View from City Road: Long-term worry on unemployment

More than a million people in Britain have been without work for a year or longer and, despite recent unexpected falls in the headline jobless total, long-term unemployment is likely to continue rising.

This is both a social and an economic problem. The long-term jobless are more susceptible to illness and depression and have suicide rates 20 times the norm. Their skills atrophy and they become increasingly unattractive to employers.

The Organisation for Economic Co-operation and Development points out that rising long-term unemployment is now a problem for most rich nations, with Britain only slightly better off than most.

But, worryingly, most of the suggestions the OECD has for tackling the problem have already been tried here, suggesting the scope for further improvement may be slim. Benefits are low compared with wages, hiring and firing is cheap, job security legislation is light and 'restart' interviews help place the jobless in training and deter the workshy from staying on the register.

Hopes may therefore rest increasingly on the 'workstart' pilot wage subsidy scheme that Norman Lamont announced in his last Budget as Chancellor. Under the scheme firms receive a cash subsidy, which falls over time, to employ people who have been unemployed and claiming benefit for two years or more.

The subsidy should be increased in size and the two-year threshold brought forward to six months.