Good news on the jobs front, but why is the Youth Contract not working?

A year on from its launch, the Youth Contract looks feeble in comparison to the problem it is trying to solve. It's time for a jobs guarantee.

Today’s labour market statistics continued the good news of recent months. Employment rose at the fastest annual rate since 1989, and the inactivity rate, the proportion of the population neither in work or looking for a job, is at its lowest level since 1991. Whilst there are legitimate questions about how this 'jobs miracle' is possible given the poor state of the economy, we should be very encouraged that of all the issues the UK faces, job creation does not appear to be one of them at the moment.

But behind the positive headline numbers there are still some sections of the population facing a very difficult jobs market. Youth unemployment, which was falling at an encouraging pace until a few months ago, appears now to be stuck in reverse, with the number of young people unemployed rising 11,000 in the latest quarter. Even more worrying, the number of young people unemployed for over a year, and in danger of permanent wage scarring and disconnection from the labour market, is up by 10,000. There are some positive signs, with the numbers of economically inactive youth falling and employment amongst the group rising, but the high level of unemployment points towards a large proportion of the young being left behind as the labour market improves overall.

And what is being done about it? The coalition’s Youth Contract, launched over a year ago, aimed for a radical increase in support for young people’s entry into work, providing incentives for employers to take on young employees, increases in apprenticeship numbers, and greater provision of work experience placements. It was hoped to be, in the words of Nick Clegg, "a major moment for Britain’s unemployed young people".

And where are we now? Today’s data shows that youth unemployment remains stubbornly high. A week ago Cait Reilly succeeded in challenging the DWP over its mandatory work activity scheme. And last month the latest apprenticeships data showed that new places were disproportionately going to the over-25s, with the number of school-leavers moving into apprenticeships actually falling. A year on, the Youth Contract looks feeble in comparison to the problem it is trying to solve.

A better approach would be to tackle both the short and long-term causes of youth unemployment head on. Firstly, IPPR has suggested that a jobs guarantee be adopted, with anyone unemployed and claiming Jobseeker's Allowance (JSA) for over 12 months offered a paid job at the minimum wage. There were almost 80,000 young people in this group in December, a rise of 35,000 on a year ago. This would offer instant help to them, and is a fundamentally better policy than making people work for their JSA.

Over the longer-term, we need a revolution in how the system of transition from school to work operates. At the moment, most of the 50 per cent of young people who don’t go to university are faced with poorly-funded careers advice, low-quality or non-existent apprenticeship places, and a confusing plethora of vocational education options of variable worth. This group are being ill-served by the system, which doesn’t offer the skills or the experience needed for them to fully flourish in 21st century Britain.

Changing the deeply ingrained transition system will be difficult, but the evidence from other countries suggests it is not impossible, if the will from politicians, employers, unions and wider society is there. IPPR is currently carrying out a major research project in order to learn valuable international lessons on youth unemployment that can be applied to a UK context.

Today’s jobs data was great on most fronts. But if we fail to tackle the deeply-set issues around marginal groups in the labour force, including youth unemployment, we are in danger of a recovery for some, but one that misses out on those most in need.

Spencer Thompson is economic analyst at IPPR

Nick Clegg claimed the Youth Jobs Contract would be "a major moment for Britain’s unemployed young people". Photograph: Getty Images.

Spencer Thompson is economic analyst at IPPR

Photo: Getty
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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.