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“Kickstart scheme” for young people to lift up hospitality sector

Published:  08 July, 2020

Chancellor Rishi Sunak has revealed plans to subsidise work placements for young people in a move that is believed to be aimed at stimulating the hospitality and tourism industries while tackling unemployment post-Covid.

The six-month placements, described as a “kickstart scheme” for a generation of young people who are in danger of being “left behind” by the Coronavirus epidemic, was announced at today’s summer economic update at 12.30pm GMT (8 July).

The scheme will start in August, with the government covering 100% of the national minimum wage for each young employee for 25 hours per week. Employers will have the option to provide wage top-ups if they choose to.

While there has been some criticism that young people are worth “more than minimum wage”, the scheme is aimed at getting the 700,000 students leaving school and university this year into work – many of which can be expected to become part of the UK’s re-emerging hospitality sector.

Sunak said under 25s are particularly vulnerable to the long-term consequences of unemployment during the crisis, as they are “two-and-a-half times more likely to work in a sector that has been closed”.

One of those sectors is undoubtedly the UK’s bars and restaurants, which were already suffering a staffing crisis before lockdown descended.

In April, around 80% of hospitality firms temporarily stopped trading and 1.4 million workers have been furloughed – the highest proportions of any sector.

“The looming threat of mass unemployment is rightly attracting a lot of attention,” Nic Redfern, finance director of finance advice firm Know Your Money, said.

“In particular, the pandemic has decimated the retail and hospitality sectors, which typically employ young people – so it is the under-30s who the Chancellor is clearly keen to get back into work. 

“Alone, however, [the "kickstart jobs scheme”] will not be enough. More must be done to ensure new jobs are made available to those who have lost theirs during the Covid-19 crisis.”

Some of the additional measures announced include a tripling of the number of apprenticeship placements available via the government’s existing apprenticeship scheme, with employers being paid £2,000 to create new apprenticeships over the next six months.

Bonuses of £1,500 will be paid for apprenticeships for those aged over 25.

“We know apprenticeships work, with 91% of apprentices staying in work or undertaking further training afterwards,” Sunak said.

These measures are part of a wider package announced today looking at tax, spending and employment, all aimed at kickstarting Britain’s economic recovery from the pandemic.

The chancellor also introduced a temporary VAT cut to help the hospitality sector in particular, which has already suffered major job losses.

The chancellor was thought to be considering national insurance contributions (NICs) holidays for employers as part of the stimulus package, but this was not included.

Businesses are still calling on this to happen, with reducing employer NICS seen as way to help the hard-hit hospitality, leisure and retail sectors. 

Sunak said the measures are part of “second phase of our economic response” to the Covid-19 crisis, which is all about creating and supporting jobs.

He said: “Despite the extraordinary support we’ve already provided, we face profound economic challenges. World economic activity has slowed, with the IMF expecting the deepest global recession since records began. Household consumption, the biggest component of our economy, has fallen steeply. Businesses have stopped trading and stopped hiring. Taken together, in just two months, our economy contracted by 25% – the same amount it grew in the previous 18 years. And the Independent Office of Budget Responsibility and Bank of England are both projecting significant job losses.”

Despite these challenges, he said “I will never accept unemployment as an unavoidable outcome”.

Speaking of the end of the Job Retention Scheme in October, he added: “Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before. And the longer people are on furlough, the more likely it is that skills could fade, and they will find it harder to get new opportunities.”

He has now confirmed a £1,000 bonus to incentivise employers to bring workers back from furlough

Initially rumoured to cost the government £2bn, Sunak confirmed there would be no upper limit on the number of kickstart placements made available.

It is expected to cost the government around £6,500 per person on average per placement.

The jobs must be brand new, with the funding conditional on the firm proving these jobs are additional.

They must able be “good quality jobs with employers providing kick starters with training and support to find a permanent job”, Sunak said.