Youth Employment

Steve McCabe Excerpts

Wednesday 13th July 2011 Commons Chamber

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I beg to move,

That leave be given to bring in a Bill to establish a programme to provide training and employment opportunities for unemployed young people between the ages of 16 and 25; to establish a comprehensive careers guidance service for young people seeking to enter the job market; to enable Apprenticeship Training Agencies to assist small businesses in employing apprentices; to provide small businesses with a National Insurance contributions holiday; to make provision for grants towards the wage costs of apprentices employed by small businesses; to make provision for a mechanism through which banks and other providers of financial services are required to allocate part of their bonus payment budget to support these measures; and for connected purposes.

Obviously, I welcome the small reduction in the figures announced today, but the truth is that we do not really know how high youth unemployment is in this country. The Prince’s Trust, which does such fantastic work with young people, claims that there are enough unemployed young people to fill every football stadium in the premier league, with almost 200,000 left queuing outside. It is true that youth unemployment is now much higher than it was in the second quarter of 2010. About 1,300 young people in my Selly Oak constituency are known to be unemployed. We also know that we now have the highest youth unemployment since 1992, and that one in five young people are unemployed.

John Philpott, the chief economic adviser of the Chartered Institute of Personnel and Development, argues that the best way to understand the full impact of unemployment on young people is to look at those not in education, employment or training. Helpfully, the Department for Education publishes those figures quarterly, and we can see from its statistics that youth unemployment is hovering around the 1 million mark. That is too high for a civilised society and a modern economy. How can we be optimistic about the future if we are prepared to subject our young people to a life of worklessness? How can parents have faith in a Government who are willing to let this happen? I witnessed it happen to a generation in the 1980s, and I do not want to see it happen again. That is why I am arguing that we need a fresh initiative to tackle the problem.

I want us to create a training and employment programme for those aged 16 to 25, because I believe that that is the only realistic way to tackle a problem of that size. That kind of unemployment can have long-term damaging effects. It is estimated that a period of unemployment at the beginning of someone’s career can have a significant scarring effect through their entire working life. Bell and Blanchflower argue that unemployment when young, especially for a lengthy period, causes permanent scars. It raises the probability of being unemployed in later years and institutionalises a wage penalty over the course of a lifetime.

Those effects are much greater for younger people than for older people. Gregg and Tominey used the national child development study to argue that youth unemployment imposes an impact on individuals’ wages of 12% to 15% by the age of 42. Inactive young people are also more likely to be involved in crime, and significantly more likely to be unemployed later in life, as well as having a higher propensity for physical and mental health problems, and drug and alcohol abuse. We owe it to our young people to do everything we can to prevent that scar of unemployment.

We need an employment programme that offers hope and opportunity, and we need training designed to address the structural gaps in our system. There needs to be more focus on science, technology, engineering and maths to help to reduce some of the mismatches between young people and employers. STEM skills are essential in sectors that are key to the future of UK competitiveness, such as IT, pharmaceuticals and high-value manufacturing, yet two fifths of employers report difficulties in recruiting STEM-skilled staff.

As part of a sustained programme to tackle youth unemployment, we also need to sort out the mess that has developed in careers advice and support for young people, especially the vulnerable and those whom we describe as NEETs. This is exactly the wrong time for the confusion and doubt sweeping the country as the Connexions organisation reels under the weight of local government cuts. We were told that cuts in the Department for Education area grant would have a limited impact, but we now see careers advice across the country decimated. In Birmingham the jobs of 200 Connexions staff are in doubt, and in some parts of the country provision is already being reduced to little more than online advice and a telephone help service. Barnardo’s, which specialises in work with vulnerable young people, says that it is extremely concerned that the closure of Connexions centres will leave many young people without advice and support this summer.

When the Tory party talked about an “all-age careers service” in its pre-coalition, pre-election manifesto—we should remember that that is what people thought they were voting for—I wonder how many realised that that was code for transferring specialised support to Jobcentre Plus advisers. I am sure that those advisers do a good job, but they do not have specialised skills in working with young people, and of course they can work only with the 16 and 17-year-olds who receive jobseeker’s allowance, which means they will not be helping the vulnerable, such as the NEETs, and those who too easily slip through the net.

The Federation of Small Businesses, whose knowledge and experience of small businesses we should listen to, is calling for a nationwide effort to encourage apprenticeship training agencies to act as host employers for small businesses. It points out that only 8% of small businesses have taken on an apprentice in the past year, but that 14% would be encouraged to do so if a separate organisation dealt with matters such as training, administration and employment.

The FSB is urging the National Apprenticeship Service in England to promote the benefits of apprenticeship training agencies to small and micro-businesses. It is also calling for a national insurance contributions holiday to help small businesses to give our youngsters a chance. The current national insurance holiday helps only start-ups that employ up to 10 people. It may come as a surprise to hon. Members, but start-ups employing 10 people are not common—the FSB says that most of its 205,000 members actually employ five or fewer staff.

Government data suggest that about 3,000 businesses are benefiting from the current scheme, but the Government promised that 300,000 businesses would be set up as a result of it. That suggests that money is available to help micro-businesses that employ five or fewer staff. Ultimately, the Treasury would benefit from extending a national insurance holiday, because more people would pay tax.

Youth unemployment costs more than £23 million in benefits every week, and lost productivity costs about £10 million a day: £600 million pounds would be enough to fund 100,000 young people directly, and perhaps more, in a proper Government work and training programme. It could also be used to stimulate businesses, which could mean that 10,000 more youngsters were given a chance.

The public are ahead of us on this matter, because they know that we should fund such a programme from a levy on the money set aside for unearned bonuses for wealthy bankers, who are continuing to pay themselves money that they have not earned while the rest of the country suffers as a result. I commend the Bill to the House.