Measures to boost workforce participation will target the over-50s, the long-term sick and disabled, and benefits claimants in the Chancellor’s upcoming Budget.

Tackling economic inactivity is a key component of Jeremy Hunt’s plans, as employment numbers have languished far below their pre-pandemic levels, harming the UK’s already-struggling economy.

"Through this plan, we can address labour shortages, bring down inflation, and put Britain back on a path to growth"

As part of what he is billing his “back-to-work Budget”, Mr Hunt will on Wednesday announce the axing of the system used to assess eligibility for sickness benefits.

The biggest reform to the welfare system in a decade will mean claimants can continue to receive the payments after they return to employment, according to the Treasury.

The change will allow them to move into work without fear of being reassessed and losing their benefits.

The process is expected to be replaced with one that asks claimants to demonstrate what job they might be able to take, prompting disability equality charity Scope to warn that “disabled people shouldn’t be forced into unsuitable work”.

The Chancellor will also set out plans to encourage over-50s to return to work through an expansion of skills training.

The Resolution Foundation think tank recently said that while three-quarters of the rise in economic inactivity – up by 830,000 between 2019 and 2022 – was concentrated among those aged 50 and over, efforts to get pandemic retirees to “unretire” were unlikely to be successful.

Mr Hunt will detail an overhaul of the Universal Credit system aimed at encouraging claimants to move into work or increase their hours.

The Chancellor has faced pressure to act on childcare, after it was shown to be among the most expensive in the world.

He will announce a rise in the maximum universal credit childcare allowance – which has been frozen at £646-a-month per child for years – by several hundred pounds, the Treasury said, without providing the exact amount.

The Government will also start paying parents on universal credit childcare support upfront, rather than in arrears. That will help those struggling to take on a job or getting into debt under the current system due to the sky-high upfront costs.

Other measures include:

– Stricter requirements for claimants who care for children to hunt for work or take on more hours.

– An increase in the minimum earnings threshold needed to avoid regular meetings with a work coach from the equivalent of 15 to 18 hours a week. The partner of a working person will also now be required to look for a job.

– An increase in the threshold of a universal credit claimant’s earnings under which they must meet regularly with a work coach from an equivalent of 15 to 18 hours a week. Partners of working people will also be forced to seek a job.

– A ramping-up of sanctions for claimants who do not look for or take up employment.

Mr Hunt said: “For many people, there are barriers preventing them from moving into work – lack of skills, a disability or health condition, or having been out of the jobs market for an extended period of time.

“I want this back-to-work Budget to break down these barriers and help people find jobs that are right for them.

“We need to plug the skills gaps and give people the qualifications, support and incentives they need to get into work. Through this plan, we can address labour shortages, bring down inflation, and put Britain back on a path to growth.”

"As firms struggle to fill more than one million job vacancies in the economy, it’s good to see the Government finding ways to support people back into the workplace"

With more than half a million workers having vanished from the UK workforce since the outbreak of Covid, Prime Minister Rishi Sunak tasked Work and Pensions Secretary Mel Stride with reviewing issues holding back workforce participation in the autumn.

His findings are due to be published in a white paper on the day of the Budget.

Syma Cullasy-Aldridge, chief campaigns director at the Confederation of British Industry, said: “As firms struggle to fill more than one million job vacancies in the economy, it’s good to see the Government finding ways to support people back into the workplace.”

She said it was “absolutely right” that childcare support for those on universal credit will be paid upfront, but called for a review into childcare “to ensure it works for everyone”, as well as reform of the apprenticeship levy to help over-50s back into work.

The TUC said changes such as greater childcare support are “long overdue” and welcomed “an end to assessments that cause anxiety instead of helping people achieve their aspirations”.

But, the union’s general secretary Paul Nowak said proposals to increase the use of sanctions are “worrying”.

Scope’s director of strategy James Taylor said scrapping the work capability assessment “is the minimum change needed to even begin improving a welfare system that regularly fails disabled people”.

He added: “To be successful these proposals must lead to a more person-centred system that offers specialist, tailored and flexible back to work support.

“Those that want to work should be supported. But for some, that’s not an option and disabled people shouldn’t be forced into unsuitable work.”

Labour’s shadow work and pension’s secretary Jonathan Ashworth said: “Over recent months, Labour has outlined welfare reforms to get Britain back to work and now the Tories are following our lead.”