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New job creation plan needed to prevent New Year spike in unemployment

14 December 2020

The Economic Affairs Committee publishes its report ‘Employment and COVID-19: time for a new deal’, which urges the Government to shift spending away from wage subsidies towards creating new jobs to prevent a spike in unemployment next year.


The Government needs to shift spending away from wage subsidies and towards creating new jobs, if it is to prevent a spike in unemployment next year. It must focus spending on creating job opportunities for people who are most at risk of unemployment in sectors which need workers urgently and that are sustainable.

This means creating jobs to repair the UK’s ‘social infrastructure’, the urgency of which has been exposed during the COVID-19 pandemic, by increasing the number of social care workers and investing in the childcare sector. It means prioritising sustainable infrastructure projects that can be delivered at scale, quickly, and across the whole of the UK.

The Government should also introduce a new job, skills and training guarantee, available to every young person not in full-time education or employment for one year. It should enhance its existing skills, training and employment support policies, including the Kickstart and the Restart programmes which need to be better co-ordinated if they are to be successful.

Chair’s comments

Lord Forsyth of Drumlean, Chair of the Economic Affairs Committee, said: 

“The Government has given the impression that the economic crisis will be short-lived and everything will be fine by the spring. It also assumes that the good news on the vaccine means that the economy and labour market will no longer need support. Both of these assumptions are wrong.

“The sectors with jobs that historically lead labour market recoveries – hospitality, retail and leisure – have been flattened. They are likely to be in a worse state in the spring when wage support ends. Unemployment will spike.

“The Government is sleepwalking into an unemployment crisis. The Chancellor needs to get ahead of the curve to avoid being in the same position as he was in the autumn. He needs a strategy urgently for what comes next and this report sets out a comprehensive plan to save the prospects of a generation of young people.”

The Committee’s other key findings and conclusions include: 

  • The economic impact of the COVID-19 pandemic, which is the largest economic shock in 300 years, has not been shared equally. Many higher paid workers experienced little or no economic hardship, whereas the youngest and lowest paid workers have experienced significant damage to their livelihoods and prospects. The Government needs to recognise this in plans for the recovery.
  • A significant proportion of the debt from the COVID-19 loan schemes will never be repaid. The Government should create a new state entity to manage debt and repayments, along the lines of the UK Recovery Corporation proposed by TheCityUK, and loans should be converted into more manageable obligations such as contingent tax liabilities or 'student loan-type' structures.
  • The temporary increases to Universal Credit should be made permanent, including the £20 per week increase to the Standard Allowance. The Government should also ensure that those on legacy benefits receive a comparable uplift, review the level of the benefit cap and increase the generosity of social security for struggling families.
  • The cost of providing adequate sick leave to quarantined workers is small in comparison to the cost of them not isolating and spreading the virus further. The Government should raise the level of statutory sick pay and expand eligibility to the lowest paid.

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