banner image
Back to News

To deliver growth and support more people back into work, a renewed focus on empowering the regions to boost economic resilience is the way forward

Insights Thought Leadership 15 March 2023

The Office for Budget Responsibility (OBR) is now forecasting that the UK will not enter a technical recession this year, with a contraction of 0.2 per cent anticipated, and that inflation will fall to 2.9 per cent by the end of this year – it is currently 10.1 per cent.

It is also forecast that the UK economy will grow in 2024, by 1.8 per cent. Over the course of the full forecast period, the unemployment rate is expected to rise by less than one percentage point, peaking at 4.4 per cent in 2024, with 170,000 fewer people out of work compared to what was set out by the OBR in the Autumn.

12 new investment zones have been announced, including in the West Midlands, Greater Manchester and Liverpool regions, if they meet the criteria, each area in England will have access to £80 million over five years. The clusters will look to enable growth in sectors such as green industries and advanced manufacturing.

The Chancellor has committed in his Spring Budget statement to focus on helping more people to become economically active. It has been confirmed that the Government will pay childcare costs on Universal Credit in advance and increase the maximum amount of support available. Free childcare will be extended to eligible working households below the age of three, starting at 9 months of age. This funding announcement aims to tackle a cost of living pressure that has acted as a barrier to many parents who want to secure additional employment hours. Changes to the administrative earnings threshold will be made to increase the minimum amount a person can work before being asked to meet with their Work Coach, from 15 to 18 hours of earnings, set at the National Living Wage. There will also be a strengthening of the Universal Credit sanctions regime focused on claimants who do not proactively look for employment, the detail of which will need to be carefully considered to understand if the right balance is going to be achieved in future when supporting those individuals to find work.

Targeting over-50s who are economically inactive is one way to address labour market factors that are limiting growth. As part of the Spring Budget, a new ‘returnerships’ apprenticeship has been announced to offer a route for the over-50s to gain the skills they need to work towards a path back into employment. There will also be the expansion of skills bootcamps that will offer reskilling opportunities in important sectors for economic growth, including construction and technology.

The Spring Budget statement coincided with the release of the Health and Disability White Paper, which sets out, amongst a range of proposed measures, a plan to end the Work Capability Assessment, a major welfare reform that aims to help more disabled people to pursue work opportunities without impacting on the existing benefit support they receive. There will also be a new voluntary employment scheme launched to help disabled people and those with health conditions into a suitable role called ‘Universal Support’. The Chancellor will fund 50,000 places every single year on the scheme.

Ian Porée, employee owner and Chief Executive of Seetec, has responded to the Chancellor’s Spring Budget statement:

“Economic inactivity has held the economy back from achieving greater growth. Seetec has recently called for additional funding for reskilling in key sectors, so that targeted action is deployed where it matters most. Recent official statistics have shown the increasing impact of labour market challenges on local communities, with coastal areas having some of the highest rates of economic inactivity. This underlines the importance of looking at how, at a more regional level, additional devolved economic powers can be handed down to top-tier authorities to work with their local business leaders and anchor organisations to strengthen the capacity of, in particular, small and medium enterprises. This could better enable the ability to regenerate communities currently impacted the hardest by economic inactivity and lead to new opportunities to boost their prosperity in the future. Investment zones focused on growth sectors and a commitment to grant funding settlements to trailblazer Mayoral Combined Authorities that give them the independence they need is welcome and could help enable better regional economic resilience.

“Increasing childcare support will enable more people to balance family and work life. As part of our policy recommendations to address cost of living pressures last year, we called on the Government to extend free childcare support, so it is welcome news that parents of nine-month-olds are set to benefit. This announcement alone will enable increased economic activity as parents have greater flexibility to increase their work hours.

“The expansion of skills bootcamps and the introduction of a new ‘returnerships’ apprenticeship, targeted at encouraging the over-50s to retrain and return to work, should be welcomed, but the Government needs to bring all the various announcements and newly funded initiatives under the direction of a single strategy to continue to arrest the trend seen amongst older age groups who have opted to become economically inactive. We hope that the Cabinet Committee for Domestic and Economic Affairs will lead on the creation of a single strategy to improve labour market resilience that could help make more progress towards better levels of growth in the economy.

“Making sure everyone has the equal opportunity to achieve and succeed is important. The newly published Health and Disability White Paper has set out plans to enable greater flexibility for those who are often the furthest away from finding sustainable and fulfilling work. If the Government wants to make more inroads in reducing the disability employment gap, any future welfare reform will need to look at how Access to Work can be better resourced to enable the best working environment for people of all abilities. There also needs to be additional personalisation of employment support, allowing providers the ability to further innovate their delivery model to boost outcomes.

“Addressing labour market challenges has been put at the centre of the Spring Budget statement, but the ambition to get more people into work will need to be matched by a recognition that the package of measures set out today aimed at stimulating growth cannot be a one-off, as several of the negative trends in the economy will probably require the phasing of Government action over a longer timescale than previously anticipated. The Chancellor will need to match his commitment to interventions in the economy that aim to address issues hampering the spread of prosperity, with a continued focus on fiscal discipline to increase the likelihood of more communities benefitting from sustainable growth.”

Read the Spring Budget ‘Red Book’ here.

The Health and Disability White Paper is available on the Department for Work and Pensions website here.