Budget 2023: Institute for Employment Studies reaction – much to welcome but more to do

Yesterday’s Budget had a welcome focus on employment, and in particular in helping more people who are outside of the labour force to get (back) in and on helping people at risk of leaving work to stay. However it leaves three significant challenges – around the scale, breadth and pace of reform; and unanswered questions particularly around benefit conditionality and sanctions.

First on scale – the centrepiece measures were a major expansion of the 30 hours of free childcare to all pre-school children (at a cost of £5 billion a year by 2026); and a new ‘Universal Support’ programme to help disabled people into work (costing around £1 billion over the next five years). Both are welcome, but come with caveats:

• On the childcare measures, current funding rules are often not enough to meet provider costs, leading to higher fees being charged for non-funded hours. And while there was some additional funding to help meet capacity pressures in the childcare sector, more investment may yet be needed to ensure that providers can deliver the childcare offer. What remains absent is a more comprehensive plan to boost the childcare workforce, reduce costs and increase supply.
• Meanwhile new funding for a ‘Universal Support’ programme is welcome but the government needs to confirm that this is genuinely new and additional. The programme promises around 50,000 places a year for disabled people who are out of work, which is the same number of disabled people as have been supported over the last two years through the Work and Health Programme (which is due to end in 2024).

Secondly on breadth, there was much to welcome around health and work in particular – as well as the new Universal Support programme, the Budget included significant new investment in expanding musculoskeletal and mental health support, funding employment advisers in health settings, extending pilots to subsidise occupational health for SMEs (alongside two consultations on the role of OH in the workplace), and new pilots of ‘WorkWell Partnerships’ to join up health and employment locally. All of these can make a real difference in supporting good work as a health outcome.

However, the Budget missed an opportunity to go much further on how we work with employers and what we expect from them in return. In the short term, the government could have done much more to improve how we support employers to make work better and to fill their jobs – through our employment services and by supporting local partnerships and networks that work with employers. And in the longer term could have gone much further in looking to address some of the factors that lead to people leaving work or choosing not to return – particularly around improving employment protections for those in less secure work, and requiring more from employers to support retention and rehabilitation for those with poor health. The continued failure to introduce the long-delayed Employment Bill is particularly disappointing.

The Budget was also lukewarm on support for older people, announcing a fairly modest extensions of the ‘Mid Life MOT’ programme (that provides careers, financial and health and wellbeing support for older people in and out of work); and relatively small-scale reforms of skills support (broadly, tailoring apprenticeships to support returns to work, and expanding shorter-term training). The main announcement around older people – the abolition of the lifetime limit on pensions savings – appears unlikely to do much at all for labour supply. While it will clearly address a specific issue for highly paid workers in the public sector, more broadly it is hard to see how incentivising pension saving would lead to high earners staying in work longer rather than leaving earlier (especially given the continued flexibilities to draw down these savings in your fifties).

Thirdly on the pace of change, many of the measures announced yesterday will take years rather than months to implement, or are being piloted and consulted on in advance of fuller rollout or reform. This is understandable – these are long-term challenges and it is important that we get them right – but the government could have moved quicker in some of these areas, particularly by extending access to existing employment programmes, or by enabling employment support providers to bid to the new Shared Prosperity Fund this year rather than next.

Finally, the measures announced yesterday leave some unanswered questions on benefit conditionality and sanctions, first around how the proposed tightening of the application of sanctions will be applied in practice, and secondly in how jobsearch requirements would be applied in any reforms of disability and health benefits (which the government has published a separate white paper on). We are very concerned about the implication that jobsearch requirements for people with long-term health conditions could be left at the discretion of Jobcentre Plus work coaches without health professional input, and more broadly have concerns about the continued tightening and extension of conditionality and sanctions within the benefits system – set out in more detail in this twitter thread from our Institute Director.

All told, the measures announced yesterday should be welcomed, and will make a small but important difference to supporting economic growth and more inclusive employment. However, there is much more to do.