What might happen to the “back to work” budget with a potential change of government?
Just over two months ago – on 15 March 2023 to be precise – I attempted to summarise that day’s Budget speech by the Chancellor of the Exchequer, Jeremy Hunt.
My Employer News post that day was a lengthy one, not least because The Chancellor’s address had focussed heavily on the need to unlock the economic potential of the 1 in 5 of the UK’s adult population who are considered “economically inactive” by the statisticians.
Economically inactive?
Before proceeding further, we must clarify what is meant by this term. The Office for National Statistics (ONS) define the economically inactive as:
“people who are not in work, and have not been seeking or not been available for work”
This definition covers a very wide – and extremely diverse – range of reasons for not being actively involved in the employment market, ranging from those that don’t need to work to those that are physically and/or financially prevented from actively doing so. Some examples are listed below:
- in full-time education
- don’t need to work
- taking a career break
- have family caring responsibilities
- have an illness or condition that prevents them from working
- have taken early retirement
This is therefore a very diverse grouping, and it follows that there is no one solution which will encourage all these disparate groups to return to the national workforce.
The proposed measures
It follows that The Chancellor’s response to this problem had to be wide-ranging – and indeed that proved to be the case. The full listing of proposed and actual measures to be introduced can be read in this document produced by HM Government alongside the Budget:
Spring Budget 2023 Factsheet – Labour Market Measures
Broadly employers welcomed these decisions, yet detailed scrutiny of many of these measures is yet to take place given that implementation dates vary from this tax year through to the 2025/26 tax year.
What about the General Election?
This timeline might yet be a problem.
Ordinarily, such a far-reaching set of proposals would be announced near the start of a government’s parliamentary term to ensure enough legislative and implementation time to evidence progress and success before the next scheduled General Election.
Yet the next General Election is required to take place no later than January 2025, and in all probability will be called even sooner. So, will any incoming new administration – of any colour – simply adopt, embrace, and (importantly) implement these changes?
After the election
It’s impossible to be sure until the key political parties publish their manifesto commitments, but we should not assume that a change of government and/or ministers would automatically result in a change in the measures announced.
At a fundamental level, these changes are ones that all the main political parties are likely to broadly agree on. Supporting hard-working families with childcare and care costs, helping the ill and injured back into the workplace, and making pension savings attractive again are all items that are good for employees, employers, and HM Treasury too.
So, whilst there may be small tweaks and a re-badging of some ideas, the basic direction of travel is likely to continue under the existing or indeed any new government after the next national vote.
Pension changes?
The one exception to the above may be the pension changes announced.
Early thoughts from the Labour Party suggested the removal of the Pensions Lifetime Allowance might be reconsidered under any new administration they might form.
Yet it is to be expected that any incoming government – again regardless of political colour – is likely to use the new parliamentary term as an opportunity to finally reform the entire range of pension tax reliefs. Such reform is seen as long overdue, having been shelved in the run-up to the EU Referendum way back in 2016.
If such radical change does indeed take place, then the future (or otherwise) of the Pensions Lifetime Allowance will become a fairly minor footnote to bigger and more fundamental issues for employers and employees alike.
The now?
But the above is mere speculation. For the moment employers would be well advised to focus on the now – particularly with regard to those announced pension changes.
The increase in pension annual contribution limits is significant, as is the removal of a tax penalty for exceeding the lifetime allowance in the current tax year. These changes will make some employer concerns around their pension auto-enrolment processes irrelevant, and for many will remove the need to offer an alternative “high earner” set of employee benefits for those who would be penalised under the old system of thresholds.
The removal of the lifetime allowance also negates the need for many employers to offer an alternative – but less flexible – type of Group Life Assurance scheme known as an “excepted” scheme. These schemes have been widely used in recent years to prevent a life assurance claim from inadvertently counting towards – and potentially breaching – the pension lifetime allowance. With the allowance charge no more, there is perhaps no need for many employers to continue with such arrangements, and a return to the more familiar and flexible “registered” schemes will be considered by many organisations.
Final thoughts
It seems likely that most – if not all – of The Chancellor’s announced changes to encourage more of the economically inactive back into the workplace will continue to be adopted by the current and/or any future government following the next General Election.
It should also be noted that these measures should help many employers simplify their benefits offerings, perhaps enabling a greater focus on “universal” benefits offerings that better support all workers – regardless of grade or status – equally.
So, there are plenty of positives to be taken from these new measures, and employers should look to embrace these changes as they adapt their existing approach to employee benefits provision. A good employer outcome will be a lower HR workload alongside a more attractive remuneration and benefits offering to both existing and potential employees.
Steve Herbert is Wellbeing & Benefits Director at risk consultancy and insurance intermediary Partners&.