Covid-19: Economy

Lord Layard Excerpts

Thursday 4th June 2020 Lords Chamber

[Lord Layard (Lab)]

My Lords, the huge danger that we face is mass long-term unemployment. Once that takes root, it is extremely difficult to reduce it. It kills the human spirit but also of course costs the Exchequer a lot of money. However, there is a well-tested way to prevent it, which is an active labour market policy. Instead of paying people money for doing nothing, we pay employers to employ them to do something useful. That is what we did for young people under 25 after the financial crisis. It was called the young person’s guarantee. Once these young people were long-term unemployed, their benefits ceased and instead they were offered a guarantee of work at the rate of the job for at least 25 hours a week for at least six months. The jobs were with regular employers, the state paid the basic wage and the employers had to compete for access to the workers on these terms by offering meaningful jobs, including training. When the programme was evaluated, it was found to have raised the employability of those who went on it by at least a quarter, and the net cost to the Exchequer was under half the gross cost.

The crisis that we now face is much greater than after the financial crash. It is a crisis that, as we know, was rightly and deliberately created by the Government, and I think that puts an especial responsibility on the Government to the victims of the slump that they have created. That responsibility has to extend this time to people of all ages, so we need more than a young person’s guarantee: we need a guarantee to workers of all ages that they will not be left to drift into long-term unemployment. For any worker approaching a year’s unemployment, there should be a job guarantee and we should then support people’s incomes only through work, not through inactivity. To find the jobs that we need, the state should pay the minimum wage for at least 25 hours a week for the first six months that an employer employs an at-risk person.

This is not pie in the sky; we have decades of experience of it. I ask the Minister to meet with some labour market experts to discuss what should be done this time around.