The Chancellor will today unveil a multi-billion-pound jobs package as the biggest unemployment crisis in a generation brews.
This includes £2billion to subsidise thousands of six-month work placements for 16 to 24-year-olds who are now facing long-term unemployment.
Spilling the tea on his plans while sipping from a £180 mug yesterday, Mr Sunak said: “Young people bear the brunt of most economic crises but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.
“We also know that youth unemployment has a long-term impact on jobs and wages, and we don’t want to see that happen to this generation.”
Unions welcomed his news but warned they would be “checking the small print” to make sure every job gives proper training and a route to steady employment. But some critics warn his plans could be too little, too late.
And amid fears youth unemployment could double to over a million by the end of the year, the National Institute of Economic and Social Research urged him to do “whatever it takes” to bolster the economy and save jobs.
Mr Sunak will set out broader plans in his mini-Budget in the Commons today but a bigger fiscal stimulus is not expected before the autumn. Measures he is understood to be considering include a stamp duty holiday to boost the housing market, a temporary cut in VAT and £500 vouchers for the public to spend on the high street.
The Treasury has admitted young people are more likely to have been on the job retention scheme, which stops in October – with three in 10 18 to 24-year-olds furloughed. One in 10 young people have already lost their jobs, many in sectors like retail and hospitality.
And the number of under-25s claiming unemployment benefits has doubled from 250,000 to 500,000 since March – while 700,000 young people are emerging from education to face an extremely difficult jobs market.
The National Institute of Economic and Social Research called on the Chancellor to extend the furlough scheme, which has protected over 9 million jobs over the lockdown and continues to support around 6 million workers.
It added: “Ending the scheme prematurely could lead to permanent long-term damage to the economy if those who become unemployed lose their skills and attachment to the labour market resulting in permanently higher unemployment and weaker productivity.”
NIESR analysis shows withdrawing the furlough scheme too early could lead to the permanent loss of £50bn of GDP per year – the equivalent of £750 per person.
Shadow Chancellor Anneliese Dodds said: “The Government is yet to rise to the scale of the unemployment crisis.
“The priority is to prevent additional unnecessary unemployment in the first place by abandoning the ‘one-size-fits-all’ approach to the removal of the Job Retention and Self-Employed schemes.”
Under the “kick-start” scheme, 16 to 24-year-olds on Universal Credit will be eligible for six-month placements with the state covering 100% of the minimum wage for 25 hours a week. Bosses, who can top up wages, get a £1,000 admin fee.
TUC chief Frances O’Grady, who is calling for a National Recovery Council including unions and business, welcomed the measure as a “good first step” to prevent mass youth unemployment. She added: “But we’ll be checking the small print to ensure every job provides proper training and a bridge to steady employment. Employers must do the right thing.
“They should work with unions to avoid job displacement, create good opportunities for all young workers and guarantee at least the real living wage.
“We must do all we can to avoid the misery of mass unemployment.”
But Lib Dem leadership candidate Layla Moran said: “It will sadly be too little too late for many of the corona class of 2020 and the thousands of young facing the threat of unemployment this year.
“Eighteen-year-olds could be left being paid just £161 a week under this scheme.
“We risk losing a generation who will never recover their earnings.”
The Resolution Foundation said the scheme could help up to 300,000 young into work – but must be delivered quickly.
RF economist Kathleen Henehan said: “Action to keep youth unemployment down is crucial to avoiding lasting damage to careers that are just getting started. History also shows it is crucial these jobs are created quickly.”
The IPPR think-tank warned youth unemployment could double to more than a million by the end of the year – and the Government package is not enough.
Harry Quilter-Pinner, senior research fellow, said: “Every day a young person spends out of work is a waste of their potential and a barrier to robust economic recovery. The Government is right to introduce a wage subsidy.
“This is a big step in the right direction. But… at least £3bn of investment would be needed to address the scale of the crisis. The Chancellor’s package falls short of this. He should be prepared to scale up this commitment if the recovery is slower than we hope.”
Among the job measures already announced are a £111million scheme for firms in England to get a £1,000 bonus if they offer unpaid traineeships. Mr Sunak will also detail a £3bn green package with grants for homeowners and public buildings to improve energy efficiency.
Meanwhile, the Chancellor faces pressure to drop new rules that could result in employees, especially those in the healthcare sectors, being hit with an extra tax bill for the coronavirus tests they take.
Treasury Committee chair Mel Stride, a Tory MP, said the move could make tax bills for doctors and nurses “mount up”, adding: “This risks deterring workers from taking employer-sponsored tests”.