'Back to work' plan to push self-employment

Unemployed people will get more government help to start their own businesses under plans to move Britain “from recession to recovery” to be set out by ministers next week.

The jobless will receive up to £800 tax-free and intensive support and advice on how to become self-employed as soon as they sign on the dole under a new drive to bring down unemployment as soon as possible after the recession ends. There are growing signs that many women are starting their own businesses from home.

The extra cash will be announced in a “Back to Work” White Paper published alongside the Chancellor Alistair Darling’s Pre-Budget Report on 9 December.

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At present, people have to be out of work for six months before qualifying for a £50-a-week self-employment credit for 16 weeks to bridge the gap between the dole and an income from their new business. The six-month gap is seen as a deterrent and ministers believe that more of the jobless would start their own firms if they could get the state help from day one.

Yvette Cooper, the Work and Pensions Secretary, told The Independent yesterday: “More and more people are interested in starting up their own business. If we can make it easier for people who are unemployed to try self employment that's good for them and good for the economy too.”

She decided to change the system after meeting women in her Pontefract and Castleford constituency who were keen to become self-employed but were worried that their redundancy money would have run out in six months. She felt they needed government support earlier.

Ministers claim the Government’s £5bn anti-recession package has helped the jobless find work more quickly than in previous recessions.

Ms Cooper added: “Last November we had to make a decision – to invest in people who’d lost their jobs due to the recession or simply sit back and let them sink or swim. We chose to invest and that’s already getting more people into jobs. But we still need to do more.”

Official figures show the number of people in self-employment is still rising in the recession – from 3,794,000 in July-September last year to 3,852,000 in the same period this year. There were 81,000 more self-employed women this year and 23,000 more men. More recent figures show the number of self-employed men rising by 6,000 and women by 26,000.

The Federation of Small Businesses has anecdotal evidence that women are setting up more home-based businesses – such as making products or online, sales and marketing ventures. In some cases this was to find work that was easier to juggle with bringing up their children.

To combat white-collar unemployment, the White Paper will announce that professionals will get an extra day of specialist help, on top of the one day of they have already been promised. The support includes one-to-one advice, group sessions with other jobseekers and how to brush up their job-finding skills.

Unemployment stands at 2.46m but is about 400,000 lower than expected at the time of the Budget in April.

Ministers say the Government’s extra measures in the face of the most severe global recession since the 1930s, has helped 50 per cent of claimants off Jobseeker’s Allowance within three months, 75 per cent within six months and 90 per cent within a year.

The claimant count is currently just over five per cent of the workforce, compared to 10 per cent in the recession in the 1990s and 12 per cent in the downturn in the 1980s. But ministers remain concerned that unemployment will continue to rise in the new year, even though the economy is expected to start to grow again in the final three months of this year.