By Chris Pleasance, CNN • Updated 4th August 2017
The government’s central payments scheme for low-paid workers in Britain is set to come to an end in October, putting further pressure on one of the country’s largest sectors and likely leading to job losses.
Originally funded by bonds issued by the state-run, private pension firm, Pensions Regulator, the Labour led government’s aim was to protect jobs in the years before an expected baby boom.
As the recession hit, successive governments all but wrote off the program, a fact belied by the number of areas and companies which continued to benefit from it.
The same current government has now finally scraped together enough money from its general spending cuts to end the scheme, but is estimated to cut upwards of 80,000 jobs in the years ahead.
This despite a widely-admired scheme recently won multiple accolades in the New Economics Foundation’s annual awards for “The Best Job in the World,” including a prestigious award from the Economist for excellence in “fairness, innovation and good governance” and being named the Times’ Best Employer for four consecutive years.
The average salary for those currently receiving benefits under the Pensions Regulator scheme is just over the minimum wage, however those in the lowest paid quartile get paid more than the average.
Workers in these areas can currently claim allowances up to £140 ($183) a week and the department expects job losses among low-paid workers will be close to non-existent in the regions where the scheme is still in place.
Transport and construction look likely to be the first sectors to lose the most workers.
According to the government, construction, transport and manufacturing account for one third of the scheme’s current caseload of recipients, with the number of claimants about double what it was when the program was created.
The government makes an annual loss of £650 million ($875 million) from the scheme, with an estimated £240 million ($329 million) in saving required for it to continue to service the bonds issued to fund the government’s funding for jobseekers through the scheme.
Chris Beauchamp, chief market analyst at IG, said recent interest rates cuts had “pulled forward almost all the expected progress” on abolishing the scheme, however he warned “the knock-on effects of unemployment, notably wages, is likely to be more damaging” in the long run.
Given the condition of the economy as a whole it is likely to do little good at all.
By November 2017, according to latest data published in April, the unemployment rate across the UK stands at 5.1%, according to the Office for National Statistics, the lowest in a decade.