The onslaught against working families continues

The government's response to youth unemployment will squeeze the "squeezed middle" even further.

If today's report proves correct then tomorrow Nick Clegg will announce a further blow for low-to-middle income families in order to pay for a new programme for the young unemployed.

Let's start with the better, latter, half of that sentence. The new programme will, according to insiders, walk and talk like Labour's "Future Jobs Fund", which offered incentives to employers to take on 18-24 year olds who had been out of work for more than 6 months. In case it has passed you by, this is the very programme that David Cameron likes to mock as being profligate and ineffective. Hence the new coalition version of it will under no circumstances be called by the same name (no doubt some Whitehall wag would have proposed the moniker "the fund for future jobs" -- but I'm guessing coalition ministers will have screened that out).

We'll find out tomorrow what the scheme looks like but if, as seems likely, the coalition has decided to swallow its ideological opposition to wage subsidies going to firms in order to encourage them to take on the young unemployed, then that is to be welcomed -- though it is scandalous that it's taken youth unemployment to reach 1 million to bring this about.

Now let's turn to how the nastier element of tomorrow's promised announcement: how it is to be paid for. Assuming the FT hasn't got it wrong, then the money will be found by the decision not to uprate tax-credits in line with inflation. Which is odd, iniquitous, and revealing all at the same time.


It's a bit odd because the Treasury has already banked the savings from freezing the working tax credit for the next three years. Which leaves the other big area of spending: child tax-credit. But here the coalition has sought to burnish their progressive credentials by announcing that they will over index the child element for the next few years (in an attempt to demonstrate some commitment to the child poverty target). Doubtless HM Treasury will have some wheeze up its sleeve for changing the indexing system for this child tax-credits - perhaps by uprating in line with earnings for this year, not inflation. But if this is the case they will face the charge they have broken with the spirit of the key spending commitment they have made on helping families with low-income children.

It's iniquitous because this will hit precisely those families who have already been on the end of the most severe squeeze of their lives. This April they already saw a major hit to support for childcare paid out via the tax credit system. This, along with other changes to tax-credits, mean that a single parent on £28k with two kids is losing £1,300 this year; or a couple with two kids on a joint income in the high £30ks is losing £2800 this year. And these cuts are a mere warm up for more than £1bn of further reductions to tax-credits that have already been announced and will commence in April 2012 - all of them targeted at the same families.

And let's not forget yesterday's news that median wages have plummeted 3.5% in real terms this year, far more for the low paid. So families whose wages are falling at a rapid rate, who have already been severely hit by April's budget cuts, and will be made poorer still in April 2012, are about to be told that they are first in line to take a cut to pay for a new programme.

Which is why this decision is also revealing. It demonstrates very clearly the knee-jerk response of ministers when pressed to find resources for a new funding pressure: take it from families getting tax-credits.

To be clear, I'm all for more action to deal with youth unemployment -- indeed, I suspect that I'd want something more ambitious than what is likely to be announced tomorrow. And that, of course, has got to be paid for. But not by low-to-middle income families.

It's not as if there are no alternatives. Labour will pursue their line that this should be funded through a tax on bankers' bonuses - and for all its well rehearsed feel, this will still strike a chord with many. But if the coalition didn't want to turn to the City there are other principled alternatives. The £7bn-£8bn spent on higher rate pension tax relief? Or stopping affluent pensioners receiving winter fuel allowance?

If this goes ahead, then don't let anyone say there was no alternative. Youth unemployment could be tackled without a further unnecessary squeeze on low-to-middle income Britain.


Gavin Kelly is a former Downing Street adviser to Gordon Brown and Tony Blair. He tweets @GavinJKelly1.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.