Labour Plans Pensions Grab To Fund Jobs

Labour has unveiled plans to provide guaranteed jobs to the long-term unemployed by slashing pension tax relief for top earners.

The £1bn scheme would see 130,000 people out of work for more than two years offered posts on at least the minimum wage.

Under the plans, outlined by shadow chancellor Ed Balls, the jobless would face losing benefits if they refuse to take the jobs on offer.

It is one of the first tax policies confirmed by Labour, which has been under increasing pressure to spell out its spending plans.

The plans are similarly designed to the last Labour government's youth unemployment scheme the Future Jobs Fund, which was scrapped by the coalition.

Mr Balls, writing for the Politics Home website, 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%.

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

"£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."

Top earners on more than £150,000-a-year currently receive a maximum of 50% in pension relief which is due to fall to 45% in April.

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

Labour is positioning ahead of a key Commons vote next week on capping benefit rises at 1% for the next three years.

The Government insists it is unfair for the handouts to rise unchecked while those in work are suffering from austerity.

But the Opposition are set to vote against the curb, arguing that the majority of people affected by the cap are those in low income jobs.

Mr Balls told Sky News: "The Government's work programme is failing and we have a choice coming up next week about what kind of welfare reform we want.

"Two-thirds of people hit by the benefits curb are in work... I don't see why we should go along and hit working families while they cut top rate taxes. That's not fair."

David Cameron described Labour's position as "bizarre" and condemned its jobs plan as a "sort of reheating of a rather unworkable scheme that we inherited in 2010".

"I think what Labour really need to focus on is their bizarre decision to support benefits going up faster than wages, which is what they are going to be voting for on Tuesday," he said.

The Tories also accused Mr Balls of double counting because last year he suggested using money raised by cutting pension relief to avoid curbs on tax credits.

Conservative Party Chairman Grant Shapps added: "Ed Balls is trying to spend the same money twice.

"That means more borrowing and more debt - exactly how Labour got us into this mess in the first place. Labour have learnt nothing from their mistakes."

Labour's plans came as the TUC accused the Government of misleading the public about benefits to ensure support for its drastic cuts.

A poll for the union found that two-fifths think benefits are too generous and three in five believe there is a culture of dependency.

But it suggested that support starts to dwindle once people realise capping benefits will also affect workers in low-paid jobs.

General secretary Frances O'Grady said: "It is not surprising that voters want to get tough on welfare. They think the system is much more generous than it is in reality, is riddled with fraud and is heavily skewed towards helping the unemployed, who they think are far more likely to stay on the dole than is actually the case.

"But you should not conduct policy, particularly when it hits some of the most vulnerable people in society, on the basis of prejudice and ignorance.

"It is plainly immoral to spread such prejudice purely for party gain, as ministers and their advisers are doing, by deliberately misleading people about the value of benefits and who gets them.

"Voters who have a better grasp of how benefits work and what people actually get oppose the Government's plans. When people learn more about benefits, support moves away from coalition policy.

"The truth remains that benefits are far from generous, the vast majority of the jobless are desperate for work and most benefit spending goes either on pensions or on benefits for those in jobs or who aren't able to work."