Businesses warn of job losses threat as Starmer hopes to get 2m back into work

Sir Keir Starmer is in a new row with leading company bosses as his government attempts to force around 2 million young people back into work.

As work and pensions secretary Liz Kendall unveiled the “Get Britain Working” plan in the Commons, a major business organisation – the British Chambers of Commerce – warned that Labour’s policies are more likely to lead to job losses.

There was similar criticism from the Confederation of British Industry (CBI), with both organisations pointing to the impact of employment rights legislation and the rise in national insurance dubbed “the jobs tax”.

The government plans to force young people and the long-term sick to take up work or lose their benefits in a dramatic move to end worklessness and increase employment in the UK.

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But Matthew Percival, work and skills director at the CBI, said: “Employers have a key role to play in supporting the delivery of the government’s objectives. There’s no doubt that rising taxes and employment costs will make it more difficult for them to do so.”

With the employment rights bill discussed by MPs in committee stage on the same day, the issues were linked by Shevaun Haviland, director general of the British Chambers of Commerce.

He said: “The Budget has already left many firms feeling bruised, and if this legislation is enacted as it stands, it could hamper growth, restrict recruitment and lead to job losses.”

Professor Len Shackleton, editorial and research fellow at the Institute of Economic Affairs, said: “It is questionable that there would be enough jobs for them in any case, given that the Budget and minimum wage increases have sharply raised the cost of employing people, especially the young, while new employment rights from day one mean that employers face greater risk in taking on those without a sound employment record.”

The warnings followed a bruising start to the week for the government, with chancellor Rachel Reeves forced on the back foot about her Budget at the CBI conference after being pilloried by Britain’s largest business organisation and captains of industry.

Most damaging was the criticism from Salman Amin, the chief of McVitie’s owner Pladis, who warned: “It’s becoming harder to understand what the case for investment is … to make a difference in the growth rate of the economy.”

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While there was some praise for the government’s plans, ministers were warned about their blindspot over businesses.

Lord Elliott, president of the Jobs Foundation, said: “Achieving this objective requires a thriving business community, and that requires a policy environment which encourages businesses to invest and create jobs.”

Addressing MPs, Ms Kendall insisted that people who “can work, must work”.

The work and pensions secretary warned the benefits bill for sickness and disability is set to rise “by £26bn by the end of this parliament” as she announced the plans in the House of Commons.

”But under our government, this will change, with new opportunities matched by the responsibility to take them up,” she added. “Because under this Labour government, if you can work, you must work.”

The government’s “Get Britain Working Again” plan, published on Tuesday, is primarily aimed at returning some of the 2.8 million people out of work due to long-term sickness to the workplace.

Long-term sickness has been a major driver in joblessness since the pandemic, having risen from approximately 2 million in 2019.

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The 20 places in England with the highest levels of joblessness will get more NHS staff to help cut waiting lists as part of the plans.

Extra mental health support is also set to be rolled out to coach people with mental illnesses into work, while job centres will be replaced by a new National Jobs and Careers Service.

The work and pensions secretary said a “radically improved digital offer” to be trialled at some jobcentres will help improve the efficiency of services.

She added that video and phone support for jobseekers would provide a “job centre in your pocket”.

But, as well as criticism from business, there were also warnings about the impact on the vulnerable, particularly those with mental health issues.

The Resolution Foundation think tank said the welfare reforms could boost living standards but warned the plan “needs proper resourcing to really make a difference”.

“It’s not yet clear, for example, how the government will ensure that there are enough employment, training and apprenticeship opportunities to make its ‘job guarantee’ cast iron for young people,” said Greg Thwaites, research director at the think tank.

Claire Atchia McMaster, director of income and external affairs at Turn2us, said: “Significant questions remain on the role of conditionality and sanctions. Evidence shows sanctions don’t work – they push people further into crisis, impact mental health, and make financial security harder to achieve. At Turn2us we hear from people who are unable to afford essentials like food because of these punitive policies.

“If the government is serious about rebuilding trust in social security, it must lead with fairness and compassion when reforming other areas of the system.”

Iain Porter, senior policy adviser at the Joseph Rowntree Foundation, warned: “These positive first steps risk being undermined by the government’s commitment to £3bn of cuts to the health and disability benefits budget if this simply comes from removing support for disabled people. Putting arbitrary cost savings ahead of effective reforms leaves a cloud of uncertainty hanging over the disabled people on low incomes who rely on health and disability benefits.”

Christine Jardine, the Liberal Democrats’ women and equalities spokesperson, told the Commons she saw a “contraction” in employment policies, while Conservative shadow work and pensions secretary Helen Whately accused Liz Kendall of having “dodged tough decisions”.