Youth unemployment could be halved and £23 billion of public
money saved if firms were given simple tax breaks to take on
young people not in education, employment or training (NEETs),
according to a leading think-tank.
The Centre for Social Justice (CSJ) report ‘The
Case for a Skills Tax Break' says that firms should be
given a tax break of 40 per cent of the cost of taking on a
NEET – so offsetting rises in other taxes.
The benefits could be startling – a gain to the Treasury of up to
£23.1 billion over 5 years through welfare savings and additional
personal taxes paid by the young person moving into a full-time
job.
The scheme could also drastically reduce the number of young
people without a job.
The CSJ report says: “We have assumed employment rates of 72 per
cent full time and 28 per cent part time in line with ONS survey
estimates and with paid employees on salaries of
£25,400 and £9,100 respectively from the same survey… The tax
break set at 40 per cent (to account for two days: a day's formal
training a week and a second day to account for a less productive
employee) we calculate:
“The initial average basis cost to the Government's Exchequer in
taxes foregone would be £10,166 for a full-time employee and
£3,651 for a part-time one. These are annualised values.
“But after five years of employment the average employee would
have added a net contribution to the Exchequer of £59,500 in
additional personal taxes and reduction on the welfare bill. The
benefits used are Universal Credit allowance and housing element
in a middle England location tapered for earnings.
“If we were able to reduce the number of NEETS by 52 per cent…
this would represent a total 5-year gain to the Exchequer of
£23.1 billion across all those NEETs going into full- and
part-time paid employment. Around 75 percent of this is made up
of social security savings.”
The latest official figures show almost one million young people,
946,000, are not in employment, work or training. This is more
than one in seven young people in the UK.
The report is calling for this rethink because the apprenticeship
levy “not yet living up to its hoped for impact” and the “need to
further stimulate employment growth”.
To avoid any abuse, the CSJ suggest several practical measures to
ensure the scheme would work as intended:
- The tax break would only be paid while the apprentice is
still employed and in training. There is then an incentive for
the employer to keep them after that.
- Beneficiaries would need to be a UK passport holder and/or
pass a habitual residency test in order to stop abuse of the
system.
They go on to highlight how the tax break would work
best alongside a greater focus on employability within schools –
which could be achieved by adopting the Nieper Employability
Benchmarks.
Ed Davies, Policy Director at the CSJ, said:
“The Government needs to get serious about tackling the
employment crisis among our young people.
“It is intolerable to carry on pretending that there isn't a
problem or that we can do nothing about it. That we should just
continue to pay for spiralling welfare costs.
“There is an alternative. Offering a true, and much needed,
incentive to businesses to hire young Brits could deliver for
young people, the businesses that hire them and for the wider
British economy.”
ENDS
Please see further information about the Nieper
Employability Benchmarks here.
