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The Institute for Employment Studies has called reports that the Government is considering tying back to work support for the long-term sick to benefits conditionality rules a policy that is ‘destined to fail’.
As the Chancellor prepares to make his Budget speech tomorrow, the Institute for Employment Studies [IES] has called trailed plans to force those on long-term sick leave back to work or face benefits sanctions a policy that is “destined to fail”.
Tony Wilson, Director at the Institute for Employment Studies said: “Threatening to cut people’s benefits will make people’s health worse and it will undermine trust and support from the services that it will need to work with to be effective, especially health services. It is also unnecessary, with a million of those off work with health conditions saying that they either want to work right now or expect to work in the future. Any offer of employment support needs to be open, unconditional, and working in partnership with health and other services.”
The call comes as new figures from the Office for National Statistics show economic inactivity rates fell slightly – down 0.2% on the quarter, to 21.3% in the period covering November 2022 to January 2023, driven mainly by students. Unemployment was largely unchanged, vacancies fell, reflecting ongoing economic uncertainty, and pay, excluding bonuses, rose by 6.5% on average – 7% in the private sector and just 4.8% in the public sector, well below inflation.
Calling for more support to help those who want to get back to work, Wilson said: “There are still nearly half a million fewer people in work than before the Covid-19 pandemic, driven by more people out of work due to long-term health conditions and more older people out of work. Many of those who are out of work want to work, with 1.3 million people unemployed but a further 1.7 million who aren’t currently looking but say that they want a job now. So today’s figures show the scale of the challenge for the Budget tomorrow, with nearly three million people who want a job right now but most not getting any help to find one.
“The Government has suggested that we’ll see new investment tomorrow in employment support for those out of work due to long-term ill health, but those who don’t take part could see their benefits reduce. This is being described as a ‘nudge’ but it’s more of a shove, and would be destined to fail.”
There has been a lot of focus in the run-up to the Budget on getting older workers who have dropped out of the workplace back to work. A key issue has been addressing long-term health issues. Reports suggest the Chancellor is linking employment support with benefits conditionality which means those who don’t actively seek work could face benefits sanctions.
Gillian Nissim, founder of workingwise.co.uk, said: “There has been a lot of focus on how to get older workers back to work since the pandemic and amid labour shortages. Our research consistently shows a need to tackle ageism at work, provide training and support for those looking to return to or move to different industries and promote good quality flexible jobs. The Government must be more consistent in its support for flexible working in all its forms and support businesses, particularly SMEs, to address occupational health issues and help older workers learn the skills they need for the quality flexible jobs of the future. We have deep concerns about reports of new conditionality rules to force the long term sick back to work, given the history of workplace capability assessments. Instead we suggest that the Government focuses on implementing policies that address the core barriers to work and the problems that are driving people to leave work early.”
Meanwhile, a poll by PwC for the Times Health Commission looks at the mental health component of long-term sickness figures. It found two-fifths of employers say they have seen an increase in employees taking long-term sick leave because of mental ill health. More than half of the 150 employers polled said the mental health of staff had worsened since the pandemic, while 53% said the cost-of-living crisis had damaged the wellbeing of their employees. Almost two-thirds (64%) of firms said there has been an increase in the number of staff asking for counselling. More than 40% of employers have seen an increase in changes to working patterns due to ill health since the pandemic and almost half have had an increase in employees requesting flexible working patterns.
Other changes being trailed for the Budget include the expected lifting of the tax-free allowance for pensions from just over £1m to more than £1.5m. It is also understood that the Chancellor will allow workers to contribute up to 50% more to their pensions each year before they have to pay tax, with the annual allowance expected to increase from £40,000 to £60,000. The money purchase allowance will also be raised from £4,000 to around £10,000.
Becky O’Connor, Director of Public Affairs at PensionBee, said this is unlikely to get people back to work and that, while some people might be enticed to stay longer to build up a bigger pension pot, some might leave sooner as a result of the higher limits as they would be able to build up more, more quickly. She added that the policy would not address the long-term health issue and said promoting more flexible work would be a better policy. And she said raising the Money Purchase Annual Allowance from £4,000 to £10,000 would help people who may have needed to dip into their pension pots before officially retiring, but who still need to keep building up their pension before fully giving up work.
She thinks the Chancellor is preparing people for a higher state pension age and stated: “Increasing it sooner from 67 to 68, as is now on the cards, could potentially hit people now in their late forties and early fifties – this group will need as much help as they can get to build up their private pension pots by enough to keep their dream of retiring before the State Pension age alive.”