Employment Subsidies

HC Deb 16 November 1981 vol 13 cc115-35 10.36 pm

The Minister of State, Department of Employment (Mr. Michael Alison)

I beg to move, That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme (the expected cost of which will be more than f10 million between 1 April 1982 and 31 March 1983) for making payments to employers of young people whose earnings are below a specified limit. The motion authorises the Secretary of State to set up the young workers scheme, which was announced by the Prime Minister on 27 July. The Employment Subsidies Act 1978 empowers the Secretary of State to set up schemes to give financial assistance to employers, to enable them to take on new employees and to maintain or enlarge their labour force. That is the aim of the young workers scheme.

The Act states that a resolution of the House is necessary if the scheme is expected to cost more than £10 million. The Prime Minister announced that the scheme is expected to cost about £60 million in 1982–83 and it is therefore necessary to pass the motion that we are debating. A similar scheme will be run in Northern Ireland.

The other requirements of the Act—that the Secretary of State should consult those organisations as are considered appropriate, which in this case have included the TUC and CBI, and lay a statement before the House explaining the proposal—have been fulfilled.

The background to this scheme is the deep concern about the continuing high levels of unemployment among young people, particularly school leavers, which all of us share wherever we sit in the House. As might be expected at this time of year, the number of school leavers out of work has been decreasing over the past few months. There were 216,000 unemployed school leavers at the end of October compared with 285,000 in July. However, the figures are higher than they were a year ago. In October, despite the increase in the number of places offered on the youth opportunities programme, 70,000 more school leavers were unemployed than in October 1980.

Unemployment is a terrible experience for anyone of whatever age; and I do not wish to give the impression that the Government regard any one group of people as necessarily deserving job opportunities more than any other. Indeed, the very fact that our special employment measures as a whole help, for example, the long-term unemployed and older workers shows that the Government are determined to do everything possible to overcome the worst effects of unemployment.

Nevertheless, it needs to be recognised that there is a grave risk that youth unemployment can create a vicious circle—young people finding that they have no job because they have no experience and no experience because they cannot find a job. And if young people fail to gain experience, and so fail to get jobs and working skills we shall find ourselves in the end with insufficient skilled manpower to face the nation's industrial and commercial future. This is quite separate from the personal effect on individual youngsters of prolonged periods of unemployment at the beginning of their working life.

It is to try to break into this vicious circle that the Government are providing over £400 million this year and propose to spend over £700 million next year on the youth opportunities programme. About half a million young people will benefit from the training and work experience provided by the programme in the current year, 1981–82. The Government have undertaken that unemployed 1981 school leavers will be offered a place on the programme by Christmas and that young people under 18 years who have been registered unemployed for three months will be offered a place on the programme within three months. These are very ambitious undertakings and I know that the MSC and the careers service are doing their utmost to help to meet them.

The Government are considering also a new training scheme for young people that will eventually replace the YOP. We intend to place increasing emphasis on the training of young people, whether unemployed or in work. That is the basis of the so-called new training initiative.

Valuable though the YOP is in preparing young people for work, it is essential that the experience and working skills that are acquired in the course of the YOP scheme should be put to good use as soon as possible. In other words, we need to train young people for jobs and then help them find jobs in spite of their handicap—there is no doubt that it is one—of youthful lack of experience.

There is increasing concern, which is based on unmistakable evidence, that one major contributing factor to the high level of youth unemployment is that the relative wage levels of young people are too high. For example, a recent study commissioned by the Confederation of British Industry is reported as concluding that many employers have decided to stop recruiting young people between 16 and 18 years because they are considered to be "poor value for money".

Mr. Tony Marlow (Northampton, North)

My hon. Friend was saying that the Government were thinking in terms of replacing the YOP or moving on to a new stage or a new phase. I wonder whether he could, even at this stage, expand slightly what he means. Are we to understand that the work experience on employers' premises, for example, should have rather more training sewn into it? If so, what are we to understand would happen to the community service aspect of the YOP? Does he envisage any changes in that?

Mr. Alison

The broad drift of the YOP scheme will be in the direction of more training. That will not exclude valuable community schemes such as those that my hon. Friend has in mind.

Mr. Charles R. Morris (Manchester, Openshaw)

Will the Minister explain whether the Government accept the judgment that employers think that 16 to 18-year-olds are poor value for money? How on earth will we ever train youngsters for work if that is the attitude of the Government?

Mr. Alison

I shall elaborate the thesis. It is true that the phrase "poor value for money" is an unpleasant one. No one cares to think of his son or daughter in that way. However, if employers do not regard young people as value for money in terms of their output, young people will remain unemployed, however much we might wish that it were otherwise.

Over the eight years to 1976—the latest date for which the relevant statistics were collected—basic weekly rates in national agreements for manual workers rose by 200 per cent. for adult workers, but by 270 per cent. for youths and boys. This narrowing of differentials, which was most marked in the early 1970s, is clearly likely to have its greatest effect when employers are cutting costs to preserve competitiveness. If the gap between the wage levels of adults and young people is too narrow, young people will be squeezed out of the labour market. Many employers who are keen to help young people cannot afford to employ them.

Mr. Frank Hooley (Sheffield, Heeley)

Surely the figures that the Minister has just quoted show the impact of market forces on the labour market. I thought that his Government were, in favour of market forces.

Mr. Alison

They may or may not be the result of market forces. They may be the result of trade union monopoly power. That is one of the interpretations that can be placed on them.

The young workers scheme is designed precisely to tackle the problem. It will encourage employers to take on more young people at wage rates which more properly reflect "value for money". The scheme will provide £15 a week to employers of eligible young people earning less than £40 a week and £7.50 if earnings are £40 but less than £45 a week.

To be eligible, young people must be under 18 and in their first year of work within one year of the start of their first full-time permanent job. Payments can be made for up to one year in respect of each young person.

The scheme will come into full operation on 4 January 1982. That means that employers will be able to claim payments in respect of young people who are eligible on or after that date. Payments will be made quarterly in arrears to minimise the administrative burden both on employers and on the Department when dealing with claims. Employers will be able to make claims for people who have been taken on before 4 January 1982, provided that the young people are eligible on that date. Of course, only periods of employment after 4 January will qualify for payments. To make it easier for employers to establish the eligibility of young people as quickly as possible, we shall start to accept applications from employers on 7 December this year.

The basic details of the scheme will be advertised in the national press at the end of this month and full details of the scheme will be described in a leaflet that will be available in jobcentres, employment offices, careers offices and my Department's regional offices, again by the end of this month,.

The scheme will be open to all employers except domestic households and public services, such as the Civil Service, the Health Service and local authorities. However, nationalised industries and public corporations may apply.

The Government consider that to encourage public services to take on more staff, even young people, would be inconsistent with our policy of reducing the size of the Civil Service and constraining administrative expenditure generally, of of which is designed to help firms in productive industry to expand their output and employment.

Our objective, which is to create more job opportunities for young people, will be achieved in two ways. First, the payments themselves will encourage employers to create new jobs for young people. Secondly, the design of the scheme will encourage employers to adjust wages so that the general wage levels of young people will properly reflect their inexperience. That adjustment of wages might occur through a change in the rates offered to new recruits or perhaps the deferral or limiting of wage increases that might otherwise be offered.

It is inevitable that such a scheme will result, in the short term at least, in payments being made to employers who would have taken on young people anyway. That is particularly so as it works partly by influencing wages, including those of young people already in work. However, in the longer term as the full effects work through we would expect more new jobs for young people to be created.

Overall, our operating assumption is that the number of young people attracting payments for their employers will build up to between 50,000 and 100,000 in the first few months of the scheme.

Mr. Allen McKay (Penistone)

How does the Minister work that out? Wage scales are set out for a boy leaving school and taking work at the age of 15 or 15½, increasing every six months until he reaches adult age. Apprenticeships used to be counted as being between the ages of 14 and 21, when wages were low, before the apprentice became fully productive. The adult rate now starts at 18 and not 21. If the scheme interferes with the pay of 15 and l6-year-olds by enticing employers to pay under the rate, rates in many industries will be upset and a lot of trouble will be caused.

Mr. Alison

That may or may not be the case. The scheme aims to exert a downward pressure on rates for youngsters, to make it possible for more youngsters to be drawn into work. We make no bones about the fact. The estimate that I gave of the number affected is the best that we can make at present. We shall have to watch to see whether the estimate is fulfilled.

Since the scheme was announced, it has attracted considerable interest and comment. For example, some argue that the Government should insist that employers offer training to qualify for payments. The Government have fully demonstrated their commitment to securing an improvement in the quantity and quality of training offered to young people. I have already mentioned the new training initiative. Our concern to improve the quality of the youth opportunities programme also demonstrates that concern. As I said, my right hon. Friend the Secretary of State hopes shortly to announce a major new initiative to assist in the training of young people.

We concluded that it would not be right to make it a formal requirement of the young workers scheme that training should be given. First, it would mean that training programmes would have to be discussed and agreed with each employer, which could require many staff and which would slow down the processing of applications. It would be much more bureaucratic and time-consuming. I imagine that most employers would like a quick decision on their application for a grant.

Secondly, an extra condition would inevitably put off some employers and thus reduce the effectiveness of the scheme in creating job opportunities for young people. Thirdly, and most importantly, I am convinced that schemes with many different objectives lumped together in one project often fail to meet any of the objectives through sheer diffusion. To be effective a scheme must be simple and straightforward and concentrate on one clearly identifiable objective.

Although there is no formal training requirement, I have no doubt that the scheme will encourage more training. By reducing the wage levels of boys and girls it will enable more employers to offer proper training and perhaps to retain training staff who might otherwise be at risk because of financial constraints. To assist in that we have ensured that Government schemes to support apprentices—and the unified vocational preparation programme—are compatible with payments under the young workers scheme. We are also considering ways to bring the administration of the scheme closer to that of the unified vocational preparation programme.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

The Minister would be the last to deny that there have been abuses of the youth opportunities programme. How will he monitor the new scheme to ensure that it is not abused? An employer can employ a young person and pay him less than a skilled worker.

Mr. Alison

The youth opportunities programme is a separate issue. The scope, aims and technicalities of the schemes are different. Abuse of the new scheme is more likely to be in false declaration—deceit over age, the date of a programme starting or whether another employer has claimed under the scheme. There is a variety of possible fraudulent uses of the scheme, but it is difficult to see ways in which there could be abuse in the sense of exploitation of the youngsters as is alleged to occur in certain YOP schemes. I appreciate the hon. Gentleman's anxiety, although it is perhaps based upon a failure totally to appraise the details of how the scheme will work. I certainly agree that the scheme needs to be monitored, and we shall indeed monitor its effects very closely. We shall wish to look particularly closely at the effects upon training.

I am convinced that the approach that we have adopted will avoid complicating the young workers scheme unnecessarily, while allowing employers to offer sufficient and proper training.

One of the possible abuses levelled at some of the opportunities opened up under the YOP scheme is the idea of substitution. Some anxiety has been expressed that the young workers scheme will simply give jobs to young people at the expense, not necessarily of skilled, trained adult workers, as the hon. Gentleman suggested—I think that a different kind of employee is involved here, as we are dealing in the main with very inexperienced, untrained, unskilled youngsters—but of older workers with a comparable degree of skill but perhaps a little more experience.

One of the purposes of the scheme is to correct a distortion in the labour market that is causing high unemployment specifically among young people. It follows, of course, that if the scheme is successful it will encourage employers to recruit eligible young people in preference to others and to redress an unsatisfactory and indeed pernicious balance. The central advantage of the young workers scheme over previous schemes designed to encourage youth employment, however, is that it is designed to encourage new jobs both while the payments are made and in the longer term. By bringing about realistic wage levels for young people the scheme will enable employers to be more competitive and to create new jobs even afer the payments have stopped in any particular case.

It is, therefore, our view and expectation that the scheme will create new jobs as well as giving preference to young people in the filling of those jobs. Again, we shall certainly monitor this very closely.

Mr. Jim Craigen (Glasgow, Maryhill)

I am grateful to the Minister. He has been very good about giving way. I have listened to his reasoning and have formed the impression that the scheme could, in effect, pave the way for some kind of minimum wage for young people, because in many respects it drives a coach and four through traditional collective bargaining arrangements.

Mr. Alison

I think that it will have exactly the opposite effect to that of a minimum wage scheme. It will free the market, which is already regulated to some extent by minima set by wages orders, and introduce simply an unpredictable, certainly not a final, minimum wage in any statutory or fixed and rigid sense. It may set a floor or a ceiling, a set of parameters as it were, for young people's earnings, but this will be through the effect of choice in the market.

Mr. Craigen

A notional choice.

Mr. Alison

On the day on which the scheme starts, many employers may well be prevented from paying wages within the scheme's limits because of contractual obligations, collective agreements or statutory wages orders. I must make it clear that nothing in the scheme releases employers from those obligations. However, the scheme will create new jobs, partly by influencing wage levels. It would be self-defeating if we set such limits that even unrealistically high wages enabled employers to qualify.

Mr. Ray Powell (Ogmore)

rose——

Mr. Alison

If the hon. Gentleman will forgive me, I must try to complete my speech. Perhaps he will make his point during his own speech. In fairness to other hon. Members, as we have only an hour and a half, I must give those who have been silent but who wish to speak in the debate a chance to do so.

I hope that in the longer term all those who are party to wage agreements or sit on wages councils and boards will see the sense of the scheme and ensure that more and more employers can qualify.

The wage limits I have outlined today will be reviewed next summer so that employers who, for understandable reasons, might be unwilling to cut wages, can hold wages to a reasonable level which could give them the opportunity to qualify for the scheme next year.

Over the past few years we have had considerable experience of running special employment measures. Opposition Members have also taken part in such schemes. In many ways this scheme is unique. In others it follows the experience of previous schemes. Unlike measures that were employment subsidy schemes, the young workers scheme not only provides payments to employers who recruit young people but seeks to act directly on a cause of youth unemployment, namely, unrealistic wages. Like the temporary short-time working compensation scheme, it seeks to influence employers' behaviour in a way that will enhance our ability to respond to economic recovery.

Because of its novel features, the effects of the scheme are inevitably difficult to quantify. Nevertheless, I am certain that it offers real hope to unemployed young people. I commend it to the House and I urge the House to approve the motion.

11.1 pm

Mr. Barry Jones (Flint, East)

The youth of Britain are paying a terrible price for the Government's failure to run the economy successfully. Last month, nearly 205,000 school leavers joined the dole queue. That was 49 per cent. more than in October 1980. Those young men and women who left school at Easter and still have no job total over 7,000. For every job vacancy, 39 unemployed school leavers must fight against each other, while 39,000 under18-year olds have been unemployed for more than six months this year. Early next year, without special employment measures for the under-18s, unemployment can be expected to top the figure of half a million young men and women. This year 10,000 fewer apprenticeships have been available to school leavers.

No criticism can be too harsh of a Government who savage the hopes of tens of thousands of young men and women. Monetarism has already laid waste large tracts of British manufacturing industry. Its newest and latest victims are the youngest citizens and their deeply worried and increasingly anxious parents. Schoolteachers, parents and harassed careers officers know that there is a frightening upward trend in youth unemployment in Britain today.

Mr. Marlow

I have quite a lot of respect for the hon. Gentleman. I would, however, have rather more respect for him if, instead of attacking the Government over unemployment, which he knows is world-wide—it is happening in Europe and in North America—he would put forward positive proposals to help the young people for whom he effects much concern. The hon. Gentleman hammers away, blaming the Government for unemployment that is currently world-wide. That helps no one.

Mr. Jones

I was about to say that the town of Flint, in my constituency, now has a male unemployment rate of 40 per cent. Many young men and women in the town face a grim future on all current assessments. The hopes of Britain's army of young unemployed must rest on a number of factors. First, there should be a clear statement from the Government that the new training initiative for young people will be financed adequately by the Government. Hon. Members would have liked to hear a strong guarantee tonight from the Minister. Why did the Minister's Department inspire the recent press speculation that to fund the new training initiative the Minister was considering a training tax on employers?

Secondly, there must be a fundamental alteration in the Government's economic strategy. There must be a speedy reflation and expansion. We should certainly aim to create new jobs for our young people. Hon. Members will perhaps agree that youth unemployment at its existing levels is both a social and a political time bomb. If today's youth believe that the Government have no useful role for them to play in modern society they will surely turn to violence and crime.

Before dealing in a little detail with what the Minister outlined, I mention a third matter. The Government are surely bound to say that they intend a speedy upgrading of the youth opportunities programme allowance of £23.50. I remind the Minister that inflation has reduced the real value of the allowance by at least £5, that the TUC proposes a £30-a-week payment, and that the MSC has proposed a minimum of £28 a week.

I draw attention to the Prime Minister's statement on 27 July, in which there were some key phrases. The right hon. Lady said: the wages of young people are often too high … That situation has come about because of unrealistic pay bargaining … trade unions and employers will have to take this factor into account in their bargaining … take on more young people at realistic wage levels."—[Official Report, 27 July 1981; Vol. 9, c. 835–6.] On 28 July, there was the pregnant statement: We have no immediate plans for legislation on wages councils."—[Official Report, 28 July 1981; Vol. 9, c 979.] These must be regarded as a very disturbing set of remarks, because we know that the most enthusiastic proponent of the scheme is Professor Alan Walters, the Prime Minister's special economic adviser. We suspect that Professor Walters bested the then Secretary of State—the right hon. Member for Lowestoft (Mr. Prior)—in the late summer consideration of how to fund the new training initiative. Trade union leaders are not alone in believing that the scheme has been launched in a confused, contradictory and potentially contentious manner. It is clear from what he said tonight that the Minister does not have in mind a very flexible scheme.

I understand that there are 33 wages councils. Only three paid more than £45 a week. One was the making of coffin furniture, and perhaps it is only right that that pastime should earn a minimum wage of £47.20. But of those wages councils that paid less than £40 a week, I find from my researches that young people training in the fur industry have a minimum wage of only £21 a week, and those in hairdressing only £30 a week. It is clear that three wages councils industries are technically outside the scope of the scheme outlined by the Minister. But the question is how ambiguous and meaningful are a series of Prime Ministerial remarks made in the House on 27 and 28 July?

Problems may arise if an employer covered by a wages council order lowers a young person's wage below the statutory minimum or offers a wage below the minimum to be able to take advantage of the scheme. Should it be brought to the attention of the wages inspectorate, the underpayments will have to be investigated, and the employer may have to decide whether to pay the statutory minimum and presumably lose his benefits under the scheme or to refuse to pay the statutory minimum, leaving himself open to possible prosecution and a fine of up to £100.

I am not sure from what the Minister said what effect this last would have on the employer's continued eligibility for the scheme's assistance, because, in making an application for the young workers scheme assistance, an employer will have to sign a statement showing, inter alia, that he is aware of statutory minimum rates. If an employer starts by receiving the scheme's assistance and then suddenly loses it, it may affect his willingness to continue to employ the young person in respect of whom he receives assistance.

From a study of Hansard, it seems that the Prime Minister is evidently aware of the discrepancy between the young workers scheme wage limits and certain wages council minima. Witness the following remarks, reported in Hansard for 28 July, when the hon. Member for Hereford (Mr. Shepherd) asked the Prime Minister to confirm that the Government were carrying out a review of all wages councils. The Minister of State should tell us "Yes" or "No" on that matter. I shall refresh his memory. The Prime Minister's answer was: We have no immediate plans for legislation on wages councils."—[Official Report, 28 July 1981; Vol. 9, c. 979.] If there are any plans, the Minister of State should tell us bluntly what the Government are up to.

Tonight the Minister should have announced the scheme and said that jobs will not be pegged to specified earnings levels. He should have gone on to say that the subsidy should be conditional upon an additional job being created and that applications should be granted only where a recognised union has been fully involved. Such a scheme would then have been more tightly controlled and less likely to be manipulated.

What astonished me was that tonight the Minister said that there could be no guarantee that those who enter employment under the aegis of this scheme would receive training. If that were to be so, it would be a disgraceful consequence. It would be unjust treatment of some very young and very vulnerable people entering work. It may well be described justly by Opposition Members as Tory laissez-faire at its very worst.

A number of informed sources believe that the scheme has some potentially objectionable implications. First, from what the Minister said the scheme's rationale appears to be based on the presumption that juvenile wages were too high and were primarily the cause of school leaver and youth unemployment. We reject that. We say that the root cause is the deepening recession that has been created largely by the practice of monetarism by the present Government.

Secondly, trade union leaders fear that the basic purpose of the scheme is to give employers a financial incentive to pay young people less than £40 a week in order to qualify for the subsidy. The same union leaders felt that the scheme raised questions on the operation and enforcement of orders by wages councils which covered juvenile workers. The scope for the unions to build on these legal minima through collective bargaining might, therefore, be at risk.

With no little concern, the TUC has stated that the scheme is not simply about encouraging employers to recruit the young unemployed; it is also about encouraging a reduction in the existing juvenile wage rates. If that is so—and it appears to be so—we face a very serious situation.

In trying to assess how the scheme came forward to its present state, I think that the House would be interested to know of a comment in the Financial Times of 26 January this year by the now famous Samuel Brittan. With Professor Walters, he may well have much to do with the scheme. He said in his article: Of course the writ of the councils should immediately cease to apply for young people and should be phased out for workers in general. Those are very worrying remarks.

In the same newspaper on 7 August, the secretary of the Institute of Directors, Mr. Walter Goldsmith—a man who might make Ghengis Khan appear to be a leading wet—said wages councils must be made compatible with the employment subsidy scheme for young workers". On 28 August in The Times the labour correspondent was reporting, without contradiction: Ministers do not deny that one purpose of the scheme is to bring down rates of pay for school-leavers. To his credit, however, that correspondent also included a comment by Len Murray, the general secretary of the TUC, who said that the scheme's purpose was to encourage employers to undermine union rates of pay. As there is no requirement in the scheme that the young people recruited by employers have to be additional to the normal staff complement, or that a new job has been created by the employer, employers will be able to use the subsidy to fill existing jobs. In those circumstances, the scheme is clearly open to abuse by employers by, for example, making older workers and young adult workers aged between 19 and 24 redundant so that they can be substituted by unemployed school leavers taken on under the scheme. The overall net effect could simply be to redistribute existing jobs at the expense of adult workers.

The TUC feels that there is also the strong prospect of abuse—as has often been the case in the past—by employers sacking a young person, taken on under the scheme, just before he has done a year in employment, so as to avoid the consequences of a claim for unfair dismissal, and then proceeding to take on another young person, and repeating the process indefinitely. There are clearly grounds for concern, and I know that the TUC made known its concern to the Secretary of State less than a week ago.

The scheme that is before the House is yet another indicator of the Government's monumental economic incompetence. The unemployment crisis has now assumed the status of a national emergency. The Opposition believe that Britain's manufacturing industry has been undermined by the application of monetarist economic theory. Before us now is a nightmarish vision of our young people growing old on the dole. From sheer weight of numbers, the youth opportunities programme is buckling under the strain, and throughout Britain major companies are ceasing to invest in apprenticeships, in training schemes, and in industrial research projects.

Our education service has been subject to a series of brutal cuts and closures, and the Manpower Services Commission has predicted a truly horrendous scale of youth unemployment—unless special measures are taken—with 550,000 people unemployed by 1983. That is 68 per cent. of young people under the age of 18. The scale of our problems requires a more comprehensive approach than this controversial scheme.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

I remind the House that the debate has to end at 12.6 am.

11 19 pm

Mr. Eric Cockeram (Ludlow)

If Gilbert and Sullivan were alive today a political commentator would conclude that they had been active in the House this evening, because here we have a Conservative Government—committed to cutting bureaucracy, and cutting State spending—introducing a Socialist measure.

If the result of the last general election had been different and a Labour Government were proposing this measure, Conservatives Members on the Opposition Benches would be bitterly opposing it. A Conservative Government committed to cutting the Civil Service are introducing a new scheme the effect of which, if it does not involve taking on more civil servants, will be that there will be more civil servants who will have to be replaced than there would have been without such a scheme.

Equally, we have a Conservative Government committed to cutting State spending, introducing a new scheme that they say, with tongue in cheek—they admit that they do not know—will cost an estimated £60 million in the first year. Like all State spending schemes, we can be assured that that is an underestimate.

We have a Conservative Government who are committed to cutting bureaucracy and to getting the Government off the people's backs but who are introducing a scheme that will involve filling in forms, putting through returns and providing inspectors to ensure that the scheme is not being abused. It is right, when State money is involved, that inspectors should do that, but the proposal comes from a Conservative Government. If we were sitting on the Opposition Benches, we would oppose this measure.

This Conservative Government said that they would introduce a method whereby the State took less of the gross national product. Three years ago the State was spending about 40 per cent. of gross national product. Today that figure is 44.5 per cent., and rising. This measure will increase State spending once again.

We are told that the scheme will last for 12 months per employee and that there are ceilings of £40 and £45. However, we can be sure of one thing. At the end of 12 months there will be pressure to raise or index-link those rates and to extend the scheme beyond the 12-month period.

This is a Gilbertian measure for a Conservative Government to propose. However, let us return to fundamentals. The problem is youth unemployment. However, it is more than that. Unemployment among youths and school leavers is proportionately worse compared with unemployment for other age groups. Why? The reasons have already been mentioned. Youth wage rates have, for several reasons, been raised proportionately faster and higher in percentage terms than have the wage rates of adults.

The problem is that apprenticeship schemes that used to continue until the age of 24 terminate at the age of 18. There are only three stages on wage rates, from 15 to 18. The same is true of wages councils. The full adult rate is reached at the age of 19. As a result, youths have been priced out of jobs. It is no good denying that.

In my constituency, Star Aluminium in Bridgnorth used to run an apprenticeship scheme with 18 youths. It has closed that scheme. It says that it cannot afford to train apprentices in addition to the wage rates that it is forced to pay.

In other words, the trade unions have priced those youths out of a job.

Mr. John Evans (Newton)

Rubbish.

Mr. Cockeram

It is not rubbish. As has been said, many apprenticeships have been stopped because of the cost.

Mr. Evans

Because of the Government's policies.

Mr. Cockeram

They have been closed, not because of the Government, but because of the cost of the schemes.

I come from Merseyside, and many youths who leave school at the age of 15 would jump at the opportunity of a job at £30 a week. However, it is illegal for an employer to take on a school leaver at that wage. It is below the wages council rate. Youths would willingly leave school and accept £30 per week, free of tax and the opportunity thereby provided, but wages councils are pricing them out of jobs. The solution is not to subsidise or introduce more bureaucracy, but to allow those youths to work. We should not think that we can solve the problem by throwing money at it.

When it comes to adult unemployment, a Conservative Government say that they cannot solve the problem by increasing the public sector borrowing requirement or by throwing money at it. They say that the problem must be solved by providing real jobs at competitive wage rates. However, that same Government openly state that they can solve the problem of youth unemployment by subsidy and by throwing money at it. That is an anachronism and it is Gilbertian. I ask the Government to think again.

11.25 pm

Mr. John Golding (Newscastle-under-Lyme)

The unemployment situation facing young people is the grimmest ever. The blackness of the situation was clearly seen in September, a month which in earlier years has shown a big drop in the number of school leavers unemployed. That has not been the case this year, when a very small drop occurred.

The number of vacancies notified to careers officers in September was only 5,200, which was one-sixth of those notified in September 1979. Those 5,200 vacancies were chased by 265,000 unemployed school leavers and about 350,000 others under the age of 20. That means over 600,000 wanting work and only 5,200 vacancies notified. That is the crisis created by the Government.

No wonder that the youngsters and the careers officers—who work so hard and conscientiously in the front line—are in despair. Of course, there are other vacancies in jobcentres or elsewhere. Of course, the Government's mean-minded decision to stop youngsters having financial assistance before September has affected the figures. On the other hand, the general unemployment rate would be higher if it were not for the special measures, including the increase in the youth opportunities programme. Were it not for those special measures, there would be another 345,000 people unemployed.

I welcome the increase in the youth opportunities programme. I support YOP strongly, and that is one reason why I oppose the new scheme. It will hinder the development of the youth opportunities programme. Already YOP is in difficulty, and it is clear that Government guarantees will not be met. The new scheme will waste money and foster local trade union opposition. The youth opportunites programme—a scheme put forward by the TUC in 1976—has always had to be sold to unions at local level. It is becoming more difficult to do so.

Why is that? First, the Government have pegged the allowance at £23.50. It increasingly is seen as a cheap labour scheme. The allowance should be raised to £30. If the Minister will not listen to any other argument, the word "incentive" should move him.

Secondly, it is believed that in too many places youngsters are being used in a productive capacity. I say "believed", because the truth is hard to find. We must reassure adult workers that the original aim of YOP will be implemented to move youngsters from one job to another, giving them experience and training and not using them as cheap labour.

Thirdly, unions are increasingly worried that YOP is coming to be seen as an alternative to regular apprentice arrangements. It must not be used to replace apprenticeships or to undermine existing arrangements. We need an expansion in apprenticeships, an improvement in quality and a development of the youth opportunities programme. Despite the massive collapse in apprentice recruitment, the Government are helping many thousand fewer apprentices than did the Labour Government. That in my view is shameful.

Fourthly, the number of youngsters being placed in regular employment from schemes has slumped from over 70 per cent. to an estimated 30 per cent. now.

How should we tackle the problem of lack of jobs? First, of course, we must change the economic policy of the Government. The simple proposal is to get rid of the Treasury Bench and introduce alternative policies. I shall leave those arguments to others.

I agree with the Institute of Careers Officers that we need a youth employment subsidy scheme but not the one that the Minister is introducing tonight. It should not be linked to maximum pay. My view, which might be unpopular on the Opposition Benches, is that changes in pay relativities since 1945 have adversely affected the employment prospects of some manual unskilled young workers, but not those on rates on a below wages council level.

That, also, was the view of a Minister of State in the Department, at the time the scheme was devised. The Earl of Gowrie, speaking in the other place in March, said: I do not think that, particularly where the young are concerned, there are some job opportunity losses as a result of any statutory minimum."—[Official Report, House of Lords, 31 March 1981; Vol. 419 c. 112.] The previous Minister of State was speaking of wages councils. He clearly does not believe that wages council minimum rates have led to the loss of jobs for the young.

What has happened in the Department since? Professor Walters' ideological subsidy, which I cannot believe the right hon. Member for Lowestoft (Mr. Prior) wanted when he was the Secretary of State, is the wrong way to tackle the problem. The problem that will face the wages councils industries has already been highlighted. It is to be regretted that payment will be made to employers who do not need the inducement. The Labour Government made that mistake with the recruitment subsidy for school leavers. They paid employers to recruit bright youngsters with a stack of qualifications. The scheme was unnecessary, and we were told that unreservedly by employers.

We rectified that mistake when we replaced the scheme with the youth employment subsidy, which helped only the long-term unemployed, those who were least likely to get work. That is the sort of subsidy that we now want—one that applies only to the long-term unemployed among our young people.

We wound up the youth employment subsidy when we introduced the youth opportunities programme, but before we left office I asked that we reconsider that decision. The youth employment subsidy, linked to a period on YOP and to a period of unemployment, is the sort of subsidy that we should be paying employers, a subsidy that will help those youngsters who have not a cat-in-hell's chance of getting work. Those are the young people that we should be helping under this scheme.

Professor Walters' subsidy will waste money. How cost-effective did civil servants tell Ministers the scheme would be? What figures did they present to Ministers on that score? In addition to wasting money, it will increase the prejudice and discrimination against youngsters from adults who, rightly, do not like to see anyone under-cutting the rate for the job. I was dismayed during my time at the Department of Employment to discover how much discrimination existed against the employment of the young on the shop floor, except as apprentices. There were so many barriers to the employment of the young unskilled. Employers did not notify vacancies for the unskilled to careers offices. Increased shift working in some industries squeezed youngsters out because of the law.

The most significant factor, however, was and still is the system of wage payments. Bonus systems so often depend upon a whole group being fully effective from the start. That is why we see so few young people working on the shop floor in so many firms. Workers demand that no one under the age of 20 or so is recruited. The workers talk of discipline, of regular attendance, and of safety. But those who exclude the youngsters from operative positions are really thinking only of their own pay packets.

Now the Government are compounding their folly of pegging the YOP allowance by introducing what they brag of as a cheap labour scheme. It will make more difficult the job of those of us who support special measures to help the young. It will make it more difficult for us to persuade adults to remove prejudice against the employment of the young.

I hope that the Government will abandon this scheme as quickly as they decently can. There are better ways of spending £60 million to help the young unemployed.

11.35 pm

Mr. Tony Marlow (Northampton, North)

My right hon. Friend the Minister of State expressed concern about the high level of unemployment among school leavers. As I said in the House less than a week ago, being 16, 17 or 18 years of age is a confusing time in the best of conditions. At that age young people are coming to terms with themselves; they are uncertain about their role in society and their relations with other people. To reach that stage and have nothing worth while to do must be miserable and dispiriting.

Is my right hon. Friend's definition right? Should his concern be about unemployment among school leavers or about the lack of anything positive or worth while for school leavers to do?

We have come to believe that young people, at the age of 16, if they are not going on to higher education, should go straight into employment. But in a way the rest of the world has left us behind. In many countries—Germany, in particular—there are many more schemes, other than employment, for young people to go into when they leave school.

Many of the young unemployed have older brothers and sisters who went straight from school into work and achieved relatively high earnings. That is attractive to them. Now is the time for us to think afresh. We hope that the economy will improve and that facilities will be available for those who want employment. We hope that plans will develop to satisfy those who want industrial training, vocational training and apprenticeships. We also hope that the right programmes will be available for those who want to go on to further and higher education. But there are those who do not want to continue their education, who do not know what training they want, who do not know what sort of employment they want, and for whom perhaps no employment is available. We must devise still further schemes to satisfy their needs.

The scheme outlined by my right hon. Friend can be looked at in two ways. First, there will be a tendency to price young people into work which, from the point of view of young people who want jobs, is wholly beneficial. It may go even further. It may encourage some employers to set up special activities that will employ large numbers of young people who, by pricing themselves into jobs, will allow employers to run operations that otherwise would not be commercial or profitable. To that extent, more jobs could and should be created.

On the other hand, some of those jobs will probably be taken by young people at the expense of mature workers. It is desperately important to find worthwhile things for the young to do, but it is equally important, if not more important, to find something worthwhile and remunerative for the mature worker to do. He has not only himself dependent on his well-being and employment; he probably has a wife and young family to support.

The extent to which the young, with their reduced wage levels, will take jobs from mature workers will increase the cost to the Government. The supplementary benefit unemployment pay of a 40-year-old may be £40 or £50 per week more than that of a young worker. If my right hon. Friend says that the take-up could be 100,000, I accept that there will not be anything like the level of substitution of 100,000. But were it 100,0(10, at £40 per week net difference, that would be another £250 million on top of the £60 million. As I said, I accept that that is not the figure, but I should be interested to hear my right hon. Friend's views on the matter.

Finally, the Government, rightly, are pursuing vigorously their ideas for a new training initiative. Hon. Members on both sides of the House are concerned that the new range of opportunities should be as wide-ranging as possible. Suggestions have been made about various schemes of national community service, national service and voluntary community service of one sort or another. I implore my hon. Friend, as he pursues and revises his programme, excellent though it may be, to leave the door open for the development of a sensible and sensitive community service, which I think many right hon. and hon. Members would support.

11.40 pm

Mr. Jim Callaghan (Middleton and Prestwich)

About three years ago I had the pleasure and privilege of visiting Japan. Wherever I went, in factories and in offices, I saw only young employees. I did not see anyone from the older generation. I asked why and was told, with a smile and sensibly, "We have to look at our seed corn. We are trying to get the older generation to retire, if possible with a golden handshake, so that every one of our youngsters is fixed up with a job."

I am therefore delighted that the Government, despite all the criticisms, are making a positive attempt to improve the prospects for young people.

I was pleased when the Prime Minister announced on 27 July 1981 that the Government proposed to set up a new scheme to provide encouragement to employers to employ young people at realistic wage levels. Having listened to tonight's debate, I put a question mark after the word "realistic", because there is a difference of opinion about realistic wage levels. However, the new scheme will start on 4 January 1982 and be set up under power granted in section 1 of the Employment Subsidies Act 1978.

Support will be made available to employers in respect of young people under 18 whose gross earnings are below £45 a week and who are in their first year of employment. I note that all employers in Great Britain except—and I stress this—those in the public services or domestic households may apply under the scheme for payment of £15 a week for each employee earning under £40 a week and £7.50 a week for each eligible employee earning over £40 but under £45 a week. I am led to believe that the maximum period of payment for one individual will be one year and that it is assumed that the operating cost will be about £60 million in 1983.

I am pleased that it is proposed to assist employers to retain persons in employment who would otherwise become unemployed or to take on new employees and generally to maintain or enlarge their labour force. However, I ask the Minister to examine the proposals, which excludes local authorities from receiving the financial assistance which would enable them to pay extra wages to low-paid youths on youth opportunities programmes sponsored by them.

I have in mind the wonderful work done by the go-ahead Rochdale borough council, which, through its borough engineering and planning depths, has sponsored many youth opportunity schemes, which provide skills and jobs for the youth of the area and improve the environment, to the delight and joy of all who live there.

In the last two weeks I have visited one of the work schemes involving the restoration of the Rochdale canal. The scheme employs 28 youth opportunity trainees, working along the canal with 32 others aged 19 and over who were taken on under the community enterprise programme. Under the YOP, the 16-year-olds working on the scheme are paid the princely sum of £23.50 a week—and we heard earlier that the Government are thinking of reducing that wage. Admittedly they are learning skills in making and repairing stone walls, repairing and restoring wooden lock gates, repairing and replacing towpaths, and all under expert tuition. I have seen the work at first hand and I know that they are doing a marvellous job.

Nevertheless, if one considers the unemployment benefit that they would receive for doing nothing and idling away their time—and perhaps getting into difficulties with the police—they are effectively doing hard physical labour in dreadful weather for 40 hours a week for the princely sum of £10 a week extra.

Mr. Marlow

That applies to a lot of family men on full wages, if they are on relatively low wages. It is a common problem throughout the economy.

Mr. Callaghan

I challenge the hon. Member, who earns a princely sum as an hon. Member, to work with those youngsters on the Rochdale towpath for £10 a week. It is little more than slave labour dressed up as a youth opportunities programme. Those youngsters are doing a marvellous job for the community, and the community must recognise that fact.

If young people are not trained in skills, there will be no future for Britain. As the Japanese say, we must look to the seed corn. If we compare the wages of apprentices doing similar jobs in the private sector, we find that they earn about £44 a week. I should like the Minister to look at the differentials.

One of the CEP workers, Stephen Jackson of Furness Road, Middleton, who is a cabinet maker by trade, said that before being made redundant he earned £107 a week. Now he earns £44 a week, doing heavy work in dreadful weather.

Work on the canal is in its fourth year, and Mr. John Brinton, the assistant borough engineer, is pleased with what the youngsters are achieving, but he said: They are worth a lot more than £23.50 a week. I echo those sentiments, as did Councillor O'Brien, who accompanied me on the trip. He said that the scheme was enabling youngsters to get jobs in the private sector later, because they got good work experience in skills connected with walling, concrete and macadam work.

When I visited the site on a wet afternoon, I noted that there were no toilet or washing facilities for the youngsters. How many hon. Members would work under those conditions for £23.50 a week? Some of the youngsters felt bitter that other YOP schemes involved working in much more pleasant surroundings—some schemes cover decorating old people's homes—yet there was no difference in the allowances.

Accordingly, because of what I have seen on the Rochdale scheme, I ask the Minister to review the decision not to assist local authorities with extra financial aid. Youngsters working on YOP schemes organised by local authorities have not had a rise in pay for more than two years.

I call on the Minister to end the exploitation of YOP trainees as cheap sources of labour and to bring in a scheme of nationally integrated training and apprenticeship linked to permanent jobs.

11.50 pm

Mr. Jim Craigen (Glasgow, Maryhill)

It is well known that the scheme is a professor's device. No doubt a professor will offer to undertake a research project for the Government next year to monitor the success of the scheme over 12 months. I am doubtful whether the scheme will generate the new job opportunities that are required for young people. It is more likely to help pay employers for existing jobs, create more tension in the work place and increase the sense of friction between younger and older workers.

If wage levels are regarded by the Government as being too high they should remember that wages are only one element in the cost to an employer of engaging a young person. There is also the employers' national insurance and the cost of training. If the Government addressed themselves more to the uplifting of the employers' national insurance contribution for the 16 to 18-year-olds and took over more of the funding of the training courses presently borne by employers for that age group, it would be more helpful and more constructive in the employment of young people.

I do not think that the scheme in itself will overcome the disinclination of employers to recruit young people. It seems that it is designed—I am always willing to applaud constructive schemes—to ease the Government's battered conscience over the high level of youth unemployment. Moreover, the scheme will shake the very fabric of free collective bargaining between employers and trade unions. It will have implications for adult workers. As the hon. Member for Ludlow (Mr. Cockeram) said, it will involve its fair share of paper work and extra civil servants.

I sounded out half a dozen employers in my constituency. I asked them how many youngsters they recruited last year and how many they had taken on this year. I outlined the proposed scheme and asked whether it would encourage them to take on additional young people. With one exception they said that it would make no difference to them. Sadly they had all recruited fewer young people this year than they were able to take on last year. One employer replied "We are not the sort of company that would prefer to take on young people as cheap labour". Two engineering companies said that the rate for a 16-year-old was £46.55, and so the scheme was of no real relevance to them. However, they all said that it would be of enormous assistance if the Government were to give way on the question of the employers' national insurance surcharge. They claimed that that would assist them to meet training costs. They observed that the Government would do better to introduce meaningful proposals for a much long-awaited new training initiative. I have a feeling that it will be like "Waiting for Godot" and that we shall not appreciate what is coming when the great announcement is made before Christmas.

In the longer term if we are to benefit young people, assist employers and, moreover, assist the community generally, the Government must introduce a scheme that is more positive and rather less arbitrary.

11.54 pm

Mr. Ray Powell (Ogmore)

I congratulate my hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) on covering the subject matter so briefly. I also congratulate him on initiating a debate on 21 October on the youth opportunities scheme. That debate covered the whole issue of unemployment, particularly youth unemployment.

The figures, facts and details given by my hon. Friend just now and in that debate on that issue cover the whole problem. About 300,000 young people are having to cope with the difficulties of unemployment. The only solution that the Government have come up with is a scheme that I believe will give unscrupulous employers the opportunity to employ people at under £40 a week. Unless they employ them at under £40 a week they will lose the subsidy of £15 that the Government are offering. How many employers will take on young people and pay them £41 and have £7.50 when they could induce young people to start work and pay them appreciably less than £40 a week?

The Minister suggested that £40 was a substantial figure. How many young people would earn £40 and say that that was a reasonable wage to live on? The Opposition are complaining that the £23.50 paid for YOP participants is insufficient for young people to live on.

In item 2 of the document, in the penultimate sentence, the Secretary of State said: I have consulted the CBI and TUC, thus meeting the requirement in Section 1(3) to consult such organisations as are considered appropriate. What were the reactions of those organisations? Were they in full agreement? Did they offer any alternatives? Are they satisfied that the measures will help to alleviate youth unemployment? Were they convinced that the scheme will provide encouragement to employers to employ more young people at realistic wage levels?

In conclusion, I should like to mention unemployment in Wales and the desperate youth unemployment problem, although 17,000 young people are on the MSC schemes. Unemployment has escalated by nearly 100 per cent. since the Government cook office. About 100 men and women join the dole queue daily. The CBI predicted that the figure of 170,000 will reach over 200,000 before the end of the year.

Why does unemployment in Norway and Sweden stand at 1 or 2 per cent., while in Wales there is 20 per cent. unemployment? n Mid-Glamorgan there are 56 persons out of work for every vacancy. What hope is there for our young, our children and our children's children?

We must find a solution. I call on the Government immediately to abandon their economic measures and to introduce real and positive solutions to the problems, or resign. Let us save that calculated waste of a generation.

11.58 pm

Mr. John Sever (Birmingham, Ladywood)

Now that the hon. Member for Northampton, North (Mr. Marlow) has resumed his place, I shall draw some of his remarks to the Minister's attention, because I would not want the hon. Gentleman to go away unanswered.

Will the Minister accept that it is dangerous for us to consider some of the measures that the hon. Gentleman put to him earlier on the basis that we should be diverting his Department's attention from solving what my hon. Friend the Member for Flint, East (Mr. Jones) rightly described as a national emergency, to hare-brained, loosely thought-out schemes about national resource something or other?—I do nor know what the hon. Gentleman was trying to convey to us. In an attempt to give young people something to do. the Department would be involved in community work, national service and other schemes that are not its prerogative.

Young people want to work. They want a job. They do not want schemes such as those suggested by the hon. Member for Northampton, North. They want to go into society, involve themselves in meaningful work and take home a fair wage for the job that they do.

In many households in my constituency the only earned income comes from a young worker. When we talk about the demands on society for young people to have jobs, we should remember that fact. Young people must be given every opportunity to take meaningful work for which they get a salary.

12.1 am

Mr. Alison

I shall follow the precedent of the hon. Member for Newcastle-under-Lyme (Mr. Golding) when he was in Government and promise to write to hon. Members about the points that I cannot cover because of a lack of time.

I repudiate the sweeping accusations against the Government of insensitive and misleading economic dogma. I reiterate two general points of background to the scheme. First, I beg hon. Members to bear in mind that the purpose of the scheme is to create new jobs for young people. Our systematic and deliberate estimate of the number of employers who will draw the benefit for young workers is between 50,000 and 100,000 in the first few months of the scheme. That is a positive contribution to job creation.

Secondly, there is no doubt that the differential between wages for adults and young people in Britain is dramatically out of line, certainly with other EEC countries. For instance, the rate for 17-year-old workers covered by the wages council order in the laundry industry is 90 per cent. of that for adult workers. With such a narrow differential there is no hope that youngsters who lack experience will be taken on. We aim to widen the differential and to create new jobs for youngsters. I believe that we shall succeed.

The hon. Member for Flint, East asked about the new training initiative. My right hon. Friend the Prime Minister has said that my right hon. Friend the Secretary of State will shortly make a statement on the new training initiative. That will be about the turn of the year. The hon. Gentleman also touched on the increase in the YOP allowance. Again, an announcement is imminent. About 14,000 young people are joining the scheme each week, so the present level is hardly a disincentive. I willingly concede that some wages councils pay more than the £45 upper limit.

I hope that I made the position of the wages council orders clear. Nothing in the scheme releases employers from their obligations under the orders.

The hon. Gentleman mentioned abuses of the scheme, such as the substition of younger workers and sacking older workers. It will not be as easy for an employer to abuse the scheme as he makes out. He could not dismiss an older worker as redundant if he attempted to recruit a younger one to take his place. Older workers therefore have, I think, the protection of the Employment Protection Act against unfair dismissal, but we shall certainly keep a very close eye on this from the point of view of potential abuse.

My hon. Friend the Member for Ludlow (Mr. Cockeram) criticised the scheme because of the potential increase in the number of civil servants. I remind him that the number of civil servants has increased quite rapidly as a result of unemployment. The unemployment benefit service, for example, has had to recruit a large number of extra civil servants to deal with unemployment. We hope that by increasing the number of job opportunities for youngsters we shall, on balance, be able to make a saving in civil servants.

My hon. Friend will bear in mind that in schemes to assist small businesses, for example, it is perfectly reasonable—indeed, Conservatives would expect this—that the Government should be prepared to introduce some further administration and to lay out taxpayers' money to encourage small businesses to start up. If the scheme is productive, therefore, it is worth doing in terms of extra resources and extra civil servants. We believe that the scheme will be productive. I very much agree with my hon. Friend's analysis of the increasingly narrow differential between young and older workers.

The hon. Member for Newcastle-under-Lyme criticised the scheme because of what he regarded as the sinister and unsatisfactory interaction with the existing YOP scheme——

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).

Question agreed to.

Resolved, That this House authorises the Secretary of State to set up, in accordance with section 1(1) of the Employment Subsidies Act 1978, a scheme (the expected cost of which will be more than £10 million between 1 April 1982 and 31 March 1983) for making payments to employers of young people whose earnings are below a specified limit.