Ruya Yonak 16 March, 2023

7 min read

Chancellor Jeremy Hunt’s plans to bring more people to the workforce

Chancellor Jeremy Hunt’s anticipated Spring Budget addressed some of the concerns regarding missing workers and outlined ways to decrease the number of the economically inactive. The Office for Budget Responsibility (OBR)’s economic forecasts have considerably changed compared to the forecasts back in November 2022. So, what changes can employers expect from the labour market?

The Chancellor delivered some much-needed good news during the Spring Budget 2023, saying that the UK has avoided a technical recession.

Additionally, the Office for Budget Responsibility (OBR) has changed their inflation forecast, and now predicts that the inflation will more than halve and reduce to 2.9% by the end of the year. At the same time, the most recent ONS (Office for National Statistics) data shows that the UK economy and labour market are stabilising.

Totaljobs’ European Labour Economist Julius Probst recently reviewed the new economic forecasts that indicate the UK is doing better than initially thought. However, the cost of living and higher interest rates will continue to affect people until the end of the year – indicating that salary will be the top priority for jobseekers.

Key findings from the ONS data and points from the Spring Budget

The employment and unemployment rates stand still, at 75.7% and 3.7% respectively. According to Jeremy Hunt’s budget statement, the OBR predicts that the unemployment rate will peak at 4.4%, instead of 4.9%.
The economic inactivity rate decreased further, with more young people aged between 16 to 24 years old joining the workforce. There was an increase in the number of part-time workers and part-time self-employed.
The number of vacancies fell for the eight consecutive quarter to 1,124,000 – remaining at pre-pandemic levels.
Salaries in the public sector have risen by 4.8% between November and January – the fastest pace in 17 years, but the inflation means real wages can’t keep up with the rising cost of living. Mr Hunt didn’t share any plans to address the ongoing strikes planned by the NHS, public and transport workers.
The Chancellor announced that the energy price guarantee would continue for another three months, and costs for those on prepayment meters would be aligned with direct debit prices.
When it comes to business taxes, the Chancellor said that the plan to increase corporation tax to 25% would go ahead. However, he announced a new bill that will allow businesses to offset 100% of their UK investments against their profits.

Keeping over 50s in the workforce

Perhaps one of the most important highlights of Chancellor Hunt’s Spring Budget was the scrapping of the LTA (Lifetime Allowance), which limits the total amount of pension savings before being subject to more tax. Mr Hunt also increased the annual tax-free allowance by 50% from £40,000 to £60,000.

The Chancellor hopes these changes will keep and bring workers over 50 into the workforce, including doctors who retired early. He also recognised that these experienced workers have different expectations from their work life. So, he announced a special apprenticeship – which he called a ‘returnership’ – that would be created for those who want to return to work.

He added that these programmes would focus on flexibility and previous experience. According to Totaljobs’ Hiring Trends Index (Q3 2022), only a quarter of over 55’s that planned to leave their job wanted to retire early. On the other hand, 24% said they were seeking a higher salary due to the rising cost of living.

Encouraging people with disabilities and long-term sickness to work or re-join the workforce

The Chancellor also introduced what he described as “the biggest change to our welfare system in a decade”, abolishing work capability assessment and allowing those on disabled benefits to continue claiming benefits while working.

He also announced support for those who were unable to return to work due to long-term sickness, allocating £400 million for mental health and muscular skeletal support, and an additional £3 million to help people with special needs to transition into work.

The Chancellor also revealed sanctions to get people on universal credit benefits into work or increase their hours through the help of work coaches.

Help for parents to come back from leave or enter the workforce

Last year, a survey of almost 27,000 parents with young children found that 43% of mums would rather leave their jobs to take care of their children due to the cost of childcare. Supporting this, the ONS data shows that 84% of those who left their jobs to take care of family are women.

In the Spring Budget, Chancellor Jeremy Hunt announced free childcare services to be rolled out in stages:

From April 2024, all working parents of 2-year-olds will access 15 hours per week
From September 2024, all working parents of children aged 9 months up to 3 years old will access 15 hours per week
From September 2025 all working parents of children aged 9 months up to 3 years old will access 30 hours free childcare per week

Mr Hunt also said the government would provide upfront nursery payment for parents who were moving into work or increasing their hours.

European Labour Economist Julius Probst comments on the budget announcement;

As expected, Chancellor Jeremy Hunt announced plans that would make it easier for people to get back into and stay in work. His plans include pulling back retired over 50s into the workforce, helping parents with childcare, and removing work capability assessment so disabled people can continue to claim benefits when they enter the workforce.

Our findings show that a lack of job satisfaction and seeking a higher salary to combat the high cost-of-living were among the top reasons the over 55s were either leaving jobs or dropping out of the workforce entirely. We hope that the government’s new approach to LTA and ‘returnerships’ can pull more economically inactive people into the workforce. However, the question of skills shortages remains.

At the same time, the number of long-term sick is persistent. So, fixing the health care system is vital if the UK economy is to make a full recovery. Health-related issues are the biggest reason behind economic inactivity, with the number of working adults on long-term sick-leave having increased by half a million since 2020. However, the Chancellor hasn’t announced plans in the Spring Budget to address NHS waiting times.

Julius ProbstEuropean Labour Economist

Totaljobs’ overview of the recruitment landscape

Our latest Hiring Trends Index provides an in-depth look at the impact of inflation and the rising cost of living on employees and candidates, as well as employers’ plans to tackle their hiring challenges in 2023.

According to our data;

Less than a third (30%) of businesses increased recruitment in Q4 compared to 35% in Q3.
In 2023, employers expect inflation’s impact on business costs (41%) and meeting salary expectations (39%) to be their key challenges.
One third (31%) of employees are planning to look for a new job in 2023, down from 90% in 2021 – pointing to the end of the Great Resignation.
The pressure of finding the right talent continues to impact business, as more than a quarter (27%) expect filling vacancies will be challenging in 2023.
The average mean time to hire has slightly decreased in the final quarter of 2022, falling to 6.4 weeks from 6.8 in Q3. This is still higher than the average time to hire in 2021.
Higher salaries are the top driver behind job searches (57%) in next 12 months as jobseekers aim to counteract the rising cost of living.

Read our Hiring Trends Index to learn more about how economic factors are influencing the labour market and what employers are doing to attract and retain workers.

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