The chancellor’s spending review has not done enough to support businesses to develop the skills they need beyond the coronavirus crisis, experts have warned, despite plans to inject billions into helping the long-term unemployed back into work.
In his spending review yesterday (25 November), Rishi Sunak pledged to spend £3bn on a new ‘Restart’ programme to provide those who have been out of work for more than 12 months with tailored job-seeking support.
Sunak also announced plans to increase both the national living wage and the national minimum wage, as well as pay rises for some NHS staff and the lowest-paid public sector workers.
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However, Ben Willmott, head of public policy at the CIPD, said the spending review revealed a “big gap” on its promise to prioritise skills. He said the government’s ambition and level of investment in this area “fails to do enough” in the current crisis.
“Greater investment in skills will be crucial in tackling the UK’s poor workplace productivity performance,” Willmott said. “It would help equip people for changing job opportunities, give businesses the skills they need to survive and grow, support wage growth and help the economy recover lost ground as quickly as possible.”
Willmott welcomed the extra funding for Sunak’s Restart programme to address “spiralling” unemployment, but said it was crucial that support for the long-term unemployed provided access to training for both technical and transferable skills that will enable people to move across roles and sectors.
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And Kirstie Donnelly, chief executive of City & Guilds Group, said the Restart programme felt “backward-looking in scope” and lacked any detail about “how we’re going to support people to retrain and reskill now”.
“In order to get to grips with this unprecedented crisis, what we need are more creative and practical strategies designed to tackle today’s issues, to get away from a top-down, one-size-fits all approach and listen to the ideas and needs of local regions, and we need immediate action,” Donnelly said. “If it’s going to be crunch time for unemployment in six months, can we afford to let people wait 12 months before giving them the support they need?”
She called on the government to prioritise working with local authorities and businesses to create a national network of employment and training hubs within the regions most impacted by unemployment and to support reskilling back into meaningful employment.
In his statement, Sunak said unemployment would continue to rise into next year, with the Office for Budget Responsibility forecasting it to peak at 7.5 per cent, or 2.6 million people, at the end of 2021.
Alongside the announcement of his Restart scheme, Sunak said the government would increase the national living wage by 2.2 per cent to £8.91 per hour from April 2021, as well as extending eligibility to those over the age of 23, in line with recommendations from the Low Pay Commission. The national minimum wage will also see an increase.
Suank said these minimum wage increases would likely benefit around two million people, and that a full-time worker on the national living wage would see their annual earnings increase by £345 next year.
Bryan Sanderson, chair of the Low Pay Commission, acknowledged that recommending a minimum wage increase in the midst of an economic crisis coupled with the pandemic was a “formidable task”, but said: “There are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed.”
He added that the commission did not believe the increase in minimum wage presented a significant additional risk to employment prospects, beyond the already challenging outlook in the face of Covid and the economic downturn.
The spending review comes as a new analysis from the Resolution Foundation predicted that the Covid crisis was on track to cut average pay packets by £1,200 a year by 2025. The think tank warned that “the combined effects of weaker pay growth and higher unemployment will serve to prolong Britain's living standards squeeze”.
Torsten Bell, chief executive of the Resolution Foundation, said the pandemic was causing “immense damage” to the public finances and permanent damage to family finances too.
“Yesterday, the chancellor chose to ramp up his Covid spending to £335bn,” Bell said. “But he also quietly dialled down his spending plans beyond the crisis. For all the talk of ending austerity, its legacy will continue for many public services throughout the parliament.”