As I reported today, the Treasury is looking seriously into the idea of adopting German-style “mini jobs”, a scheme long championed by free market Conservative MPs. The model is that workers can earn up to €400, or £314, tax free each month, while their employers benefit from flexible labour with minimal bureaucracy: they pay a flat rate of wage taxes, insurance and pension contributions.
It is easy to see why companies and jobseekers might be clamouring for the government to pick this up, but there is actually a serious political case as well. Tories who were frustrated by the Liberal Democrats’ opposition to radical labour market reforms put forward by Adrian Beecroft have been calling for ministers to come forward with some new deregulation measures for some time.
The Lib Dems themselves are keen not to be seen as too obstructionist on this issue given the drive for growth, and party officials have assured me that they are not pushing back against the mini jobs idea. Could this be the middle way?
When I canvassed the Tories on what they thought of the proposal, the response was overwhelmingly enthusiastic.
Kwasi Kwateng, a leading member of the free enterprise group, which has pushed the idea, was unsurprisingly keen:
It’s extraordinary that we have to learn lessons in labour market flexibility from Germany. Anything we can do to make things easier for small business owners has got to be a good thing.
Douglas Carswell, a backbencher, pointed out that Steve Hilton had been keen on the idea a year ago and the Treasury should have paid more attention:
It’s about time they looked at this. We are often told that Europe is stopping us from liberalising the labour market but the mini-jobs idea shows that if you had a bit of oomph in the Treasury or Whitehall there’s a heck of a lot more we could do
The doubts are being voiced by Vince Cable’s business department, which expressed considerable scepticism. A spokesman said:
This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour. This is quite different to the situation that exists in the UK.
Whether these anxieties represent mandarins unsure about breaking new ground, or a principled objection from Vince himself, remains to be seen.
Jim Pickard
Kiran Stacey