Chancellor Jeremy Hunt presented his Spring Budget 2023 yesterday, which included plans on helping people return to work.

"Spring Budget begins to implement the Chancellor's strategy to deliver long-term sustainable growth, focusing on four key priorities: Employment, Education, Enterprise and Everywhere," Hunt said.

The Office for Budget Responsibility also announced that it is now forecasting the UK economy will avoid a recession and, supported by action taken at the Spring Budget, and GDP will be higher in the medium term.

The Budget stated that UK unemployment is near a 50-year low. However, since the Covid-19 pandemic, there has been a significant increase in people neither in nor looking for work. With 6.7 million of the working-age population economically inactive, excluding students.

Spring Budget 2023 announced a 'comprehensive employment package' focused on four groups: the long-term sick and disabled, welfare recipients and the unemployed, older workers, and parents.

Long-term sick and disabled

More than 2.5 million people report being inactive due to long-term sickness. To help these people remove the barriers to employment, the government is introducing a Universal Support programme in England and Wales to match people with disabilities and long-term sickness with jobs and provide support and training to help them succeed.

Spring Budget 2023 also introduces measures to address the leading causes of ill health-related inactivity, including tailored employment support in mental and musculoskeletal health services and expanding access to digital resources and health checks.

"This is a new, voluntary employment scheme for disabled people where the government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need. It will fund 50,000 places every single year," Hunt said. "We also want to help those who are forced to leave work because of a health condition such as back pain or a mental health issue."

"We should give them support before they end up leaving their job, so I am also announcing a £400 million plan to increase the availability of mental health and musculoskeletal resources and expand the Individual Placement and Support scheme," Hunt added.

Welfare recipients

The government is also providing additional support to help Universal Credit claimants find employment or increase their hours by increasing Work Coach support and work search requirements and strengthening support for claimants that are carers of children.

"There are more than 2 million jobseekers in this group, more than enough to fill every single vacancy in the economy," Hunt said. "Independence is always better than dependence, which is why we believe those who can work, should. So sanctions will be applied more rigorously to those who fail to meet strict work-search requirements or choose not to take up a reasonable job offer."

As for working hours, the Budget announced that the government will increase the Administrative Earnings Threshold from the equivalent of 15 hours to 18 hours at National Living Wage for an individual claimant. This means that anyone working below this level will receive more work coach support alongside a more intensive conditionality regime.

Older workers

Spring Budget 2023 also focused on workers over 50 who have left the labour market.

The Chancellor said its reforms will increase the number of people who get the best possible financial, health and career guidance ahead of retirement by enhancing the DWP's (Department for Work and Pensions) Mid-life MOT strategy. The government will also increase by fivefold the number of 50+ Universal Credit claimants who receive mid-life MOTs from 8,000 to 40,000 a year.

Along with the UK's Education Secretary, the government will introduce a new kind of apprenticeship targeted at the over 50s who want to return to work. They will be called 'Returnerships' and operate alongside skills boot camps and sector-based work academies.

They will combine existing skills programmes to make them more appealing for older workers, focussing on flexibility and previous experience to reduce training length.

The Returnerships are supported by £63 million of additional funding.

The government is also increasing tax relief on pensions to encourage workers over 50 to extend their working lives. The Lifetime Allowance charge will be removed from April 2023 before the Allowance is abolished entirely from April 2024, and the Annual Allowance will be raised to £60,000. The Chancellor added that these reforms will help ensure that highly skilled individuals such as NHS clinicians are not disincentivised from remaining in the workforce.

Parents

"There are around 435,000 people in England with a child under three who are inactive due to their caring responsibilities; many of these people report that they would like to work but cannot afford childcare," the Spring Budget stated.

The government said it is significantly expanding the support on offer by providing 30 hours a week of free childcare for 38 weeks a year for eligible working parents of children aged nine months to three years. This will be rolled out in phases from April 2024, in addition to the 30 hours a week already provided for eligible working parents of 3 to 4-year-olds.

The government will also provide £204 million in 2023-24, increasing to £288 million in 2024-25, to substantially uplift the hourly funding rate paid to providers to deliver the existing free hours offers in England.

As a result of these reforms, the government is providing free childcare for eligible working parents of children from nine months until they start school.

"This will help with the cost of living, support education for the youngest children, and remove one of the biggest barriers to parents working," the government stated.

The government is also launching a new wraparound pathfinder scheme to support the expansion of school-based childcare provision on either side of the school day. In addition, support for childcare costs in Universal Credit will be made available upfront, and the maximum potential benefit for parents will be increased.

The Office for Budget Responsibility expects this package to result in 110,000 more individuals in the labour market by the end of the forecast period.

Spring Budget 2023 also announced that to help ease immediate labour supply pressures, the government will accept the Migration Advisory Committee's (MAC) interim recommendations to add five construction occupations to the Shortage Occupation List (SOL) initially. Ahead of its wider SOL review concluding in autumn 2023.

Inflation and the economy

The OBR expects inflation to fall from its peak of 10.7% in Q4 2022 to 2.9% in Q4 2023, a fall of over two-thirds. Inflation in 2023 overall is expected to be 6.1%, 1.2% lower than in the OBR's November forecast. In addition, the direct effect of policies at the Spring Budget are expected to lower CPI (Consumer Prices Index) inflation by 0.7% in 2023-24.

On the economy, the OBR forecasts the UK economy will avoid a recession and, supported by action taken at the Spring Budget, GDP is higher in the medium term.

Despite avoiding a recession, economic conditions remain challenging in the short term. The OBR forecasts the economy to contract in the first quarter of 2023 by 0.4% and not to grow in the second quarter, before growth returns and strengthens over the rest of the forecast period.

GDP will fall by 0.2% on an annual basis over 2023 but has been revised up by 1.2% compared to the OBR’s November forecast, the largest upward revision the OBR has made to growth between forecasts outside the pandemic period.

After this year, the UK economy will grow every year of the forecast period: by 1.8% in 2024; 2.5% in 2025; 2.1% in 2026; and 1.9% in 2027.

The OBR also expects the unemployment rate to rise by less than one percentage point to 4.4%, with 170,000 fewer people out of work compared to their Autumn forecast.

Spring Budget also announced the launch of the refocused Investment Zones programme to catalyse 12 growth clusters across the UK, including four across Scotland, Wales and Northern Ireland. Each cluster will drive growth in key future sectors and bring investment to the local area. Each English Investment Zone will have access to interventions worth £80 million over five years, including tax reliefs and grant funding.

The recruitment industry reacts

Neil Carberry, Chief Executive of the Recruitment and Employment Confederation, said the REC welcomes the Chancellor's focus on employment and labour shortages and the adoption of many of the recommendations of the REC's Overcoming Shortages campaign.

"It is also good to see government appreciate the need for an overall strategy to boost growth, given forecasts that, even at the more optimistic level set out by the OBR, are far below what we need.

"The childcare changes will be helpful for the jobs market and pay for themselves over time as parents stay in higher paying jobs," Carberry said. "But we also need to make sure the provision is in place for parents to get what they have been promised. The implementation of the childcare changes won't come quickly enough to help businesses and industry overcome entrenched labour shortages in the current economic slowdown."

Carberry said this is concerning when labour and skills shortages could cost the UK economy up to '£39 billion per year from 2024.'

"The big gap in (yesterday's) Budget is on skills," Carberry continued. "While more devolution to local areas is the right choice, government is inventing new qualifications and retiring ones that business values, rather than focusing on what will get employers investing more - reforming the failed Apprenticeship Levy. A missed opportunity yet again."

Kate Shoesmith, Deputy Chief Executive of REC, said, "Moves towards a childcare system that help low- and middle-income parents and guardians get into and progress in work are long overdue and very welcome. With the number of new jobs adverts last month at a 14-month high, we need more of this kind of labour market activation support. The upfront payment for childcare for those on universal credit will certainly help."

"Reform to pensions tax will help a number of people but the winners from this reform are not the only group that need urgent help," Shoesmith said. "This tight labour market isn't going away and demand for staff has continued through the first quarter of 2023. Offering flexible skills training, by reforming the Apprenticeship Levy, is long overdue."

"Students preparing for the exam season face uncertainty about the future jobs market. Therefore, the government needs to better equip them for the skills that are critical to our future, such as in green jobs and a green economic recovery," Shoesmith said.

"Many businesses want an immigration system that flexes to the needs of the economy. It is worth reflecting that people seeking refugee status are banned from working while they wait months, and often years, for a decision on their asylum claim. This is despite polling last year found that 81% of the public support the right to work for people seeking asylum in the UK,” Shoesmith said.

Tania Bowers, Global Public Policy Director for APSCo (Association of Professional Staffing Companies) said the Chancellor's plans are still missing crucial elements to support the strength of the labour market.

"The confirmation that Jeremy Hunt will create investment zones outside of London is a move we welcome and is something APSCo called for in its original recommendations to the government," Bowers said. "We have long advocated that any national skills strategy should be underpinned by investment in skills and training in urban hubs and regions with strengths in particular industries."

"The planned investment into sectors which continue to struggle with skills shortages including AI, nuclear and life sciences is all welcome news, however a more immediate strategy to provide the skills needed to deliver the growth the Chancellor is hoping for is required. We expect hiring to be hit in the short term by the impending increase in corporation tax which will only put greater pressures on the domestic labour market," Bowers said.

"The Chancellor's plans to reduce economic inactivity, encourage the over 50's back into work, support those with a disability into employment and deliver better childcare provisions will help increase the number of people in work, but won't provide the skills that are needed immediately. The barriers to upskilling the workforce are multi-faceted and, unfortunately, not all have been addressed in Jeremy Hunt's statement," Bowers added.

"While we await the full details of the reforms to disability benefits, the Chancellor's focus on removing barriers to employment is a sentiment we echo. It cannot be stressed enough, though, that planned support to get more disabled individuals into work needs to address issues including inflexible work practices, transportation challenges and the inflexibility in hiring processes that continues to impact this segment of the workforce," Bowers said.

Simon Winfield, Managing Director of Hays UK and Ireland, said, "The examples of re-training opportunities and 'returnerships' for the over 50's are important; however, it's not just about tempting older workers back into employment. It's also about educating employers to have conversations about re-skilling, part-time working, and career opportunities when workers reach a certain age."

"The steps announced (in the Budget) are positive, especially with regards to those who are economically unactive due to long-term sickness, disability, or ill health," Winfield continued. "However, there are still large proportions of the population who struggle to access work and need support in doing so such as ex-service leavers, neurodivergent professionals and caregivers. Not only does hiring from outside your usual talent pool make good business sense, but it's more importantly allowing those who might need certain tweaks to the application process, or access to part-time work a chance to thrive in a skills short labour market."

Seb Maley, CEO of Qdos, an insurance provider for the self-employed, said, "The Chancellor completely ignored the IR35 legislation in his speech. This smacks of irony in a so-called back to work Budget. The government wants retirees to return to work but won't address the issues plaguing IR35 reform. These tax changes forced many freelancers and contractors into early retirement, at a huge cost to the economy.