Pay firms to hire staff, Labour urged

A LABOUR government should break the cycle of long- term unemployment and poverty by paying employers to take on those out of work for more than 12 months. This will be proposed in a report by the Commission on Social Justice, set up by the late party leader John Smith and chaired by Sir Gordon Borrie, former director-general of Fair Trading.

The independent commission's report, due out this week, argues that some form of financing should be available to public or private sector employers who give jobs to the long- term unemployed. One idea is that such employers would be given a National Insurance 'holiday' from their contributions.

Labour's leader, Tony Blair, will welcome the report but will stress that in this, as in other areas, more work may be needed. He is anxious to break the dependency culture and may want to go further towards US-style workfare than the commission.

Sir Gordon places emphasis on financial incentives to get people from welfare to work, rather than on compulsion through the withdrawal of benefits. The commission has concluded that there is a growing gap between those in work, whose partners often have part- time work, and families where both parents are unemployed. This has lead to an increasing polarisation between 'two-job' and 'no-job' families.

The report, Social Justice, Strategies for National Renewal, aims to be a comprehensive analysis of future welfare provision which might take more than one term of office to implement. The 16 commission members stress that it is not intended as a Labour manifesto for the next election.

The party leadership has been at pains to stress that it will not be bound by the findings of the report, which maps out a vision for Britain looking ahead to 2010. Gordon Brown, the shadow Chancellor, is determined that the proposals will not land the party with additional spending commitments - or present the Tories with an opportunity to 'cost' a Labour government's likely spending.

However, the big unions will welcome Sir Gordon's findings, both because they reject the notion of means-testing in the benefit system and because they back the concept of full employment.

Instead, the commssion's findings include an option to target child benefit through making it taxable for high earners. The commission argues for a minimum universal state pension which would be topped up by with private and occupational pension provision.

A full integration of the tax and benefit system is rejected as too complex to administer but the report makes several recommendations designed to eliminate the poverty trap where some unemployed people lose benefit when they return to work.

Its other findings in a roughly 400-page report include support for a student loan system, possibly one based on payback through the National Insurance system.

The findings will go to Labour's economic commission and to the National Executive Committee, which will prepare its own report for next year's party conference.