We need an enterprise revolution to tackle the scandal of youth unemployment

The coalition has failed to help would-be entrepreneurs innovate their way into work. Labour will show that we can do better.

Under this government, youth unemployment reached a staggering one million. Even more face the prospect of a low-skill, low-paid and insecure job. This has to change.

But we don’t just want to help people to get a job; we want to help those who want to create a job for themselves and for others. An enterprise revolution among our young people could help us tackle the scandal of youth unemployment – and help get our country back on its feet. And that’s what we’re setting as a Labour ambition today.

Today, Britain doesn’t do as well as it should in global enterprise league tables. In fact, if we had the same start-up rate as Germany or America, we could create another 200,000 new self-employment opportunities and businesses. That’s the conclusion of a brilliant new report written by Jamie Mitchell, former managing director of Innocent Drinks for Labour’s Youth Jobs Taskforce today.

The report is urgently needed. This week, we learned that the government’s much vaunted plan to help would-be entrepreneurs innovate their way into work is miles short of hitting its target. The New Enterprise Allowance was supposed to support 40,000 people set up shop. But it’s still 35% short of hitting its goal – and a measly 6% of young people have received help. We think we need to do better than that.

Jamie’s recommendations should be read and considered by anyone – and any party – who thinks that we can and should do better. Studying the pioneering work of Labour councils all over Britain, along with the great work of the Prince’s Trust and Young Enterprise, Jamie has handed us some big conclusions to think on.

First, we need to make sure enterprise isn’t just a bolt-on to careers advice. Enterprise needs to be recognised as a big option that’s open. There is no lack of talent, ideas or creativity among our young people. Our problem is that too much of this entrepreneurial energy is unrecognised or unsupported. Right now, JobCentres’ advice is mixed at best and what’s left of our careers service often gives enterprise only a fleeting mention.

Second, Jamie also encourages us to consider whether we could expand the Start Up Loan scheme, targeting young people aged 18-30, and how to put more emphasis on encouraging young unemployed people to consider the New Enterprise Allowance, which is on course to dramatically miss its targets. Local councils need to follow the example of trailblazers like Sheffield Council, which has built a team of school enterprise champions, academies like the Peter Jones Enterprise Academy offering enterprise qualifications, business networks offering advice, and universities offering incubator space, advice, training and even grants – all dedicated to boosting the ranks of local young entrepreneurs.

Next, we have to look at enterprise in schools. Young Enterprise for example, reckons that 42% of their alumni start a business during their career. That’s nearly twice the rate for those who join their programme. And finally, we need to think about how we measure outcomes a little better so that we know what works and what doesn’t.

This is a big ambition. It is to the next generation of entrepreneurs that we will look for the businesses that will help our nation thrive in a fast changing world, drive the innovation that will improve our lives, and create the decent jobs we need.

Jamie’s report is about putting entrepreneurship at the heart of our national story and builds on our ambition to make this happen - from our plans for a proper British Investment Bank with a network of regional banks to help businesses get the finance they need, to a revolution in skills giving firms the support, funding and responsibility to make this happen.

Our challenge is to open the floodgates of opportunity, giving our young people the chance to turn their good ideas into successful businesses.

Liam Byrne MP is a former technology entrepreneur and shadow work and pensions secretary

Chuka Umunna MP is shadow business secretary

Unemployed young people stand in line outside a job centre in London. Photograph: Getty Images.
Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR