Chancellor Kwasi Kwarteng is expected to announce reforms to the welfare system to encourage thousands more into work

Prior to the #minibudget on Friday, Chancellor @KwasiKwarteng is expected to announce reforms to the welfare system that will encourage thousands more into work.

The Chancellor is this week expected to announce changes to Britain’s welfare system that will help boost people’s earnings, get them into work and support economic growth.

• Around 120,000 more benefit claimants will be asked to take active steps to seek more and better paid work, or face having their benefits reduced.
• Over 50s to get more support to find work, boosting economic growth.

Changes to Universal Credit expected to be announced later this week will require benefit claimants working up to 15 hours a week at National Living Wage to meet regularly with their Work Coach and take active steps to increase their earnings or face having their benefits reduced. This gradual expansion is an increase from the 12-hour threshold and will bring an additional 120,000 benefit claimants into the Intensive Work Search Regime.

With more than 1.2 million job vacancies across the UK, Work Coaches will set clear expectations with claimants and make sure they stick to their commitments. These commitments could include applying for jobs, attending interviews or increasing their hours. People who don’t fulfil their job-search commitments without good reason could have their benefits reduced in line with existing benefit sanctions policy.   

Eligible claimants over 50 years old, including new claimants and the long-term unemployed, will also get extra support from Work Coaches. The newly unemployed will get 9 months of targeted sessions, and people who are long-term unemployed will receive a booster session followed by 3 months of intensive employment support.

Rising economic inactivity in the over 50s is contributing to shortages in the jobs market, driving up inflation and limiting growth. Returning to pre-pandemic activity rates in the over 50s could boost the level of GDP by up to 1 percentage point.

Chancellor Kwasi Kwarteng said:

“Our jobs market is remarkably resilient, but it is not perfect. While unemployment is at is at its lowest rate for nearly fifty years, the high number of vacancies that still exist and inactivity in the labour market is limiting economic growth.

“We must get Britain working again. These gradual changes focus on getting people back into work and maximising the hours people take on to help grow the economy and raise living standards for all.

“It’s a win-win. It boosts incomes for families and helps businesses get the domestic workers they need, all while supporting economic growth.

Secretary of State for Work and Pensions Chloe Smith MP said:

“As we continue to face economic challenges and labour market shortages, we are committed to helping people on lower incomes to boost their pay – because we know work is one of the best ways to support your family and help grow our economy.

“Whether it’s increasing their hours in their current role, entering a new sector or switching careers, we want people of all ages and all stages to be able to progress into fulfilling careers.

“The expertise our dedicated DWP Work Coaches bring, will help to drive this change by removing barriers to progression and opening up opportunities for training and building skills, to increase earnings.”

These changes will be Great Britain-wide and, in line with usual practice, the UK Government will work with the Northern Ireland Civil Service to determine the most suitable way to deliver support in Northern Ireland in due course.

Certain groups will remain exempt from sanctions, including people who are unable to work due to long-term sickness or a disability.

Sector reaction

Stephen Evans, chief executive of Learning and Work Institute, said:

“This announcement isn’t the right answer or the right question. It will require some people working relatively low hours to take steps to increase their hours or earnings. But the best way to help people progress and raise earnings is a more joined-up approach that looks at employers’ responsibilities, how we improve skills, economic growth, and engaging support for individuals together. And in any case the real issue we have is the number of over 50s and people with long-term sickness who have left the labour market altogether.

“The Government needs to extend support to this group, who are mostly excluded from help at present. It could start by investing the estimated £2 billion underspend from its 2020 Plan for Jobs. We urgently need a joined-up plan to increase employment and promote growth.”

Scott Parkin FIEP, Chief Executive of the Institute of Employability Professionals said;

“The employability sector is well-equipped and primed to support more people into work but there needs to be a continued drive to provide more specialist support that will encourage those who are not just currently unemployed, but those who are classed as economically inactive, to join the workforce.

“Older people in particular need specialist help to upskill and retrain which is why the sector has invested in providing specialist employability training to over 2000 employability professionals to support Over 50s into work.  Employer engagement is also key to ensure they understand how to make their jobs accessible and inclusive for people with barriers and long-term health conditions into work and as a sector we will continue to work with employers to help them look at ways they can support more people into sustainable work.”

Tony Wilson, Director, Institute for Employment Studies said:

“These measures aren’t going to make any difference at all to the labour shortages that employers are facing.  If anything they could make them worse, by forcing people to change jobs or give up work entirely.  They’re also incredibly modest measures – affecting about one in three hundred of those in the labour force – and miss that point that part-time work has fallen since the pandemic began while full time work is rising.  The problem is that we don’t have enough workers, not that our workers aren’t doing enough hours.   These labour shortages are holding back growth and fuelling inflation, which means living standards will be lower and interest rates higher for longer. 

“What we urgently need is a proper plan to help the nearly two million people who are out of work, not looking for work but want a job.  Many of them are older and health conditions, and aren’t getting any support at all.  And we need to work far better with employers on recruitment, retention, upskilling and support at work.”

Elizabeth Taylor, CEO, ERSA said:

“This was the perfect moment to harness the help of organisations who have the answers to engaging people outside the remit of Jobcentre Plus, those who can reach out to the economically inactive, and offer them employment and skills advice that is outside the benefits regime and the Jobcentre Plus Work Coach offer. There are successful national outsourced provisions including the Work and Health Programme and Restart, but these depend on Jobcentre Plus referrals.  

“There should be an offer beyond these, the employment support sector has the expertise and employer relationships to fill vacancies, what it needs is the funding to work with people who have left the workforce and with some who have yet to join. The end of European funding in 2023, and the gap before the option to fund people and skills starts in 2024, means that many organisations who could step up and provide solutions are without the resources to do so. There should be an investment in organisations that can reach out into local communities with employment and skills offers tailored to local need, that can engage people including over 50, those with care responsibilities, carers, partners of claimants, parents, young NEETS, to encourage and empower them to fill vacancies.”

Notes:

• These changes are expected to be implemented from January 2023. Full details will be set out in due course.
• This new increase in the Administrative Earnings Threshold builds on the rise from 9 to 12 hours at national Living Wage (i.e. from £355 to £494 per month) for an individual claimant, which takes effect this month, bringing 114,000 more people into the Intensive Work Search Regime.
• Raising the threshold to 15 hours at National Living Wage equates to £618 per calendar month for an individual claimant.
• Long-term unemployed is defined as someone who has been out of work for 12 months or more.
• Inactivity due to long-term sickness has been rising since 2018.