Chancellor announces £3bn unemployment scheme and minimum wage increases

Government pledges tailored support for those out of work for more than a year, but warns joblessness could peak at 2.6 million in 2021

Chancellor Rishi Sunak has pledged billions of pounds in funding to help the long-term unemployed into work as part of plans to support the economy during the coming year.

Setting out the government’s spending review this afternoon, Sunak announced he would be creating a £3bn ‘Restart’ programme to provide those who have been out of work for more than 12 months with tailored job-seeking support.

However, the chancellor said he expected unemployment to continue to rise well into 2021. “Despite the extraordinary support we’ve provided, the [Office for Budget Responsibility] expects unemployment to rise to a peak in the second quarter of next year of 7.5 per cent – 2.6 million people,” he said.

As expected, Sunak also used the statement to announce a freeze to public sector pay – albeit with exceptions for some NHS staff. “Coronavirus has deepened the disparity between public and private sector wages,” he said, adding that while in the six months to September, private sector wages fell by almost 1 per cent, public sector wages increased by nearly 4 per cent.

“Unlike workers in the private sector who have lost jobs, been furloughed, seen wages cut and hours reduced, the public sector has not,” Sunak added. “In such a difficult context for the private sector, especially for those people working in sectors like retail, hospitality and leisure, I can not justify a significant across the board pay increase for all public sector workers.”

Instead, Sunak announced a pay rise for more than a million nurses, doctors and other NHS workers, and guaranteed pay increase of at least £250 for any public sector worker earning under the national median wage of £24,000.

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He also said the government would be accepting the advice of the Low Pay Commission by increasing the national living wage by 2.2 per cent to £8.91 per hour, as well as extending eligibility to those over the age of 23. The national minimum wage will also receive an increase.

“Taken together, these minimum wage increases will likely benefit around two million people,” he said. “A full-time worker on the national living wage will see their annual earnings increase by £345 next year.”

Commenting on the announcement, Neil Carberry, chief executive of the Recruitment & Employment Confederation (REC), said collaboration between businesses and the government was needed to make the government’s Restart scheme work.

“We're already working with government to support businesses and workers in navigating the recovery, including through the Kickstart scheme, which the REC is facilitating to get more workers into the employment industry,” he said. “A close partnership with government to ensure jobseekers can access the expertise of professional recruiters through Jobcentres will allow the Restart scheme to make a big difference.”

Carberry also called for reform of the apprenticeship levy – an issue the chancellor briefly mentioned but did not go into any detail about. “The levy must be broadened so temporary workers can access high-quality, shorter training courses – the kind that are needed now to help people transition into growing industries and support the government's ambitions for regional infrastructure,” he said.