‘Benefits sanctions could make labour shortages worse’

Plans to force low-paid part-time workers to work more hours could make labour shortages worse, according to the Institute for Employment Studies, which says greater availability of part-time work could enable older workers who have left the labour force during the pandemic to return.

The plans, announced in today’s mini budget which had a big focus on tax cuts, would extend benefit sanctions on people on minimum wage who don’t fulfil job search commitments or work part time and don’t seek longer hours from those who work up to nine hours a week to those who work up to 15 hours a week.

The Government says the aim is to address labour shortages, but Tony Wilson, Director of the Institute for Employment Studies, said: “There are over a million unfilled jobs in the UK, but still half a million fewer people in work than before the pandemic. The economy is creating jobs but there aren’t enough workers to fill them. Unfortunately though, today’s budget measures will make virtually no difference to the shortages and challenges that firms are facing. If anything, plans to force low paid part time workers to work more hours could make things worse, by forcing people to change jobs or give up work entirely. It also misses that point that part-time work has fallen since the pandemic began while full time work is rising. The problem for the economy and employers is that we don’t have enough workers, not that our workers don’t work enough hours.

He added: “There are nearly two million people who are out of work, not looking for work but who want a job. Many of them are older and health conditions, not on benefits not getting any support at all. We need a proper plan to help people into work and to help employers fill their jobs, otherwise we’ll continue to throttle growth and fuel inflation.”

The Chancellor Kwasi Kwarteng also announced that jobseekers over 50 will be given extra time with work coaches to help them return to work.

The TUC called the mini-budget, which includes the removal of the cap on bankers’ bonuses which the Government says will attract bankers back from Europe, “Robin Hood in reverse”. TUC General Secretary Frances O’Grady said:

“This budget is Robin Hood in reverse. We should be rewarding work, not wealth. But at the first opportunity, Liz Truss is holding down wages and lining the pockets of big corporations and City bankers. The party of pay cuts strikes again.”

IR35 and employment rights

There was some celebration from self-employment campaigners, however, who have welcomed changes to IR35 rules on off-payroll working. The IR35 reforms, which rolled into the public and private sectors in 2017 and 2021 respectively will no longer apply from April 2023. Instead, the original rules will remain, and contractors will be responsible for assessing their own tax.

Welcoming the changes, Dave Chaplin, CEO of tax compliance firm IR35 Shield said: “Today, contractors and businesses will be celebrating as Liz Truss and her government have not only kept to their promise but gone further and repealed a legislation that has had a damaging effect on business and contractors’ livelihoods for the past five years.”

Other announcements in the Chancellor’s statement include a cut in the basic rate of income tax to 19% from April 2023, the scrapping of the top 45p income tax rate on earnings of more than £150,000 a year leaving the highest rate at 40p and the reversal in the recent rise in National Insurance (NI) from 6th November, brought in to pay for health and social care.

On employment rights, the Government will legislate to make it more difficult for unions to call strikes by requiring unions to put pay offers to a member vote.

The mini-budget follows an announcement on Thursday that the Government is to review all retained EU law through the introduction of a Retained EU Law (Revocation and Reform) Bill. This will include Working Time Regulations, TUPE, part-time and fixed-term worker regulations and Agency Worker regulations. Under the Bill, all government departments will have to review then retain or replace all EU derived law. Any laws that are not formally retained will automatically expire on 31st December 2023. Unions have expressed anger at the potential for a reduction in existing employment rights.

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