§ I turn now to the continuing problem of high unemployment. It is a problem that can be solved—and there is no secret about how. The solution to the problem of unemployment—it is the only solution—requires progress on two key fronts. The first is a sustained improvement in the performance of business and industry, and thus of the economy as a whole. That is what every aspect of the Government's economic policy has been designed to assist, and it is already achieving impressive results. The second is a level of pay which enables workers to be priced into jobs instead of pricing them out of jobs, and which in particular ensures that British industry can hold its own against our major international competitors.
It is here that Britain's weakness lies. The plain fact is that labour costs per unit of output in British business and industry continue to rise faster than is consistent with low unemployment and faster than our principal competitors overseas. Productivity is, certainly rising quite rapidly, but pay is rising faster still.
It is this—and not our alleged dependence on oil—that constitutes the Achilles' heel of the British economy. 172 In a free economy—as the CBI has frankly and commendably acknowledged—it is the responsibility of employers and management to control industry's cost structure in general and its wage costs in particular. In the new and improved climate of industrial relations, and with inflation falling and set to fall further, there can be no excuse for failure to discharge that responsibility. I have, however, considered whether there is anything further Government can do to assist this over the longer term.
The problem we face in this country is not just the level of pay in relation to productivity, but also the rigidity of the pay system. If the only element of flexibility is in the numbers of people employed, then redundancies are inevitably more likely to occur. One way out of this might be to move to a system in which a significant proportion of an employee's remuneration depends directly on the company's profitability per person employed. This would not only give the work force a more direct personal interest in their company's success, as existing employee share schemes do; it would also mean that, when business is slack, companies would be under less pressure to lay men off; and by the same token they would, in general, be keener to take them on.
This would clearly be in industry's own interest, and most emphatically in the best interests of the unemployed. It should therefore occur without any prompting from Government. But there is considerable inertia to overcome, so it might make sense to offer some temporary measure of tax relief to the employees concerned to help get profit-sharing agreements of the right kind off the ground, and to secure the benefits that would undoubtedly accrue if they really caught on.
Inevitably, the design of such a relief, and the precise definition of qualifying agreements, would need to be drawn with considerable care. The Government therefore propose to discuss with employers and others to see if a workable scheme can be defined which offers the prospect of a worthwhile and broadly based take-up. If these preliminary discussions were sufficiently encouraging, we would prepare a consultative document setting out a detailed scheme for wider consideration.
Meanwhile, there is more we can do of an immediate nature to help the unemployed. In my Budget last year I announced the Government's intention to launch a new two-year youth training scheme, leading to recognised vocational qualifications. The new and expanded YTS will duly come into operation next month. It will be a giant step towards our objective of ensuring that no youngster under the age of 18 need be unemployed.
I also announced in last year's Budget a substantial expansion of the community programme to help the long-term unemployed—those who have been out of work for over a year, or, in the case of those between 18 and 24, for more than six months. The community programme, which offers work for up to a year on projects of benefit to the community, is currently providing almost 200,000 places. I have agreed with my right hon. and noble Friend the Secretary of State for Employment to provide the funds to raise the eventual target for this year to 255,000 places—very nearly double the number that existed a year ago..
§ Mr. John Prescott (Kingston upon Hull, East)You used to say these were not real jobs.
§ Mr. LawsonAt the same time, the average wage limit for the community programme will be increased to £67 a week from next month.
Last November, my right hon. and noble Friend announced two pilot schemes to provide further help for the long-term unemployed. These new initiative, which began in January, are a counselling scheme open to all the long-term unemployed in the pilot areas, and a jobstart allowance of £20 a week for six months for those long-term unemployed who take a job at less than £80 a week.
§ Mr. PrescottTea and sympathy.
§ Mr. LawsonThese pilot schemes are already producing results, and I have accordingly decided to provide the funds to develop them into a single programme covering the entire country. This means that every single one of the long-term unemployed throughout the land will be offered individual help and advice in finding a job.
§ Mr. PrescottBut no job.
§ Mr. LawsonI shall also be providing the resources to launch a brand new scheme—the new workers scheme—to help 18 to 20-year-olds to find a job. This will provide for a payment of £15 a week for a year to any employer taking on an 18 or 19-year-old at up to £55 a week or a 20-year-old at up to £65 a week. The new workers scheme should provide a worthwhile incentive for employers to create jobs for young people.
Finally, I have agreed to a substantial enlargement of the proven and highly successful enterprise allowance scheme—[HON. MEMBERS: "Hear, hear."]—which makes payments of £40 a week for up to a year to assist unemployed men and women to set up in business on their own account. Funds will be provided that will enable the annual rate of entry to the enterprise allowance scheme to be increased steadily from its present figure of 65,000 to 100,000 by April 1987, and to provide more training for those involved. At the same time I propose to improve the tax treatment of payments made under this scheme.
The total public expenditure cost of the measures I have outlined, together with consequential spending in Northern Ireland, comes to £195 million in 1986–87 and £285 million in 1987–88. These gross costs will, however, be partly offset by savings on social security benefits, leaving a net public expenditure cost of £100 million in 1986–87 and £165 million in 1987–88. This will be financed from the reserve, and there will therefore be no overall addition to planned public spending.