The UK chancellor will lay out his ambition to get hundreds of thousands more people into work in next week’s Budget, introducing reforms intended to move the sick, disabled, parents and older workers back into jobs.
Inactivity is set to be a big focus of Jeremy Hunt’s March 15 Budget, although critics will question whether his patchwork of changes will significantly alter the dynamics in Britain’s tight labour market.
The Office for Budget Responsibility, which scores government policies in terms of their potential to raise growth, is expected to be cautious. Former OBR officials say the fiscal watchdog’s approach is “show, don’t tell”.
Under next week’s proposals, benefit claimants will be encouraged to move into work or increase their hours through changes to the universal credit system and increased job support programmes.
An element of coercion, backed by sanctions, will be used, with claimants being asked to attend more regular meetings with work coaches and attend skills boot camps.
The work capability assessment will be scrapped, allowing disabled people to try work without fear of losing their benefits and reducing the number of assessments needed to qualify for health-related benefits.
Childcare costs for people on universal credit will start to be paid up front, rather than in arrears, while the maximum amount people can claim for childcare under the scheme will also be increased by several hundred pounds.
Hunt will also target measures at disabled people, people with chronic health conditions and the over-50s, many of whom left the workforce after the Covid-19 pandemic.
Older workers will be offered “returnerships”, offering flexible skills training that takes into account previous experience, with a further 8,000 “skills boot camp” places to the 56,000 currently on offer.
Hunt said: “Those who can work, should work because independence is always better than dependence. We need to plug the skills gaps and give people the qualifications, support and incentives they need to get into work.
“Through this plan, we can address labour shortages, bring down inflation, and put Britain back on a path to growth.”
However with 1.2mn job vacancies in Britain, ministers privately accept that mobilising inactive workers in the UK will not be enough to fill skills shortages and are looking to foreign workers to help plug the gaps.
The government’s migration advisory committee is carrying out a major review of the jobs market and is next week expected to add construction jobs to the shortage occupations list, allowing employers to bring in foreign workers on lower salaries and with less visa bureaucracy.
The backdrop to the new measures is a big rise in the number of people aged 16-64 who are economically inactive due to long-term sickness.
Around 5.8 per cent of the working age population is inactive, the highest rate in 16 years, according to the Labour Force Survey. The Office for National Statistics has predicted that an ageing population will push up inactivity rates even further over the next three years.
Long-term sickness or disability was the main cause of the unexpected rise in inactivity between 2019 to 2022, the data shows.
The UK has a bigger problem than most comparable nations. All 37 advanced OECD economies experienced an increase in inactivity rates in the first half of 2020 but the UK is part of only 20 per cent that still have higher rates than pre-pandemic, according to the ONS.
Latest figures show that employment is at 75 per cent and unemployment is close to a record low of 3.7 per cent.