Brown resists clamour to introduce wage subsidies
PM not convinced that European-style support for firms would save jobs
Thursday, 12 March 2009
The Government has rejected growing calls for it to pay subsidies to companies to encourage them to put workers on short time or lay them off temporarily instead of sacking them.
A coalition of employers, trade unions and MPs is pressing for European-style "wage subsidies" costing £1.2bn a year to protect 600,000 jobs. Although they won the support of some ministers, they have failed to convince Gordon Brown.
Government sources said the Cabinet had decided that help for individual sectors – such as the car industry – is a better way of keeping people in jobs than a blanket scheme. Ministers fear that companies would take advantage of the payments by rushing to threaten job cuts, or using the grants to protect "uneconomic" jobs that would eventually have to be axed anyway.
"Gordon Brown believes the priority is to get [bank] lending flowing to firms and then offer more targeted help," one source said. "He believes there would be a deadweight cost in which money would go to firms that didn't really need it." The issue was rammed home yesterday when Toyota announced cuts in production and pay at its two UK factories, minutes before the Government held a special summit to discuss the automotive crisis.
Ministers say subsidies could return to the agenda if the Cabinet is convinced that Britain's skills base would be eroded by redundancies. Supporters warn that the fightback after the recession could be hampered if too many skilled jobs are lost. Backers include the Federation of Small Businesses, the Engineering Employers Federation and the Trades Union Congress. They proposed the payment of £3.3bn in wage subsidies to pay 600,000 workers 60 per cent of their previous wages for between three and six months, arguing that the actual cost would be reduced by savings of £1.2bn in unemployment benefit and £850m in extra tax revenue.
Ninety MPs, including 81 Labour members, have signed a Commons motion calling on the Government to look at all options to help manufacturers retain skilled workers, warning that they are being forced into other jobs as more firms bring in short-time working. Some 23 per cent of engineering firms have already introduced short-time and a further 19 per cent are considering the move.
Wage subsidies are operating in France, Germany, Italy and Spain. But ministers say their social insurance systems are different, with unemployment pay often worth about 90 per cent of previous wages – so the cost of making up the difference is much smaller.
The Welsh Assembly has brought in a ProAct scheme which gives a £2,000 wage subsidy for employees on short time – plus a £2,000 training subsidy for each worker to help them boost their productivity. A nationwide scheme operated in Britain in the 1970s, whereby firms thinking of cutting at least 10 jobs were given a £20-a-week subsidy for up to a year for each job saved.
Despite the rebuff by the Cabinet, bosses and unions intend to continue their campaign. Brendan Barber, the TUC general secretary, said: "Wage subsidy schemes... across Europe are preventing thousands of unnecessary job losses." John Wright, chairman of the Federation of Small Businesses, added: "We must... give viable small businesses the support they need to keep people in jobs."
The two organisations are also pressing ministers to suspend a rule that forces workers on reduced hours, or who are laid off temporarily, to be available for a new job after 13 weeks in order to claim benefits. They point out that some lay-offs and short-time working lasts longer than 13 weeks.
Economy drive: How car-makers have reacted to the recession
Toyota (Burnaston, Derby and Deeside)
Two-week shutdown, pay and hours cut by 10%.
Ford (Essex, Daventry, Merseyside, Bridgend, Southampton)
850 jobs lost, four-day week, production cuts.
Honda (Swindon)
Production of cars halted until June 2009.
Aston Martin (Gaydon)
600 jobs lost, three-day week instituted.
Jaguar Land-Rover (Solihull, Halewood)
1,050 jobs lost, production cuts, one-year pay freeze, four-day week.
Bentley (Crewe)
Three-day week, 220 jobs lost, seven-week closure from March.
LDV (Birmingham)
95 jobs lost, production suspended since December.
Nissan (Sunderland)
1,200 jobs lost, and some shifts have been stopped.
BMW Mini (Swindon, Cowley)
850 jobs lost, two-week shutdown planned for August.
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Comments
Old Gordy and Co really know how shaft their long suffering benefactors don't they?
... cutting tax for all of us. Reduce corporation tax, or increase the thresholds, moving cash from the state back to us.
Some of your list (Toyota, Ford, Nissan) are multinationals with financial problems so large that any UK action would be as effective as urinating on a house fire, others (Aston Martin , Bentley) are luxury care makers, who are bound to have lower sales in a downturn. LDV is a long running bad joke. The only light is BMW Mini, a one product company, with a good product.
The danger here is supporting failing companies. Once you start you are penalising better run companies, and you can't stop, since your withdrawal would be seen as causing the, inevitable, collapse.
However, by subsidising people, (e.g. by giving everyone a citizen's income, linked only to their age), removing the minimum wage legislation, making the first x pounds of all wages tax free, (i.e. excluding this element from the calculation of total income for tax purposes), and NIC free, (for both employer and employee), work would always pay and employers would be able to find the labour that they could pay the most for without having to worry about how little this might be.
The idea of a "citizen's income" would be much less costly administratively than all the complex benefits, (both means tested and non means tested), income tax allowances and so on that we have at the moment. This could replace the old age pension, income tax allowances, (in normal times), unemployment pay ,child credits / allwances and a lot else. Couple this with a flat rate of income tax and you can make the overall system as progressive as you like.
They simply cannot grasp what they have done, what they are doing or the long term consequences of their actions.
They need to understand that job sharing, shorter working weeks, renegotiated pay and conditions are only one part of an employment strategy. The other should be penal redundancy obligations for the employer and higher pay offs.
Yes this would make UK PLC a different place to work and conduct business but the effect would have been fewer unemployed and more commitment to finding a soloution before an employee faces the axe.
We can't do that now because Brown decided that spending billions on supporting banks (those conduits of debt) whose models are based off rapeing their customers was a far better use of our supposed wealth. (The prat has no mandate to do that yet we let him!)
What a piss poor decison that will prove to be.
Saving a Scottish Bank was a political charade - and has cost and will cost this country dear whilst english workers suffer - lets face it letting one bank go and with it Brown would have been a good thing. The hideous way in which these guys did business should have resulted in sackings not bungs.
At this point we need to work out how we hang on to the little industry we have before the whole country is on the dole or working for the civil service - at this rate the third world is just around the corner for Britain. Whether fat dave cameron is the man to lead us out of this who knows, but regime change is needed now to prevent more expensive and economically damaging acts of self saving by this poor excuse for anything Brown. What amazes me still is that people still believe that he was ever prudent and that he has any credible form of intellect, it always seemed to me that he preferred to deal in longdated BS which is now coming back to haunt him. The economic scenario is uglier than the fool who created it and that takes some doing.
How can Brown do any deal on wages when he will cut them in other industries and services. Watch the unrest with teachers, nurses, rail workers spill into public demonstrations. Then see the true courage of the Brown government. Running for cover.