Chancellor set to announce ‘back to work’ Budget – Sector Reaction

Chancellor Jeremy Hunt is expected to set out the ambition to get hundreds of thousands more people into work in his Budget next week. A Health and Disability White Paper will be published on the day of the Budget outlining our plans to scrap the Work Capability Assessment. Skills bootcamps will be expanded by 8,000 places per year in 2024-25, up from 56,000 currently.

• Plan expected to remove barriers to people getting into work and tackle Britain’s economic inactivity problem.
• Support will focus on disabled people and those with long-term health conditions, over 50s, and low-earners and parents on Universal Credit.
• Changes are expected to encourage benefit claimants to move into work or increase their hours with more Work Coach support, and childcare costs on Universal Credit to be paid up front.

Bootcamps expanded and Work Capability Assessment to be scrapped

Benefit claimants are expected to be encouraged to move into work or increase their hours, through changes to the Universal Credit system and increased job support programmes. As a result of measures set to be announced at Budget, hundreds of thousands of claimants will be asked to attend more regular meetings with work coaches, skills bootcamps will be expanded and the Work Capability Assessment will be scrapped.

The Government will also start paying childcare costs on Universal Credit up front

The government will also start paying childcare costs on Universal Credit up front, rather than in arrears. Currently many low-income working parents are unable to afford the up-front cost of childcare, making it harder for them to get into work. The maximum amount people can claim for childcare on Universal Credit will also be increased by several hundred pounds, making childcare more affordable for thousands of working parents.

These measures will help people get jobs, increase their hours and extend their working lives – all contributing to the government’s priority to grow the economy.

The Chancellor’s plans are expected to benefit disabled people and those with long-term health conditions, people on benefits and the over 50s. Currently there are more than a million vacancies in the economy, and one fifth of the working population is economically inactive – out of work and not looking for work.

Jeremy Hunt, Chancellor of the Exchequer, said:

“Those who can work, should work because independence is always better than dependence.

“Already we’re seeing near record levels of employment in Britain, but we need to go further to build a country that rewards work and gives everyone the chance of a better future.

“But for many people, there are barriers preventing them from moving into work – lack of skills, a disability or health condition, or having been out of the jobs market for an extended period of time. I want this back-to-work Budget to break down these barriers and help people find jobs that are right for them.

“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.”

Changes to the Universal Credit system are anticipated to encourage claimants to move into work or increase their hours with additional support from their Work Coaches.

Changes to Universal Credit will include:

• Paying parents on Universal Credit childcare support up-front when they are moving into work or increasing their hours, rather than in arrears meaning low-income families will find it easier to afford and it will help remove a barrier that many face when thinking about going back to work.
• Increasing the maximum amount parents on Universal Credit can receive in childcare support by several hundred pounds, making childcare more affordable for thousands of parents.
• Alongside these changes, strengthened work search requirements are expected to encourage over 700,000 lead carers of children on Universal Credit to look for work or increase their hours and will receive additional Work Coach support to do so. Previously they would have had only limited requirements, or no requirements at all.
• The Administrative Earnings Threshold (AET), the minimum amount a person can earn without being asked to meet regularly with their Work Coach, will be increased from the equivalent of 15 to 18 hours of earnings at the National Living Wage for an individual claimant. The couples AET, where a second member of a household may not be asked to look for work if their partner is working, will be removed entirely. This is expected to ask over 100,000 additional claimants to meet more regularly with a Work Coach and take active steps to move into work or increase their earnings.
• Strengthening the application of the Universal Credit sanctions regime. This includes additional training for Jobcentre Work Coaches to ensure they are applying sanctions effectively, including for claimants who do not look for or take up employment, and automating administrative elements of the sanctions process, including sending automated messages to claimants who fail to meet with their Work Coach, to reduce error rates and free up Work Coach time.

Health and Disability White Paper

For disabled people and long-term sick:

• A Health and Disability White Paper will be published on the day of the Budget outlining our plans to scrap the Work Capability Assessment. Under the current system disabled people need to have a health assessment and be found incapable of work to receive additional income support through the benefits system. Scrapping the Work Capability Assessment is the biggest reform to the welfare system in a decade, meaning that disabled people can try work without fear of losing their benefits, and reducing the number of assessments needed to qualify for health-related benefits.

For the over 50s:

• Returnerships will offer skills training that focuses on flexibility and takes previous experience into account, shortening the length of time they have to be in training.
• Skills bootcamps will be expanded by 8,000 places per year in 2024-25, up from 56,000 currently, reskilling people in important sectors such as construction and technology.

Latest figures show that employment is at 75.6% and unemployment is close to a record low of 3.7%.

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Sector Response

STAKEHOLDER REACTION: CHARITIES

Victoria Benson, Chief Executive, Gingerbread said:

“Single parents are all too often locked out of work because they can’t afford the upfront childcare costs.  We welcome this change and the increase in childcare support available to low income single parents.  We know that single parents want to work and that those who are working want to work more hours and these changes will help many to do just this.”

Dan Paskins, Director of UK Impact,  Save the Children said:

“The UK Government has made the right decision in deciding to pay childcare fees for those on Universal Credit upfront rather than in arrears. This system was stopping people getting into work and putting people into debt.

“We’re delighted also for Save the Children’s parent campaigners who have spent years trying to get this system changed and given evidence many times in person about how this system has been negatively impacting their lives.

“This is good for families, good for our economy and most of all, good news for children.  It is a simple and effective change which will help put money in families’ pockets and make life easier for parents juggling work and childcare.”

Laura Davis, Chief Executive, The British Association for Supported Employment said:

“The British Association for Supported Employment (BASE) welcomes the Government’s announcements, which focus on empowering more disabled people to feel confident in entering or re-entering the labour market. We’re particularly pleased to hear about the plans to scrap the work capability assessment which will be a great step towards ensuring people can try employment without fear.

“We believe everyone who wants to work, can, with the right job and the right support, and should be provided every opportunity to dream big, without fear of being financially worse off.

“We look forward to hearing the detail in the Back to Work Budget on the 15^th March and would welcome the opportunity to work with the government over the upcoming months to ensure that the right support into employment is available to all disabled people across the country.

“BASE is proud to represent the amazing Supported Employment Services and Employer-Partners, who are committed to embedding inclusive recruitment, using the evidenced-based model that works. Our place, train and maintain model supports Disabled, Neurodivergent and disadvantaged people across the UK, into well matched sustainable careers that meets their needs and those of the labour market.”

Christine Farquharson, Senior Research Economist at the IFS said:

“Raising the caps on childcare support through Universal Credit will end an 18-year cash-terms freeze, which has seen the maximum amount that parents can claim lose almost 60% of its value in real terms. Cash-terms freezes are rarely good policymaking, so updating the value of these caps is certainly no bad thing. But Mr Hunt should not expect this change to move the dial on childcare expenses for most low-income families: the average family receiving childcare support through Universal Credit gets about £330 a month, less than half of the value of the cap for one child. Our estimates suggest that the number of families who will benefit is in the tens of thousands – compared to over 800,000 families who are eligible for support.

Changing the timing of childcare payments is potentially a much bigger deal. Up-front support with childcare expenses will mean that low-income families moving into work will no longer have to pay for their first month of childcare out of pocket, which leaves the average family with a 1- or 2-year-old worse off by about a third. But there are risks here too: payment in advance means that a family’s changing circumstances could leave them having to repay support, and opens DWP up to fraudulent claims. The government will need a strategy for managing these risks.

But overall, a serious approach to tackling some of the issues with childcare support in Universal Credit is welcome, and overdue. Spending on childcare support through the benefits system has fallen by two thirds since 2010, and just a quarter of eligible families with a pre-school child take up the support on offer. If these changes make it easier for low-income families to access and use this set of subsidies, that will go some way to easing the transition into paid work for parents.”

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STAKEHOLDER REACTION: BUSINESS REPRESENTATIVE ORGANISATIONS & TRADE BODIES

Syma Cullasy-Aldridge, Chief Campaigns Director, CBI said:

“As firms struggle to fill more than one million job vacancies in the economy, it’s good to see the Government finding ways to support people back into the workplace.

“Childcare costs are a barrier to many parents returning to work, especially those on lower incomes. It’s absolutely right that Government childcare support for those on Universal Credit is now paid upfront. The Government needs to announce the launch of a review into childcare to ensure it works for everyone.

“Helping the over 50s return to work requires flexible skills support from firms, so the Government should be listening to business-wide calls for a reform of the Apprenticeship Levy.

“Business will hope to hear more on how the Government can help support people back into the workplace at next week’s Budget – big gaps in our workforce require big solutions.”

Kate Nicholls, Chief Executive, UKHospitality said:

“Despite having record numbers of people working in hospitality, labour shortages continue to hold back our sectors growth potential.

“The 150,000 vacancies in hospitality are forcing venues to reduce trading hours and days, significantly impacting businesses to the tune of £25 billion in lost sales and £7 billion in lost tax to the Treasury, which hamstrings our very real capability to deliver record sales when firing on all cylinders.

“The measures announced by the Government are positive and will help get more people into work. In particular, the introduction of more flexible, shortened skills training and breaking down some of the barriers to work that exists within Universal Credit will be beneficial.

“With hospitality so central to the everyday economy and a proven driver of economic growth, investment and jobs, it’s absolutely right that addressing these shortages are a priority for the Chancellor. Making this work for such a strategically important sector will allow hospitality to help the Government deliver its twin objectives of getting the economy growing and bringing down inflation.

“Through our work with Ministers on the over 50s working group and as a Disability Ambassador for the Cabinet Office, I look forward to continuing to work with the Government on labour, skills and training.”

Neil Carberry, Chief Executive, the Recruitment & Employment Confederation, said:

“Our analysis shows that labour & skills shortages could cost the UK economy up to £39billion per year from 2024 – around the same as two Elizabeth lines. So it is important that action is taken, particularly in childcare which can be a significant barrier to work for many families. Helping those furthest away from the labour market into work is vital – and has been our focus through the Restart programme. Schemes like Restart prove the job is not one for government alone, businesses and recruitment experts can also play their part to great effect.”

Elizabeth Taylor, Chief Executive, Employment Related Services Association (ERSA) said:

“At the Employment Related Services Association, we welcome the announcement that barriers to employment will be removed for some economically inactive groups. The employment support sector has the experience and knowledge to deliver this, and we know what works, so we sincerely hope that we will have a part to play. We know the differences between those who are voluntarily and involuntarily not currently seeking work, we recognise that employment support needs to be tailored to the individual, these are not homogenous groups. Providers in the sector will be required to work with those who will not engage with Jobcentre Plus. The employment support sector has a proven track record of community-based engagement, of delivering advice and support, and expertise in matching people with the right job that can be sustained. Returning to work must be an attractive proposition – let’s make it one.”

Torsten Bell, Chief Executive at the Resolution Foundation said:

“This is a big package of carrots and sticks from the Chancellor. Paying childcare costs upfront in Universal Credit is very welcome – removing a cash flow barrier to some entering work. 

“Scrapping the Work Capability Assessment is the biggest reform of disability benefits in a decade. The goal of avoiding labelling some people as unable to work is valuable, but no-one should pretend this reform is easy – it will take years to implement.

“Alongside winners who keep higher benefits for longer, there risks being significant losers who are too ill to work but don’t have a longer lasting disability – for example, because they are recovering after an operation.”