London Daily

Focus on the big picture.
Thursday, Oct 22, 2026

Budget back to work plan 'to cost £70,000 per job'

Budget back to work plan 'to cost £70,000 per job'

Budget plans to encourage people back to work will have limited impact and cost £70,000 a job, a think tank says.

The changes are expected to bring 110,000 back to work, which the Institute for Fiscal Studies said was "just a fraction" of the those who'd left work over the past two years.

The government will spend billions to boost labour supply via tax breaks on pensions and expanded free childcare.

It said the plans would help to grow the economy and raise living standards.

Paul Johnson, director of the IFS, said the government's forecaster had calculated the overall plan to boost workforce numbers will cost around £7bn a year and increase employment by around 110,000.

"That's a cost of nearly £70,000 per job," he says.

While the chancellor "might have some success" it was likely to be modest given the large number of people "lost from the workforce in the last couple of years", he added.

UK economic growth has flatlined in recent months and the economy is expected to shrink his year. About a quarter of people of working-age - around 10 million people - do not have jobs.

Persuading workers to work for longer is part of UK plans to boost growth, with Chancellor Jeremy Hunt's Wednesday announcement on tax and spending being dubbed the "Back to work Budget".

Mr Johnson said the impact of annual net immigration numbers - assumed at 245,000 - would be far more significant for boosting employment.

The government said its independent finances watchdog, the Office for Budget Responsibility (OBR) had revised its outlook for economic growth upwards "by the largest amount ever in their forecasts" as a result of the Budget's measures.

A spokesman added: "[The OBR] also says extending 30 hours of free childcare to parents of nine months to two year olds... will lead to many more increasing their hours - helping to grow the economy and raise living standards for everyone."

The Budget also included measures to support disabled people who want to work, programmes to encourage retirees to take on jobs or apprenticeships, and changes to the rules around health-related benefits and universal credit.

On Wednesday, the OBR, noted that the impact of the back to work policies was uncertain, saying the final figure for the number of extra people in work could be half (or double) the main estimate of 110,000 workers.

That could, in turn, double or halve the cost-per-worker of the policy.

The OBR further estimate that extra workers will boost the size of the economy by 0.2% - equivalent to about £4.5bn, some of which the government will get back in extra taxes and a smaller benefits bill.


'Poor value'


The pension tax changes, removing any limit to the amount that workers can accumulate in their pension savings over a lifetime before paying extra tax, have come in for particular criticism.

They are designed to encourage pension savers not to retire early - in particular senior doctors.

But the Resolution Foundation think tank, which focuses on low and middle income earners, described them as "poor value for money" and said they may not work as hoped.

Under the plans announced in Wednesday's Budget, the tax-free limit for pension savings during a lifetime will be abolished in April.

At present, people can save just over £1m before an extra tax charge is levied.

The annual allowance will remain in place, but will go up from £40,000 to £60,000, after being frozen for nine years. Those who are already drawing a pension, but want to save more will be able to put in £10,000 a year, up from £4,000.

Chancellor Jeremy Hunt insisted the abolition of the lifetime allowance was the quickest and simplest way to solve issues with NHS doctors and consultants, who have been retiring early, reducing hours or turning down overtime for tax reasons.

But the Resolution Foundation said giving pension savers "very large wealth boosts will actually encourage some people to retire earlier than they otherwise would have done".

"It's a big victory for NHS consultants but poor value for money for Britain," said Torsten Bell, chief executive of the think tank.

Labour's shadow chancellor Rachel Reeves said the party would reverse the policy if it wins the next general election and replace it with one targeted at doctors rather than a "free-for-all for the wealthy few".

The move comes as the government is freezing general tax thresholds, which will drive up many people's tax bills.

The move is expected to raise more than £30bn by 2028, the bulk of this coming from taxes on employees' income.

It will also create 3.2 million new income taxpayers and 169,000 more will have to pay VAT.

Newsletter

Related Articles

0:00
0:00
Close
Department for Science, Innovation and Technology Commits Fifty Million Pounds to Establish Regional Artificial Intelligence Innovation Clusters
Ofgem Directs Major Energy Suppliers to Expand Vulnerable Household Support Funds Ahead of Winter Heating Season
Home Office and National Police Chiefs Council Unveil New Intelligence-Led Strategy to Tackle Organised Immigration Crime Networks
First Minister John Swinney Secures Scottish Parliament Approval for Comprehensive Climate and Green Energy Infrastructure Strategy
National Health Service England and Trades Union Congress Finalize Agreement on Emergency Winter Staffing and Pay Frameworks
HM Treasury and Department for Business and Trade Announce Multi-Billion-Pound Sovereign Investment Pact to Spur Regional Advanced Manufacturing
Bank of England Governor Andrew Bailey Signals Potential for Faster Interest Rate Cuts as Domestic Inflation Pressures Ease Below Forecasts
Parliamentary Inquiry Highlights Urgent Need to Address Housing Shortage as Scottish Completions Hit Eleven-Year Low
United Kingdom and Singapore Sign Comprehensive Financial Agreement to Deepen Digital and Sustainable Market Ties
Greggs Announces Plan to Close Four Manufacturing Facilities and Cut Seven Hundred and Forty Jobs
International Monetary Fund Raises United Kingdom Economic Growth Forecast While Warning of Inflationary Pressures
Energy Security and Net Zero Committee Urges Government to Shift Policy Costs Onto Gas to Lower Household Bills
Housebuilding Across Scotland Plummets to Eleven-Year Low Despite Government Pledges to Tackle National Housing Emergency
Greggs Announces Factory Closures Across Northern England and Scotland Affecting Seven Hundred Forty Jobs
United Kingdom and Singapore Conclude Eleventh Financial Dialogue in Singapore to Deepen Cooperation on Digital Finance and Capital Markets
Energy Security and Net Zero Committee Urges Government to Shift Policy Costs to Gas Bills and Tap Windfall Profits to Lower Consumer Prices
British Broadcasting Corporation Announces Major Cost-Cutting Overhaul to Close Linear Broadcast Services for Television Channels BBC Three and BBC Scotland Alongside Digital Radio Station BBC Radio Four Extra
London Capital Markets Face Renewed Scrutiny After High-Profile Offerings Underperform Post-Listing
Green Party Wins Historic First Westminster Parliamentary By-Election in Gorton and Denton
Environment Secretary Emma Reynolds Unveils Sweeping Regulatory Overhaul for English Water Industry
United Kingdom Health Security Agency Confirms Thirty-Four Cases in Kent Meningitis Outbreak
Ministry of Defence Prepares Heat Pump Subsidy Cuts to Fund Urgent Military Modernization
British and European Union Officials Schedule Long-Awaited Bilateral Leaders Summit for November Twentieth
Bank of England Governor Andrew Bailey Urges Strict Fiscal Credibility to Protect British Bond Markets
United Kingdom Inflation Rises to Three Point One Percent Driven by Escalating Fuel Costs
Profit Warnings Among London-Listed Companies Reach Two-Year High Amid Global Energy Shocks
Chancellor John Healey Signals Targeted Tax Changes on Banks and London Corporate Offices Ahead of Budget
British Government Reallocates Twenty-Five Per Cent of International Climate Finance to Global Biodiversity Projects
Initial British Carbon Border Taxes Set to Undercut Parallel European Union Tariffs on Industrial Imports
Whitehall Prepares National Zero-Interest Loan Initiative to Accelerate Domestic Heat Pump and Solar Adoption
European Union Offers British Automakers Access to Hybrid Vehicle Trade Protections Subject to Strict Regulatory Alignment
British Probation Officers Threaten Widespread Industrial Action After Rejecting Five Per Cent Government Pay Offer
Microsoft Abandons Major British Artificial Intelligence Data Centre Citing Severe National Grid Power Constraints
United Kingdom Inflation Accelerates to Three Point Four Per Cent Ahead of Chancellor John Healey's Inaugural Autumn Budget
Surging Cloned Number Plates Severely Complicate Traffic Enforcement and Police Investigations
Mounting Opposition Challenges Planned Rollout of Autonomous Taxis Across London
Influential Think Tank Urges Rejoining European Union to Navigate Geopolitical Crises
Government Review Recommends Slashing Benefits to Fund Youth Employment Initiatives
Senior Minister Shabana Mahmood Seeks New Law Enforcement Pact With European Union
Airbus Executive Warns Britain Risks Losing Crucial Role in European Space Industry
Exorbitant Electricity Costs Push British Steelmakers to Worst Competitive Position in Three Years
British Food and Beverage Exports to European Union Collapse by Over a Third Since Brexit
Up to Twenty English Maternity Units Face Impending Closure Due to Safety and Staffing Crises
Government Declares Severe Drought Across Southern England Following Record Dry Spell
Corporate Profit Warnings Reach Two-Year High Amid Middle East Conflict and Rising Costs
International Monetary Fund Warns Chancellor John Healey Against Proposed Bank Tax Raid
Northern Ireland Secures Favorable Agricultural Export Agreement with European Union
Scottish Government Approves Major Offshore Floating Wind Farm Near Aberdeenshire
High Speed Two Rail Project Faces Three Billion Pound Cost Escalation on Initial Phase
National Health Service Warns of Winter Capacity Crisis Across English Hospitals
×