Anthony Browne: An employers' NI holiday would be simpler and more effective than handouts for companies hiring the jobless
Nick Clegg’s announcement of £1bn worth of programmes to help the young unemployed is more than welcome. I have made the point on this site several times that the government has to be on the front foot on the battle against unemployment. It is obviously (as Tim pointed out) unfortunate that the Lib Dems briefed that getting the Tories to agree to job subsidies for the young unemployed was like getting a vegetarian to eat a kebab. The leak was clearly aimed at making the Tories seem like the nasty party, but I suspect that many senior Tories did indeed have reservations about the scheme – not because they don’t support the principle of it, or don’t want to help the unemployed, but because they are worried about the effectiveness of it. When Labour introduced their Future Jobs Fund - paying the entire cost of giving unemployed people a job for six months in the public sector – many leading Conservatives (and indeed business groups) were scathing, because such job subsidy schemes have previously proved futile. Non-jobs are invented to put the jobless in, who are then back on the dole when the subsidy finishes. The coalition’s Youth Contract, by contrast, is far better designed, for two reasons – the government will only pay at most half the cost of giving someone a job, and it is in the private as well as public sector. Private companies are less inclined to invent non-jobs than the public sector, and if they are paying half the wages, they will certainly be keen to ensure the new workers are doing something worthwhile – which means they are more likely to want to keep them when the subsidy finishes.
Some commentators have said that the relatively low take up of the government’s scheme of giving NI holidays for startups taking on workers (only 5,000 have done so) shows that there is little appetite for such NI holiday schemes. I don’t think that is the case. The NI holiday for startups is narrowly defined – it is obviously only for new companies (not all companies, or public sector employers) and doesn’t apply to London and the South East, the two regions with the greatest number of startups. The limited scope of it means that it has been difficult to give it wide publicity – ministers can’t loudly trumpet a policy that only applies to parts of the country. The result is low awareness of the scheme (as the government has admitted), which in turn has led to low take up. In contrast, a scheme that enabled all employers to get NI holidays for giving a job to the jobless could be very widely promoted – it would apply to all employers, public, private, small or big, in every area of the country. Furthermore, it would be pretty straightforward to introduce it not just as an emergency measure, but as a permanent feature of the labour market. There are strong arguments for giving incentives for employers to give jobs to the jobless in boom times as well as busts.