Labour plans to extend job guarantee plan

Labour’s flagship jobs guarantee would be in place throughout the next Parliament, paid for by a bank bonus tax and a squeeze on high-earners’ pension pots, the party said.

The pledge to include a five-year help package for the long-term unemployed in the 2015 general election manifesto comes less than a month after it said it was only being promised for one year.

Under the scheme, under-25s on Jobseeker’s Allowance for more than a year – two years for others – would have to take a taxpayer-subsidised job for six months or risk losing benefits.

Firms and voluntary sector groups would provide 25 hours’ employment a week over six months at the national minimum wage – with the Government paying the wages and employers’ National Insurance.

Another £500 per employee would be supplied towards training – which would be compulsory for participants – and administration costs.

Labour said only firms that could show they were not using the scheme to replace existing workers or reduce their hours would qualify for funding.

Last month the party confirmed reports that funding – also including the proceeds of restricting pension tax relief for high earners – was only in place for 2015/16.

Now it says the scheme – estimated on present claimant levels to cost £1.9 billion in its first year and £900 million a year thereafter – is affordable right through to 2020.

A “cautious estimate” put the revenue from a fresh raid on annual City payouts at between £1.5 billion and £2 billion – with £900 million to £1.3 billion a year brought in by the pension switch, it said.

That will see the rate of pension tax relief afforded those earning £150,000 a year or more cut to the same 20% level applied to basic rate taxpayers.

Even on the lower estimate of revenues the changes to pensions tax relief will cover the costs of the Compulsory Jobs Guarantee after the first year, the party said.

That did not account for the resultant reductions in benefit payments and the ability to shut down other schemes reducing the costs, it added.

The Opposition also sought to stem Tory accusations of unfunded policies by insisting the scheme would be the only thing paid for by a tax on bank bonuses.

Shadow chancellor Ed Balls has faced regular taunts from Conservative MPs for promising to use the bank bonus tax proceeds many times over for different spending pledges.

He said social housing and the regional growth fund would both benefit when he first announced the party’s intention to target the financial sector excesses in 2011.

But a spokesman said priorities since changed and the jobs guarantee was now “the only policy which will be funded by the bank bonus tax and the proposed changes to pension tax relief”.

Mr Balls said: “It’s shocking that the number of young people stuck on the dole for more than a year has doubled under David Cameron.

“For tens of thousands of young people who cannot find work this is no recovery at all.

“We’ve got to put this right. So if Labour wins the next election we will get young people and the long-term unemployed off benefits and into work.”

He said evidence of a return to soaring annual bonuses for bankers shows “i t’s fair to pay for our jobs plan with a repeat of Labour’s tax on bank bonuses”.

“We need a recovery for the many, not just a few at the top.

“As a country we simply cannot afford to be wasting the talents of thousands of young people and leaving them stuck on the dole for years on end. It’s bad for them, it’s bad for our economy and it’s bad for taxpayers who have to pay the bill.”

Jobs minister Esther McVey said more than 60,000 young people had taken up work experience through a Jobcentre Plus placement in the last year.

Surveys suggested 40% who did so went on to get a job, she said, pointing to i ndependent statistics showing the number of young people in work rose by almost 50,000 in the last three months.

” All young people should hold onto their dreams of what they want to become – but the way to get there is having opportunities to get your foot in the door so you can then work your way up.

” Young people tell me they need work experience to get a job, but they need a job to get work experience – and as part of the Government’s long-term economic plan we’re helping them do just that.”

The Conservatives said Treasury estimates put the cost of the jobs guarantee at £2.6 billion every year and suggested the bonus tax and pensions squeeze would not raise any money.

The Labour chancellor who first imposed the tax, Alistair Darling, said at the time it was a “one off” measure as City chiefs would quickly find ways to evade it, the Tories said.

And it said analysis by the Institute for Fiscal Studies showed Government measures had ” actually already raised this money and probably slightly more from the same group of people”.

Financial Secretary to the Treasury Sajid Javid said: “Labour’s sums don’t add up. They are proposing yet more unfunded spending, meaning more borrowing and more taxes to pay for it.

“And Labour’s bank tax is a short-term political gimmick that they want to spend ten times over.

“It’s the same old Labour. Ed Miliband has no economic plan. Labour would put the recovery at risk, put jobs at risk and hardworking people would pay the price with a less secure future.”