This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Deputy Prime Minister Nick Clegg gave a speech at the CBI’s Jobs Summit on youth unemployment.
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Good morning. Before anything, I want to thank the CBI for holding this summit. Jobs are the most pressing item on the UK’s economic agenda. Jobs for young people are the most pressing item on mine.
Youth unemployment now stands at over one million. It’s true that around 300,000 of those are in full time study. And it’s true that the numbers improved a little at the start of the year. But they are still way too high. And we must seek, constantly, to do better.
This isn’t a new problem. The economic crisis has, certainly, made life harder for young men and women starting out. But youth unemployment began rising back in 2004. Even long term youth unemployment has been worse, historically, than people sometimes realise. That’s the number of 18-24 year olds claiming Job Seeker’s Allowance for over 6 months. The previous government reclassified these individuals once they were involved in some sort of activity - a training scheme, a bit of work experience. Activity that would sometimes lead to proper work. But that very often didn’t.
Activity that made it possible to present the statistics on long term unemployment a bit more favourably but often without really changing lives, without getting these young men and women into lasting jobs.
Understanding these trends is important because, if we pin all our hopes on youth unemployment disappearing automatically once growth returns, we’ll be sorely disappointed. This is a problem that predates the financial crisis. It is at least partly structural. So, yes, we have to create the jobs - of course. And I’ll come onto the ways in which the Coalition Government is redoubling our efforts on that. But we also have to provide the targeted support to the youngsters who struggle to break into the workplace - regardless of whether we’re in good times or not. And I’ll set out how we’re stepping up efforts here too.
First, let’s just remind ourselves why this matters. The LSE and the Princes Trust have estimated that Youth Unemployment costs up to £155m a week in benefits and lost productivity. We cannot afford that when our economy needs to be running on all cylinders.
Nor can we let it become a drag on our future competitiveness either. And, even more important still, how we help these young men and women says something - says everything - about who we are.
These are our children and they are in their hour of need. Many of them already find the odds stacked against them: the poor white boys who struggle through school; the young black men who are twice as likely to be unemployed as their peers; the children growing up in the poorest neighbourhoods. And when they are excluded so early on they can carry the scars for the rest of their lives. They’re less likely to hold down a steady job or earn a good wage, more likely to end up alienated, marginalised, depressed. And everyone else picks up the bill.
Youth unemployment isn’t just an unforgivable economic waste - it’s a human tragedy too.
How, then, can we create more jobs?
I am the first to admit how disappointing the stalled nature of our recovery has been. Explosions are always best seen from a distance and I think that now, four years down the line, we are beginning to appreciate how profoundly the events of 2008 affected the UK’s economy and how uniquely vulnerable we were in the face of those events.
While this was a global banking crisis without precedent, we were hit especially hard because we have one of the most open economies in the world; with a financial services sector that had grown too big for the UK economy carrying liabilities that were around five times the size of it; UK citizens were privately indebted to the tune of 1.4 trillion pounds - among the highest in the developed world; and we had a housing market that went from spectacular boom to bust.
We have managed to maintain stability by taking decisive action on the deficit. But, the truth is, we are faced with an extremely delicate balancing act. The banks need to deleverage - fixing their balance sheets; the state needs to deleverage - restoring sense to the public finances; householders feel compelled to do the same; at the same time, the banks need to keep lending, consumers need to keep spending. We need to maintain business confidence, support demand.
That’s against a backdrop of relentless turmoil in the Eurozone: our biggest export market, which continues to shrink.
Unwinding our toxic debts while keeping the economy moving is as tricky as defusing a bomb. Start pulling at wires haphazardly and find yourself in crisis again. Hesitate and risk panic and fear. You have to be careful and deliberate. That’s why, last autumn, when growth forecasts were downgraded, we didn’t plough on regardless. We extended our deficit reduction programme by two years. Our fiscal adjustment is nowhere near as violent as some people suggest. By the end of the parliament we’ll still be spending over £730bn. That’s around 42% of GDP - more than any year from 1995 until the collapse of the banks in 2008.
And, at the same time, we’re taking every step possible to energise the economy:
- lowering corporation tax to create one of the most competitive tax regimes in the world;
- reforming income tax to put more money back in consumer pockets;
- providing cash for development directly through the Regional Growth Fund, the Growing Places Fund, the Get Britain Building Fund;
- cutting red tape, reforming planning, opening up public procurement to smaller and medium sized firms;
- protecting funding for science and R&D; creating new advanced manufacturing hubs;
- delivering High Speed 2; rolling out the fastest broadband network in Europe; creating the first ever Green Investment Bank.
- We’re intervening directly to encourage diverse and resilient business models - like employee ownership;
- we’re leading a massive export drive in new markets - China, India, Brazil;
- we’re working hard, at all times, this week included, to promote the Single Market and advance British business interests in the EU.
- Delivering a radical transfer of power away from Whitehall so that cities can drive their own growth;
- and local communities can raise money and invest in development as they see fit.
- Bold reform of the banks to insulate retail operations from high risk activity.
- £20bn of credit easing; an unprecedented focus on non-bank sources of finance; ultra-low interest rates.
If I seem like I’m hammering the point - I am. The Coalition is looking for every lever we can pull. And now, as the situation around us continues to deteriorate, the Prime Minister, the Chancellor, the Chief Secretary and I have taken the decision to exploit - to the maximum - all of the flexibility built into our plan. Because, when the world moves, you have to move with it.
The Governor of the Bank of England recently announced the Bank of England’s funding for lending and liquidity schemes which will be a massive credit boost.
We also intend to use the strength of the British balance sheet to take on some of the risk of big infrastructure projects. Boosting construction - where, by the way, a lot of young people start out.
We’ll be saying more over the coming weeks on these and other measures. This is a government fully galvanised around growth.
So that’s one half of the equation. The other is helping the young men and women who struggle to break into the labour market - whether it is in good health or not. Giving them the skills and experience to get work; giving you the confidence to take them on.
Again, the Coalition Government has been on a bit of a journey here. Seeking, at every juncture, for ways to do more. We made unemployment in general a priority from day one.
Iain Duncan Smith deserves enormous personal credit for getting our flagship Work Programme off the ground in a year, revolutionising the way we offer support so that it is tailored to individual needs, so that it is in the hands of the experts - the businesses and charities best placed to administer advice and training, so that - at all times - we aim to get people into real jobs, proper jobs so they can stand on their own two feet.
Last Autumn I launched a £1bn Youth Contract with the goal of getting every young person earning or learning again. A crucial part of that Contract is a wage subsidy which I know the CBI supports - after all, you called for it. The Government was delighted, for once, to exceed a CBI request. You suggested £1,500; we’re offering businesses £2,275 - half the minimum wage for a young person. The other idea that is often put to me is a National Insurance holiday for employers taking on young people. But, again, our Youth Contract goes much, much further: the wage subsidy is worth four and a half times what a national insurance holiday would save you in a year.
Of course, I’m always open to other ideas and proposals. No one organisation or political party has a monopoly of wisdom here. And the gravity of this problem demands us to be both restless and collaborative. David Miliband, who I understand is speaking later today, has done a lot of detailed work on this. He recently produced an excellent report with ACEVO - the Association of Chief Executives of Voluntary Organisations which advocates a job guarantee after a year on the Work Programme. I can see why that kind of backstop has intuitive appeal; but I am more convinced by the wealth of evidence which shows it’s better to get in earlier, helping these young men and women before lasting damage is done: preventative treatment rather than an ambulance service, if you like.
I was, however, very much struck by another insight from David’s report: youth unemployment hot spots. Youth unemployment is a national problem but it is more acute in certain places. Maybe inner city areas with high levels of disadvantage. Rural communities where businesses are struggling to take people on. Former mining towns at the sharp end of industrial decline. Whatever the reason, these are the toughest parts of the country to be young, down, and out.
There are different ways of determining exactly what counts as a hotspot. We identify them as the nine Jobcentre Plus districts, covering 20 local authority areas with the highest rates of long term youth unemployment and the lowest rates of return to work. And I can announce today that we will be targeting these areas with renewed urgency. For a simple reason: these are the young people who are hardest to reach in the labour markets that are hardest to crack, and they cannot be made to wait.
So, in these places we’re bringing the wage subsidy forward. Instead of coming in at nine months, it will come in at six. At this stage, three months can make all the difference.
When you feel like you’re banging your head against a brick wall when you live in an area where opportunities are already few and far between, another 12 weeks of rejection letters, of being cut off, of sitting at home waiting, worrying; that can seriously knock the stuffing out of you, making it extremely difficult to pick yourself up.
So job centres will be able to make use of the subsidy before people are referred to the Work Programme, capitalising on their links with local employers. And they’ll also intensify support: so more training, more regular coaching, spending more time with young people to knock a CV into shape or prep ahead of an interview.
We are publishing the full list of hot spots today. And the extra help will be on offer by the end of July. They’re where you’d expect them to be: the Midlands, the North, South Wales, parts of Scotland. This is all part and parcel of our bigger agenda of rebalancing the economy; of taking on the North-South divide.
Before I wind up: I’ve put a lot of emphasis on the wage subsidy because giving employers the help to take someone on means we get them into jobs which last, which is much more sustainable than subsidising jobs which don’t.
But this isn’t the only tool in our box. The Youth Contract is also made up of tens of thousands of work experience places; we’re getting businesses to open up their internship programmes so they aren’t just for children with well-connected parents; we’re supporting a record number of apprenticeships; and we hear the message from business loud and clear: sometimes these young people just aren’t ready - they don’t have the right skills. So the Coalition is putting a major focus on education. More than anything I think our decision to protect schools funding - even in these very difficult times - demonstrates that.
And we also plan to provide extra support for the children who need it most. Those children who leave school with no good qualifications, no work experience to fall back on.
The teenagers who aren’t ready for an apprenticeship, say. These were the children most let down by the previous system. Now, as we reform that system, we’re determined that they are not lost in transition.
I know that one idea John Hayes, the Minister for Skills, is looking at is piloting a new ‘traineeship’; a package of training and work experience to get the basic, necessary skills, with a recognised qualification at the end of it, an extra rung on the ladder to get you on your way to an apprenticeship or job. Again, that help will be targeted in the areas most in need.
And more detail will be coming soon.
So, to sum up, I hope I’ve given you a sense of our approach: we started with the Work Programme; we introduced the Youth Contract; now we’re homing in on youth unemployment hot spots; action that is targeted; urgent; always looking to do more;
Government working hardest for the places that have been hardest hit.
The struggles of these young men and women, their fears, their hardship, the dreams they put to one side. We cannot accept that.
It’s our duty - this generation’s duty - to give each of them a chance and to give each of them back their hope.
So I’ll finish as I began: by thanking the CBI for bringing us together today. For wanting to work with government. Because, without you, without business, it doesn’t work - none of it. I can fight for the resources; Whitehall can come up with the schemes; Job Centres can deliver these young men and women to your door; but only you can bring them in. Only you can get your suppliers and your customers to do the same.
As individuals, as organisations - you are the success stories. And now that you’ve climbed to the top of the ladder you are in a position to look round, lean down and give a helping hand to the young men and women who should be on their way up.
I know you want to - otherwise you wouldn’t be here today. I¬’m extremely grateful for it.