By Alex Klaushofer
The government faces a stark choice between a huge investment in welfare-to-work schemes or a vast increase in the number of long-term unemployed young people, according to one of its former welfare advisers.
Professor Paul Gregg’s proposals, along with recommendations from former government adviser David Freud, have shaped the Welfare Reform Bill currently making its way through Parliament.
Gregg, who is professor of economics at the Centre for Market and Public Organisation at Bristol University, told Public Finance: ‘The government’s got a choice of whether to run a tight ship or, at the other extreme, of investing massively to try to prevent the build-up of long-term unemployment.’
He added that current levels of investment in welfare-to-work programmes were now inadequate as ever more people joined the dole queues. ‘Stopping a build-up of long-term unemployment would be truly astounding with the resources that they have,’ he said.
Gregg estimated it would cost around £10bn for the kind of larger-scale programme needed to tackle rising unemployment properly. He warned that the failure to do so – with measures such as ‘golden hellos’ for employers who hire new staff – would store up problems for the government’s strategy in future.
‘The cost of doing that is when you get the recovery phase and you’ve got a lot of damaged people to get back into work,’ he said.
But he predicted that, with the latest unemployment figures at 1.97 million, the government was likely to increase its welfare-to-work programme to some degree.
‘I think we will see some attempt to put together a package of measures in the Budget to deal with unemployment,’ he said.
Thereafter, ministers would have about three months to put programmes in place before long-term problems mounted, he added.
