Major acts on jobs crisis: PM sets up high-powered Cabinet team; Cash lure to quit dole queue for college

JOHN Major, alarmed that the jobless total may reach a record 3.1 million by the summer, has ordered a high-powered Cabinet working group to find ways of tackling unemployment.

New incentives for the unemployed to take college courses and to start small businesses are among measures the group will consider. It will include ministers from key spending departments, and Michael Portillo, chief secretary to the Treasury. His inclusion is particularly significant, suggesting that some proposals involving extra funds could be announced at the same time as the budget on 16 March.

Senior ministers are anxious about the long-term political and economic effects of rising unemployment, which is likely to hit the psychologically important three million mark in February or March. Figures to be published this week are expected to show that the jobless total has risen again from its latest level of 2,908,900.

The ministerial group was proposed before Christmas by Gillian Shephard, the Secretary of State for Employment. The Prime Minister moved swiftly after a seminar with Policy Unit staff last week, suggesting that the battle against unemployment has moved to the top of his domestic agenda, replacing inflation, which was down to 2.6 per cent in December.

Labour, too, is stepping up its offensive on unemployment. Gordon Brown, the Shadow Chancellor, who will unveil Labour's 'budget for jobs' this week, said yesterday that 300,000 jobs would be lost in the next six months. One million people under 25 were now out of work, including 30 per cent of 16-17 year olds.

The Cabinet group will be chaired by Lord Wakeham, Leader of the House of Lords and one of Whitehall's most experienced 'fixers'. It is expected to include John Patten, the Secretary of State for Education, Peter Lilley, the Secretary of State for Social Security, and Michael Heseltine, President of the Board of Trade, as well as Mrs Shephard and Mr Portillo.

Ministers have been encouraged by tentative signs of economic recovery, including a 19 per cent increase in car exports in the last quarter of 1992. But Mr Major and Mrs Shephard believe that unemployment is itself slowing the recovery in confidence. Mrs Shephard is said by fellow ministers to want extra funds to expand such programmes as the Business Start-Up scheme, which will provide grants this year for 30,400 unemployed people.

The scheme is judged a success. As well as echoing the Tory commitment to enterprise, it follows the advice of government labour market experts that the main medium- and long-term growth in jobs will come from new businesses.

Mrs Shephard also wants more money for training. She secured a 1 per cent increase in real terms for such schemes in last year's Autumn Statement. But a large proportion was absorbed by the administrative costs of coping with the relentlessly rising unemployment total.

One of the newest proposals circulating in Whitehall is to encourage unemployed people, including adults, to sign up at colleges of further education. The committee is expected to consider ways of ensuring that job-seekers could thus improve their qualifications, without forfeiting some benefit as they have to at present.

Ministers want the committee to co-ordinate plans for coping with large-scale redundancy announcements in both private and public sector industry. The move comes amid continued fears for the survival of at least some of the 31 coal pits reprieved in October, and the possible closure of the Rosyth dockyard which employs 4,000 people and provides jobs for many thousands more in dependent industries.

Early emphasis is also likely on possible ways of expanding the existing Employment Action programme.

The committeee may examine expansion of 'work trials'. This new scheme, involving 20,000 people a year, allowsfirms to take on unemployed people who are still receiving benefit. No wages are paid; the hope is that the people can be found jobs if the trials are successful.