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The government should implement a back-to-work scheme where agencies “foot the bill” for employing staff but then keep the worker’s income tax as a reward.
The “transformative” proposal was put forward by Dr Richard Milburn, a visiting lecturer at Kings College, London, who said the scheme could slash unemployment and save billions for the treasury.
Speaking on the Let’s Talk Social Value podcast, Dr Milburn explained a policy idea where an employment agency would put up an agreed amount of cash per unemployed person, then bear all the costs of getting that individual back to work.
However, the organisation would then get to keep their income tax for a period of 10 years, providing a financial incentive both for staying in work, and for that person to earn as much as possible.
According to the Office for National Statistics there are an estimated 1.67 million people unemployed in Britain, with a further nine million economically inactive.
Around 25 per cent of those have been out of work for more than a year.
Despite forgoing income tax for a period of time, such an initiative would not cost the government, because those taking part would no longer be in receipt of benefits such as universal credit and aren’t currently paying income tax in any case.
Dr Milburn was the latest guest on Let’s Talk Social Value, a podcast hosted by leading social value agency Samtaler to debate a range of social and economic issues.
Dr Richard Milburn, visiting lecturer at Kings College, London, said, “You could create back-to-work bonds which create a financial incentive for employment agencies to get people back into work.
“They have to foot the entire bill of getting that person but to work, but in exchange they then get the person’s income tax for, say, the next 10 years.
“So the great advantage of this is it costs the state absolutely nothing, in fact it is a saving because they’re no longer paying universal credit and so on.
“And by asking the employer to put up a bond of, say, £1000, they then have some skin in the game.
“The fascinating thing is the employer then has an incentive not just to get people into work, but to get them earning as much as possible because their income is directly correlated to how much income tax they would generate.
“The impact this could have on training, mental health and reducing the barriers to people getting into work as quickly and as cheaply as possible is transformational.
Sarah Stone, director of Samtaler, said, “This is such an exciting idea.
“It would take some boldness and bravery to do it, but the difference it would make could be enormous.
“It’s exactly the kind of thinking we need to see in government.”
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