Hunt’s back to work plan will cost £64,000 per person employed, forecasts show

The government’s plan to get people into employment will cost £64,000 per person who finds work, forecasts suggest.

The “back to work” strategy outlined by ministers will see the Department for Work and Pensions spending £3.2 billion in total over five years, according to the Office for Budget Responsibility (OBR).

It amounts to several measures, including extra job centre services and mental health support, set out as part of the Government’s attempt to reduce economic inactivity and plug gaps in the labour market.

The OBR predicts the policies will increase employment by around 50,000 over the five-year period. This is the equivalent to costing £64,000 per person over the five years, or £12,800 annually.

Many of the jobs created will be part-time, according to the OBR, meaning the new jobs created will be equivalent to 28,000 full-time posts.

At the same time, the OBR predicts that the number of claimants in receipt of health-related benefits will still rise by 0.6 million between now and 2029.

The budget watchdog adds that the welfare reforms will also raise hours worked by 28,000 in full-time equivalent (FTE) terms by 2028-29 and that the cut in National Insurance rates which is estimated to raise employment by 28,000 and total hours worked by 94,000 in FTE terms by raising the post-tax gains from work.

Announcing the reforms, Chancellor Jeremy Hunt said the changes to the way disability benefits are assessed will halve the net flow of people moving onto out-of-work sickness welfare.

The reform of work capability assessments, designed to raise the threshold for people to be signed off work with a sickness or disability, is projected to save £1bn a year between 2026 and 2029 and raise employment by around 10,000.

Rolling out universal support, to offer wrap-around work advice to people who are out of work, will increase employment by around 15,000 and – when savings are deduced – cost £0.6bn.

Offering placements and support for those with severe mental illnesses will boost employment by 10,000.

It will cost £0.2bn, which is almost fully offset by reduced welfare spending of £0.2 billion, meaning there will be no overall price tag.

The offer of more talking therapies to help people with mental health struggles will also increase employment by around 10,000 at a cost of £0.6bn.

And expanding the restart scheme, to get older workers back into employment, will cost £1.2bn.

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Both the OBR and the Treasury warn that the true impact of these policies, and reduction in welfare spending, is hard to predict as it is dependent on individual behaviour.

As part of the DWP’s plans it said people who refuse to engage with support to help them find a job will have all benefits removed and their claims closed.

This also comes at a cost, of £5m for the first year and £10m annually for the following years, in order to provide the resources to close the claims.

According to the latest figures, there are just under one million vacancies in the UK and a 4.2 per cent rate of unemployment.

Since the Covid-19 pandemic there has been a spike in economic inactivity – those who are not working and not looking for a job – most recently driven by health issues or disabilities.

The Department for Work and Pensions pointed out that getting people into work has many benefits, including to a person’s health and wellbeing – as well as a reduction in benefit spending and an increase in tax income.

Liz Kendall, Labour’s shadow work and pensions secretary, told i the Government’s strategy won’t do enough to tackle rising numbers of people on health and disability benefits..

“This week the Tories pitched their so-called ‘back to work’ plan, but the truth is it is no such thing. The OBR reveals there will be 600,000 more people on health and disability benefits by 2028/29 with the costs up by £33bn – a staggering 75 per cent increase.

The Government said before the WCA reforms were announced the OBR forecast for those on the highest tier of health benefits was due to grow from 2.4m in 23/24 to 2.9m in 2028/29 – with sources arguing these changes will have halved the flow of people into this group.

They acknowledge that the latest data suggests a higher level of demand than earlier this year but sad this is projected to fall from 2024 onward.

A DWP spokesperson said: “We want everyone who can work to do so. It pays the bills, improves health and grows the economy, and it also means we can support those who can’t work, as any compassionate society should.

“Our reforms will build on our record that has seen almost four million more people in work since 2010, with our Back to Work plan set to help up to 1.1 million disabled people and people with long-term health conditions to look for and stay in work. Our reforms to the Work Capability assessment will halve the net inflow of those on those on the highest tier of health benefits.”