Incentives for Employers

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

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The first step is to encourage employers to look more favourably on people who have been out of work for some time.I can announce, therefore, a wholly new incentive to encourage employers to take on more people who have been unemployed for two years or more. In future, employers will get a full national insurance rebate for up to a year after taking on such a person. That will provide employers with an important new reason to give a second chance to someone who has been unemployed for some length of time—[Interruption.] Yes, but the Opposition were very late on the scene on which we have been working for a long time and they have got most of it wrong. I am going to announce a package which will show the Opposition how to do it.
This first whole-year national insurance contribution holiday will run from April 1996. More immediately, my right hon. Friend the Secretary of State for Employment intends to develop new pilots under the Workstart scheme. This offers employers a grant to recruit people who have been unemployed for over two years. There will be around 5,000 new job opportunities. Experience with existing pilots that we have been running suggests that the scheme helps to break down the prejudice which can blight the long-term unemployed.
I know that some employers will still won-y that people who have been unemployed for a long time may have lost the habit of working. We introduced the work trials scheme to counter that. It allows unemployed people to try out a new job for three weeks, without losing their benefit. They will keep their benefit entitlement. It costs employers nothing for those three weeks and it lets employers see for themselves whether the people they take on can be relied on to hold down a steady job. The record so far is impressive. A large number of people are kept on at the end of the trial period. So I propose to expand the scheme to provide 150,000 job opportunities over the next three years.
In addition, I propose a further cut in the lower rates of employers' national insurance contributions for every employee. From next April, they will come down by another 0.6 per cent. This will reduce the cost to employers of providing lower-paid jobs by another £230 million in 1995–96, on top of the reduction of £940 million carried through from 1994–95. It must make sense to keep on cutting the burden on employers who create jobs and in particular on those employers who provide jobs for less skilled people. The Labour party keeps wanting to go in the opposite direction by increasing the costs on employers with a minimum wage and a social chapter.