million – the highest level since Labour came to power in 1997.

The Chancellor warned that unemployment would continue to rise even after the economy moves back into growth and said it was “morally and economically essential” to do as much as possible to get people back into work.

He described the currently overburdened Jobcentre Plus network as “the core of the government’s approach”, announcing that it was to receive an additional £1.7 billion, on top of £1.3 billion announced in November. Everyone should receive high-quality support, he said.

Targeted assistance

The government will provide targeted assistance to help the unemployed find a job as quickly as possible and gain new skills that would enable them to do this. Those in training will receive additional money on top of their benefits, MPs were told.

“To provide these extra opportunities, we are working with employers to create or support as many as 250,000 jobs,” said the Chancellor. “This will include delivering local services, traineeships in social care, and other high demand sectors – as well as jobs for people of all ages in particularly badly hit communities.”

He also pledged £260m for training and subsidies; and guaranteed to support every 16 and 17 year-old who wants to stay in education or training, pledging a further £250m to create an extra 54,000 places at colleges and sixth form centres.

Initial reaction to these announcements has been mixed but broadly positive. Trade Union Congress general secretary Brendan Barber welcomed the measures, but said that they were “still some way short” of what was needed. “The biggest drain on the public finances will be continuing mass unemployment and we needed a bigger and better-targeted stimulus,” he added.

John Philpott, chief economist at the Chartered Institute for Personnel and Development (CIPD) conceded that the Chancellor wasn’t really in a position to do much, but said that the package for young people offered good “bang for its buck”.

However, he warned that short term relief measures to assist young jobless people often do little to enhance their long term employability. “Providing support which is more than simply “make work” will be the acid test of this new initiative,” he said.

The British Retail Consortium had hoped to hear Darling say something that would have cut the cost of keeping people in jobs. “This ‘budget for jobs’ has done little to help under-pressure retailers keep people in work,” said a spokesman, adding: “Few share the chancellor’s optimism that the economy will be growing again by the end of this year.”

On the increase in statutory redundancy pay, from £350 to £380 a week, Martin Warren, head of employment law at Eversheds international law firm, said that while this is of comfort to employees who find themselves out of work, it will be unwelcome news for employers.

“The impact will also be greater for some businesses that offer employees agreed enhanced redundancy payment schemes that use statutory redundancy pay as the starting point for calculating payments,” he added.

Key budget measures regarding jobs and employment:

  • State redundancy pay is to rise from £350 to £380 a week.
  • Income tax will not go up this year for most, however those earning more than £150,000 will see an increase from 45% to 50% from April 2010.
  • Additional £1.7bn funding for jobseekers.
  • £260m new money for training and subsidies.
  • From January 2010 everyone aged under 25 unemployed for a year to get offer of job placement or training.
  • Pension tax relief restricted for those on incomes over £150,000 from April 2011. It will be gradually tapered to the same 20% rate received by most people.
  • 2 Responses

    1. October
      Hi Louise

      Although there is no specific mention in the Budget as to when it will be increased, a quick phone call to the powers that be has led me to believe that the rise in statutory redundancy pay will come into effect in October.

      Kind regards

      Lucie Mitchell
      Editor

    2. Statutory Redundancy Pay
      Was there a date given for the raise in the redundancy paymet to £380?

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