LONDON, November 22/PRNewswire/ --

An immediate package of measures - centred on a comprehensive programme
to boost bank lending, a one-off tax credit targeted at the poor, higher
benefit payments to stimulate demand, a public works programme, and an
incentive scheme for employers to put workers on shorter hours rather than
make them redundant - is needed to stave off a prolonged recession and high
unemployment, The Work Foundation says today.

Predicting a peak of 2.5 million unemployed and a worse recession than
both the 1980s and 1990s, a new report urges the government to use every
means at its disposal - monetary, fiscal, financial and through assorted
labour market interventions - to boost the economy and protect employment. It
urges:

- Fiscal stimulus: a boost equivalent to 1 per cent of GDP (GBP15
billion), including a a one-off tax credit to the poorest households who are
most likely to spend any additional income.

- Private sector credit flows: to stimulate lending, the terms of the
Bank of England's special liquidity scheme should be relaxed; the 12 per cent
interest rate on the coupon it is charging when it invests in banks via
preference shares should be lowered; and action is needed to reduce the
insurance premium being paid to guarantee the GBP250 billion of unsecured
debt in interbank lending, together with extending the small business loan
guarantee scheme.

- Public works programme: the government should bring forward as many
construction projects as possible. There should be particular attention paid
to smaller, more labour intensive projects such as social housing, hospitals,
schools and transport (about 50 per cent of all construction orders consist
of projects involving less than GBP2 million spending).Where Private Finance
Initiative schemes are being held up by lack of credit, public money should
be made available.

- An increase in out-of-work benefits: a time-limited scheme to increase
unemployment benefits (which are low by international standards) to around 60
per cent of previous net earnings.

- Support for the unemployed: expand the capacity of job search and
support services (such as JobCentre Plus), tailored to the needs of local
areas where possible. Quality must be maintained despite the numbers of
unemployed people, though the government's welfare-to-work ambitions main
need to be revisited. UK investment in 'active labour market programmes' is
low by international standards.

- Short-time working: incentives should be offered through a publicly
funded short-time working scheme to encourage employers to retain human
capital rather than dismiss workers. The scheme would be suspended once
recovery is under way.

- Regional aid: Devolve necessary funds and powers to encourage local
authorities and Regional Development Agencies to invest in worklessness and
skills schemes (or labour market policies) that respond to the particular
challenges of the area; and to set up short-term schemes to help struggling
firms - for example, Advantage West Midlands' 'Transitional Loan Fund'.

- Bonus taxation: the government should introduce a financial services
bonus tax taper with a higher marginal rate of 75 per cent for annual
bonuses. This would discourage excessive risk-taking and reduce the impact of
perverse incentives.

David Coats, associate director - policy at The Work Foundation, said:
'It is vital that the government is bold and decisive. Without intelligent
intervention by the state, the banking crisis could damage the real economy
just as severely as the Great Crash of 1929.

'The principles that should determine the government's response to the
crisis are that interventions should be timely, targeted and temporary. Some
of our proposals are contentious and go against the grain of recent political
thinking - higher unemployment benefits, for example. But our aim is to put
money where it is most needed, where it will most readily be spent, and to
help maintain employment. Public indebtedness in the UK is low by
international standards and as long as the reflationary package is strictly
time-limited and wound up on recovery, we can afford it. Ultimately, it falls
to the state to get us through the downturn and ready for the upturn.'

Dismissing claims of a 'middle class recession', the report says job
losses are likely to fall disproportionately on full time, male workers,
amongst the young, and among those in less secure employment (this mirrors
the experience during the 1990-92 recession). So far employment has fallen in
distribution, manufacturing and construction and increased slightly in
business and financial services.

The impact of the current recession is likely to be felt across all
sectors. With regional differences less marked than in previous eras, it is
also likely to be less 'geographically specific'.

Ian Brinkley, associate director, said: 'Full employment is the most
important economic policy objective - certainly more important at the moment
than the battle against inflation. Joblessness can scar people and
communities for a long time. It is the job of the government now to throw
everything at its disposal at making sure we do not have a jobs crisis.'

Notes to Editors

1) 'Hard Labour: Jobs, Unemployment and the Recession' by Ian Brinkley,
David Coats, Naomi Clayton, Will Hutton and Stephen Overell is available from
The Work Foundation.

2) David Coats and Ian Brinkley are available for interview.

3) The Work Foundation is an independent research and consultancy
organisation.

Source: The Work Foundation

Media enquiries to Stephen Overell on +44(0)207-976-3507 or +44(0)7970-765251

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