Under this Labour government, once-in-a-generation employment reforms are like London buses – you wait an age for one and then two come along at once.
Following October’s workers’ rights changes, yesterday work and pensions secretary Liz Kendall announced the biggest reforms to employment support “in a generation”. Under plans set out in the Get Britain Working white paper, the government aims to overhaul job centres, provide new training opportunities for young people and review employers’ roles in making work accessible for those with disabilities and health conditions.
But, despite pledging £240m to fund the initiative, Labour already faces an uphill battle in trying to reach its ambitious targets.
The reasons for the government’s employment push are clear. More than 9.2 million people in the UK are currently classed as economically inactive. This is a particular problem among young people, with one in eight 18- to 24-year-olds currently not in education, employment or training. Economic inactivity is also rife among those with health conditions, with a record 2.8 million out of work due to long-term sickness.
There are inherent contradictions in Labour’s approach to employment policy
However, the government has set itself a high bar for success. Its ambition to raise the employment rate to 80% by the end of this parliament feels unachievable. Since 1961, the UK’s employment rate has only been above 75% a handful of times – it currently sits at 74.8% and hit an all-time high of 76.2% in February 2020.
In order to reach the magic 80%, an extra 1.7 million people will need to be helped into work. Although additional support for the long-term sick and new training opportunities for the country’s youth are welcome, this target cannot be achieved without more job creation.
An incoherent set of policies
But this aspect of country’s the economy is faltering. The UK’s vacancy rate is tanking. It has been consistently falling for the past 28 months and dropped by a further 35,000 in October.
The announcements in last month’s Autumn budget are only likely to accelerate this trend. Employers are having to contend with the largest increase to the minimum wage on record, an uptick in their national insurance contributions and comprehensive changes to workers’ rights, which the government estimates could cost employers £5bn.
Business leaders claim the additional tax burden is already forcing them to review recruitment plans, with 62% of companies surveyed by the Confederation of British Industries (CBI) saying they will hire fewer people as a result. The UK’s retail and hospitality bosses have also warned that the national insurance rise will make job losses “inevitable”.
The government can’t address the worklessness crisis in isolation
Questions also hang over the employment rights bill, which received a red rating from the Regulatory Policy Committee on Monday – the lowest possible rating the scrutiny body can issue. It judged the proposals in the bill unfit for purpose and said they could “make it more difficult for those unemployed or economically inactive to access jobs”.
This highlights the inherent contradictions in Labour’s approach to employment policy. The government is simultaneously encouraging higher employment rates and increasing the cost of employment.
The government can’t address the worklessness crisis in isolation. Labour must start listening to the concerns of the private sector if it wants to see an uptick in the employment figures. As Matthew Percival, work and skills director at the CBI, points out: “Employers have a key role to play in supporting the delivery of the government’s objectives. There’s no doubt that rising taxes and employment costs will make it more difficult for them to do so.”
Recent weeks have seen fresh rounds of redundancies at some of the country’s largest employers, including Asda, Ford, Deloitte, Santander and, most recently, Vauxhall, after carmaker Stellantis announced plans to shut its Luton plant.
Against this backdrop, Labour’s plans to get Britain working are already off to a bad start.
