The government will hand £1bn to private firms in a bid to tackle rising youth unemployment, Nick Clegg, the deputy Prime Minister, will announce today.
Under the “Youth Contract”, firms will be eligible for a subsidy of £2,275 for each employee aged 18 to 24 years old they take on. There will be 160,000 such subsidies – equivalent to half the minimum wage for six months – available over the next three years.
Clegg will say: “Youth unemployment is an economic waste and a slow-burn social disaster. If people are out of work when they’re young they bear the scars for decades.”
He added: “This is a £1bn package… that gets young people into proper, lasting jobs in the private sector.”
The coalition is desperate to cut youth unemployment, which surged to a 17-year high last month. Official statistics show unemployment among 16 to 24 year olds is now 1.02m, or 21.9 per cent of the workforce in that age group.
George Osborne, the chancellor, will outline how the government plans to pay for the £1bn package in his autumn statement on Tuesday. One possibility under consideration is freeing up cash by cutting tax credits.
Business groups welcomed the plan. John Cridland, director-general of employers’ organisation the CBI, said: “This will encourage firms to take a gamble on a young inexperienced person and help tackle the scourge of youth unemployment.”
Dr Adam Marshall, director of policy at the British Chamber of Commerce, added: “This package, aimed at tackling the problem of record levels of young people out of work, is welcome.”
The decision to use wage subsidies to boost employment is something of a U-turn for the coalition, which quickly scrapped £1.3bn of similar payments, instigated by the Labour party, when it came to power.
In a bid to ensure the cash helps those who need it most, the vast majority of subsidies will only be available to employers who take on a young person who has been on jobseeker’s allowance for at least nine months.
The government is keen to avoid the mistakes of Labour’s Future Jobs Fund, which was widely criticised for helping employers cut the cost of taking on university graduates they would have hired regardless.
Clegg is also expected to announce funding for 250,000 work experience placements; 20,000 smaller incentive payments to encourage employers to take on apprentices; and a new programme designed to prepare “disengaged” 16 to 17 year olds for work.