Sunak’s Kickstart scheme risks becoming a dead end for small businesses

The government’s Kickstart scheme opened for applications from employers yesterday, after several weeks of confusion. Under the scheme, companies willing to take on new young employees for six months will receive funding for 100% of the National Minimum Wage for 25 hours a week, as well as National Insurance contributions, employer minimum auto-enrolment pension contributions and a one-off £1,500 payment to cover administrative costs.

Launching the scheme, Chancellor Rishi Sunak said: “This isn’t just about kickstarting our country’s economy – it is an opportunity to kickstart the careers of thousands of young people who could otherwise be left behind as a result of the pandemic. The scheme will open the door to a brighter future for a new generation and ensure the UK bounces back stronger as a country.”

The Treasury hopes the scheme will mitigate a sharp rise in youth unemployment which is expected over the coming few months. To be eligible, young people have to already be claiming Universal Credit, meaning they are at incredibly high risk of long-term unemployment if they fail to get into the jobs market as soon as possible. This category comprises more than 800,000 24-year-olds across the country.

While furloughed young workers do not currently fit the eligibility criteria, there is an expectation that there will be a wave of Universal Credit applications from under 24s when the furlough scheme ends in October. Around a third of workers in the 18-24 age bracket have either been furloughed or lost their jobs in recent months – a significant proportion of them in industries, such as hospitality, facing the most serious financial consequences of the pandemic.

The Treasury has set aside a £2 billion pot to cover costs, with a promise to increase this spending limit if the scheme proves more popular than they predict. Given the extraordinary uptake of the Eat out to Help Out scheme last month, it is a real possibility that they will have to spend more than expected.

However, the scheme’s rollout has been marred by confusion. Small businesses will be disappointed to learn today of a new rule requiring employers to create a minimum of 30 posts to directly receive funding from the scheme. While companies which don’t meet the requirement can partner with others and apply as a group, such an arduous task could force many good employers to forsake the scheme altogether.

This issue has particularly riled the Federation of Small Businesses, whose national chair, Mike Cherry, said: “Small firms, which are the largest employers across the business landscape, have long expressed interest in this scheme and will be disappointed to find it harder than expected to take part. To put it bluntly, this scheme has not been designed with small businesses front of mind.”

Young people have also been kept in the dark with regards to their application process. The government has vaguely promised openings in November, but has offered no further details about how they will be advertised or what is expected from an application.

Hovering over this exciting new scheme is the ghost of the Future Jobs Fund, a similar six-month training program introduced after the 2009 financial crisis. David Cameron, having inherited the scheme, found that it had been ineffective. “The really damning evidence is that it’s a six month programme, but one month after the programme has finished, half the people that were on it are back on the dole,” he said.

Sunak will receive praise today for his initiative, but there will be many questions to come about the exclusion of small businesses and the lack of details for prospective candidates.