The Government should maintain support for its internship scheme against a background of rising graduate unemployment.
The call has come from the Federation of Small Businesses (FSB).
The scheme, which is due to end in March 2011, has been “highly successful”, the FSB argued, and should be extended.
Since its launch, under the previous administration in February 2010, the scheme has given paid backing to some 8,500 interns who have gained experience working in smaller firms.
Given that unemployment figures to the end of December 2010 showed that almost one million 16-24-year-olds are out of work and that youth unemployment has reached 20.5 per cent, many of whom will be graduates, the FSB is urging the Government to continue with the internship measures.
In its study, the FSB showed that, by extending the scheme, at least 5,000 new internships placements can be created at a cost to Government of £8 million, so reducing benefit payments by at least £1.5 million.
With almost one in four of interns eventually receiving the offer of full-time employment, the move would boost Treasury coffers by a further £3.37 million over the course of one year in reduced Job Seekers Allowance payments, along with a further £5.4 million in tax payments.
The FSB offered a breakdown of the figures in support of its case, indicating where the costs of the scheme would be more than offset by the reduction in benefit payments and the uplift in taxes paid by those graduates who are rewarded with permanent positions.
Currently a graduate on Job Seekers Allowance would receive £51.85 a week, the FSB said. Over the course of a six-week placement this would be a cost of £311.10. If 5,000 extra placements were created in small businesses, as with the last Graduate Internship Scheme, it would mean a saving of over £1.5 million in benefits alone.
Based on 25 per cent of graduates being offered full-time positions, by helping to create 1,250 extra jobs the Government would also save £3.37 million on Job Seekers Allowance payments in the first year of employment.
If it is assumed that these jobs are offered at £16,000, then each job would return £4,350 of income tax and national insurance to the exchequer in the first year. The tax accrued through creating 1,250 extra jobs (on the assumption that 25 per cent of jobs are offered) would exceed £5.4 million.
John Walker, the FSB’s national chairman, commented: “The current Graduate Internship Scheme has proved highly successful, with some interns going on to start their own companies and others being offered full-time positions with the business they interned for.
“The investment needed to keep the scheme going would be more than outweighed by the contribution that the Treasury would see in reduced benefits payments and the increased tax-take from those that gain employment as a result of the internship.
“The UK’s young people are the future of the economy, yet we are seeing youth unemployment approaching one million. It is time that the Government invested into this vital sector so that we don’t see a generation of youngsters consigned to the dole queue.”
