Bankers' Bonus Tax To Pay For Labour Job Plan

By Anushka Asthana, Political Correspondent

Labour is including a £5.5bn "jobs guarantee" in its manifesto under which the long-term unemployed will be told to take up taxpayer subsidised work or lose their benefits.

The party is to fund the policy with a tax on bankers' bonuses and by reducing the rate of pension tax relief among higher earners to 20% from 45%.

Labour had initially pledged the jobs guarantee scheme for one year when it was first unveiled in January, however, now it will run until 2020, if the party is successful in 2015.

The scheme will see those under 25 given jobs for six months, with 25 hours a week paid at the minimum wage. 

People aged under 25 will be asked to take on the positions after a year on jobseekers' allowance, while for everyone else they will kick in after two years.

Ed Miliband floated the job guarantee scheme in 2012

Private companies and voluntary sector organisations will be given incentives to provide the jobs by the offer of a wage subsidy. They will also be given £500 to provide an additional 10 hours a week of training.

Labour insists the policy is funded claiming the bankers' bonus tax will raise between £1.5bn - £2bn and the pension relief rate cut between £900m and £1.3bn each year.

However, the Conservatives said the policy would cost more than Labour had estimated – around £2.6bn a year – and as such would not be covered by the banker bonus tax and change to pensions.

They also pointed out that Alistair Darling, the former Labour chancellor, had said the bonus tax would be a "one off" because City chiefs would soon find a way to evade it.

Financial Secretary to the Treasury: 'Sums don't add up'

Financial Secretary to the Treasury Sajid Javid said: "Labour's sums don't add up. They are proposing yet more unfunded spending, meaning more borrowing and more taxes to pay for it.

"And Labour's bank tax is a short-term political gimmick that they want to spend ten times over."

Labour wants to present itself as the "party of work" but this policy is also borne out of a perception that it needs to be tougher on welfare.

Internal polling suggests people support Government welfare reforms by two to one, rising to seven to one with swing voters.

Rachel Reeves, the shadow work and pensions secretary, said she was prepared to be even tougher than the Government when she took up this role.

"Our Basic Skills Test and Compulsory Jobs Guarantee will give young and long-term unemployed people the chance to work and will help us to earn our way out of David Cameron's cost-of-living crisis," she said.

Speaking at a visit to a building site in south London, Labour leader Ed Miliband, who first floated the scheme two years ago, said: "We can't have a recovery that's just for a few banks.

"We've got 56,000 young people who have been unemployed for over 12 months. A Labour government will tax the bankers' bonuses and put our young people back to work."

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