Labour reveals work plan for long-term unemployed

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Pension tax relief for top earners could be slashed to provide guaranteed jobs for the long-term unemployed, under plans unveiled by Labour.

Shadow Chancellor Ed Balls said the £1bn scheme would see 130,000 people out of work for more than two years offered posts on at least the minimum wage – but they face losing benefits if they refuse to take the jobs.

Writing for the PoliticsHome.com website, Mr Balls said: “A One Nation approach to welfare reform means government has a responsibility to help people into work and support those who cannot, but those who can work must be required to take up jobs or lose benefits as a result – no ifs or buts.”

He added: “While getting people back to work will save the taxpayer money in the long-term, the up-front costs of Labour’s jobs contract can be funded by reversing the Government’s decision to stop tax relief on pension contributions for people earning over £150,000 being limited to 20 per cent.

“When times are tough it cannot be right that we subsidise the pension contributions of the top 2 per cent of earners at more than double the rate of people on average incomes paying the basic rate of tax.”

The Morley and Outwood MP added: “£1bn a year would fund a compulsory jobs guarantee initially for all those out of work for 24 months or more – which we would seek to reduce to 18 or 12 months over time.”

Yesterday’s move represents one of the first tax policies confirmed by Labour – as the party has been coming under increasing pressure to spell out its spending plans.

The announcement is also likely to be seen as positioning by the party ahead of a key Commons vote next week on capping benefit rises.

Those earning more than £150,000 would only get 20 per cent relief on savings for their retirement, rather than the 50 per cent maximum available now, and 45 per cent per cent from April.

The proposal is similar to one announced by the Labour government in 2009, which was later scrapped by the coalition.

A Treasury source said Mr Balls had suggested before the Labour conference last year that he would use money raised from cutting top-rate pension relief to avoid curbs on tax credits.

“Ed Balls is trying to spend the same money twice,” the source said.

“That means more borrowing and more debt – exactly how Labour got us into this mess in the first place.”

Shadow Work And Pensions Secretary Liam Byrne claimed the Government’s welfare reform was “collapsing in chaos”.

He said: “This is about the best way to bring the welfare bill down. A few years ago we were promised something of a welfare revolution and I think what’s now clear is that Universal Credit, the Work Programme, the benefit cap are all in a state of some disarray.”