Whoever takes on the job of Prime Minister inherits an economy facing a fundamental imbalance.
There are nine million 16 - 64-year-olds in the UK who are ‘economically inactive’. Yet despite this astonishing fact, we still have 700,000 job vacancies. That number of economically inactive people is unsustainable and comes with huge consequences for our welfare bill and our society. Meanwhile, businesses across the country report difficulties recruiting the staff they need, and this has only been made tougher in recent years by policies that make employing people even more difficult.
I spoke to Robert Forrester, the CEO of Vertu Motors, one of the largest car retailers in the country. He said the situation business finds itself in is like ‘death by a thousand cuts’, and that’s the sentiment shared by most business owners I speak to. If you’ve been reading my articles over the last year, you’ll be familiar with the following. But to recap, a small selection of the issues burdening, and in many cases killing, businesses include: the rise in Employers’ National Insurance, the added burden of the new Employment Rights Bill, National Living Wage increases outpacing both inflation and productivity growth and rising energy costs – all buffeted by the position of general economic uncertainty that the country finds itself in.
If the next Prime Minister wishes to foster economic growth, reduce welfare dependency and tackle poverty, they should recognise that business is a force for good and that it is in the national interest to introduce pro-business policy.
They can start by rewarding businesses that create opportunities. Currently, businesses are asked to shoulder all the risk when taking someone on who has been out of work for a prolonged period. The Jobs Foundation (JF) has a solution – create a nil-rate on Employers NICs for businesses when hiring someone from long-term unemployment or economic inactivity for up to a year.
The JF estimate that the policy could create 100,000 new jobs, and getting people from these disadvantaged groups both boosts the economy and would ease pressure on the welfare state.
The next Prime Minister should be conscious that employment rights matter. Workers deserve protection and fair treatment, but employment rights only have value if employers are able to create jobs in the first place. The expansion of day one employment rights won’t encourage hiring and will create unintended consequences for those who already face barriers to work.
The expansion of day one rights means firms will be much more cautious about hiring individuals with limited experience and gaps in employment history, but they’re exactly the sort of people who need opportunities the most. The next PM should consider reversing the changes brought in by this Government.
And last but not least, to get Britain working again the next PM should do their utmost to create thousands of new apprenticeships. We have nearly one million young people who are currently not in education, employment, or training.
Business would like to hire apprentices, but some, especially smaller firms without a dedicated HR department, struggle to get around the bureaucracy surrounding such schemes. The apprenticeship levy, in particular, is very inflexible and doesn’t sufficiently incentivise companies to bring new people in.
A solution to this is direct and accessible Skills Tax Relief. Backed by over 100 business leaders, Skills Tax Relief would allow businesses to recoup some of the costs of apprenticeships and other accredited training and could be worth in excess of £10 billion over five years in welfare savings, and that’s before we add additional income tax receipts the treasury would receive as a result of an increase in the number of working people.
The next Prime Minister will inherit a low growth economy with millions of people economically inactive, with little fiscal headroom and poor business confidence. But the good news is that the solutions to move towards solving these issues are emerging. What we need now is a willingness, and the vision, to identify and implement them.
