Labour MPs have no reason to oppose a fresh government attempt to overhaul the welfare system, the work and pensions secretary has said, as he unveiled a £1bn youth employment scheme.
The announcement by Pat McFadden, who said the public wanted the system to promote work and “value for money”, is regarded as a prelude to a renewed effort to change the welfare system after plans by his predecessor, Liz Kendall, were blocked by a Labour backbench rebellion last year.
Companies will get a £3,000 grant for each hire of a person aged 18 to 24 who is on benefits and has been looking for a job for at least six months, under a new policy designed to tackle the rising rate of youth unemployment.
The funding, which is aimed at creating 200,000 jobs, is part of what was described by McFadden as a “new deal for young people”.
It was announced alongside a new apprenticeship incentive, under which small and medium-sized businesses will be paid £2,000 for every new employee aged between 16 and 24 they take on. Payments to firms will be staggered under the scheme, which will start in June.
Ministers also paved the way for a slower rise in the minimum wage for younger workers, amid pressure to bring down the highest levels of youth unemployment in a decade.
At the same time, the government is getting rid of a number of management apprenticeships, of which eight in 10 are taken up by existing employees over 25.
However, McFadden also dropped strong signals that the government was laying the ground for a fresh attempt to make welfare changes, after the government was last year forced to water down plans announced by Kendall.
A U-turn on cuts to disability benefits was undertaken to avert a rebellion by more than 120 Labour backbenchers last summer, while 47 MPs later rebelled against proposed cuts to welfare.
“I want to give people a chance. I want to give them a level of support that they have not had in the past and I believe that is what welfare reform is all about and I see no reason Labour MPs should not support welfare reform that puts work and opportunity at its heart,” said McFadden when asked if he was ready to take on backbenchers once again over broader welfare changes.
Earlier, he used a speech at a further education college in east London to make the case for “radical” change to the welfare system.
“The welfare state is only as strong as the political and public support for it,” he said. “It has survived because there is an acceptance in society that we should support the unemployed, the sick, disabled people and the elderly. But the public also wants the system to promote work and value for money and they are right to do so.”
McFadden said the number of young people not in education, employment or training – a group sometimes referred to as Neets – was much too high at almost a million.
Within that group, the proportion who are sick or disabled has doubled and is now about 45% of the total.
In recognition of concerns over the youth jobs market, Peter Kyle, the business secretary, said the government would hand the Low Pay Commission (LPC) flexibility to recommend changes to the pace and timing of the minimum wage for younger workers.
Labour made a manifesto pledge to scrap “discriminatory” lower rates for 18 to 20-year-olds. However, some business leaders have blamed above-inflation rises planned for this spring for discouraging them from hiring younger adults.
In publishing the annual remit for the LPC, Kyle said the government remained committed to removing discriminatory age bands. But said the body which advises on the legal pay floor would be handed “full flexibility to determine the pace and ultimate timing of that alignment, with priority being given to the employment prospects of younger workers”.
The Tories said opportunities for work were “disappearing” under the Labour government, blaming the Employment Rights Act and the rise in national insurance contributions for employers.
Helen Whately, the shadow work and pensions secretary, said: “The best way to tackle youth unemployment is to back businesses to create jobs, not tax them out of existence to fund benefits and subsidies.”
McFadden was challenged at the event by Lindsay Conroy, chief executive of the Association of Apprentices, who said there was “real concern” among some employers at what she described as the “defunding” of some apprenticeships and the restriction on ages.
“We had to make a choice here,” McFadden responded, adding that many people would be surprised to learn that a majority of funding for apprenticeships in recent years was going to people over 25 who were already in work.
Sense, a disability charity which was among those who opposed benefits changes proposed last year by Kendall, said: “It’s extremely concerning that the government seems to be laying the groundwork for reforms to disability benefits, fuelling anxiety among disabled people already struggling as the cost of living rises.”
