Sunak will offer £4.3bn New Deal to a million jobless
RISHI SUNAK will today unveil a £4.3 billion New Deal-style package to get one million people back into work, amid warnings that unemployment could continue rising until next summer.
The Chancellor will promise that no one will be left “without hope or opportunity” after redundancies reached record levels.
The Office for Budget Responsibility, the Treasury’s watchdog, is expected to predict that unemployment, currently at 4.8 per cent, could go as high as 8 per cent by next summer – after the end of the furlough scheme – before it starts to fall.
The OBR is also expected to forecast that the economy will have shrunk by 10 per cent by the end of this year, the worst performance in 300 years.
Public service spending is on course to reach 60 per cent of GDP this financial year, a level not seen since the Second World War, with the cost of Covid predicted to rise to £400 billion by the end of the year. The Resolution Founda
tion think tank believes the OBR will forecast a permanent reduction of 3 per cent in GDP due to the economic “scarring” of coronavirus, the equivalent of £1,000 per person.
Mr Sunak’s decision to find billions of pounds for jobs support in today’s Spending Review will be seen as an acknowledgement that the unemployment crisis has a long way to go.
He will pledge to “create and support” hundreds of thousands of jobs through tens of billions of pounds of investment in infrastructure, including roads, houses, railways and cycle lanes.
A £2.9 billion Restart scheme will help the long-term unemployed to find jobs by giving them “intensive, tailored” support to meet their individual circumstances.
Another £1.4 billion will be allocated to Job Centres, which will help the short-term unemployed back into work.
The Chancellor will also extend the apprenticeship hiring incentive – that pays employers £2,000 for every new apprentice they hire – to the end of March, when the new tier system of Covid restrictions will also end. The
jobs schemes will effectively replace furlough, which ends on March 31. Mr Sunak is also expected to announce a freeze on public sector pay to help claw back some of the cost of Covid support, as well as reducing foreign aid spending from 0.7 per cent of national income to 0.5 per cent.
The review, which was originally intended to take in the next three years of government finances, will only cover the next year because of the financial uncertainty created by coronavirus.
It is not expected to contain any tax rises, which will be put off until at least the next Budget, which will come
before the end of the current financial year. However, he is likely to leave little doubt that tax rises will be inevitable in the near future.
Mr Sunak said his “number one priority is to protect jobs and livelihoods across the UK”.
He added: “This Spending Review will ensure hundreds of thousands of jobs are supported and protected in the acute phase of this crisis and beyond with a multibillion-pound package of investment to ensure that no one is left without hope or opportunity”.
Last night, the Institute of Employment Studies said it expected that up to 200,000 people who began claiming benefits during the pandemic to have reached long-term unemployment by next summer, when Mr Sunak’s Restart programme is likely to roll out.
Earlier in the year, the Chancellor launched a Kickstart scheme aimed at getting 18- 24-year- olds into work, which will receive £ 1.6 billion of
funding in 2021-22. It is aimed at creating 250,000 government-subsidised jobs. He will also confirm a £375 million package to support skills by offering people training to change career.
The announcements will draw comparisons with Franklin D Roosevelt’s New Deal policy of the Thirties, designed to get Americans back to work through major investments in public works after the Great Depression.
A Treasury source said the “concept” bore some similarities with the New Deal but it did not merit comparison in terms of scale.
The Department for Work and Pensions has released an impact assessment of the Work Programme set up for the long-term unemployed by David Cameron’s administration in 2011.
It f ound that j ob s eekers who enrolled on the programme spent on average 17 more days in employment and 26 fewer days in receipt of benefits over a two-year period.
Treasury insiders have confirmed that Mr Sunak will not be extending the £20 weekly uplift in universal credit, with no final decision until March.
Mr Sunak is currently studying proposals to align capital gains tax with income tax, as recommended by the Office for Tax Simplification, which would see the levy rise to 45 per cent for higher and additional taxpayers.
However, government i nsiders believe the Chancellor is likely to “come through the middle” and lift the highest rates from 20 per cent to 30 per cent, although any decision is unlikely to be taken for several months.
Reforms to various reliefs that apply to CGT, including entrepreneurs’ relief, are also likely to be considered. He is also looking at scrapping higher rates of pensions tax relief and introducing a flat rate of 25 per cent, in a move likely to save the Exchequer between £4 billion and £10 billion a year.
However, in a letter sent to Mr Sunak last night, more than 40 Tory MPS urged him to avoid raising taxes and to focus instead on pro-growth policies as a means of raising revenues and getting control of the public finances.