Work Foundation sets out tests ahead of the Chancellor’s Spring Statement

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Person getting cash out of the cash machine

When the Chancellor of the Exchequer, Rishi Sunak, presented his Autumn Budget and Spending Review to Parliament on Wednesday 27 October 2021 he stated, "we will help families get by".

Five months ago, inflation was 3.8%, and the labour market and wage growth were showing positive signs of recovery. Sunak could have been forgiven for thinking that the £2 billion of help for families would have been enough to see them through the expected cost of living increases.

And although the Chancellor has since announced further support with council tax cuts for millions and an energy loan announced in February, the Bank of England is warning inflation could reach 8% in Q2 of 2022 and continue to rise later in the year and the latest labour market statistics show most workers facing a real term pay cut as regular wage growth (without bonuses) stands at 3.8%.

These are extraordinary forecasts, and without further intervention millions will be facing significant challenges, especially those on low and insecure incomes.

The Work Foundation has therefore set out three key tests for the Chancellor’s Spring Statement, to help judge whether the measures within it are likely to be enough to support people through the cost of living crisis.

1. Does the Spring Statement provide additional support to the workers and job seekers most in need?

The cost of living crisis will disproportionately hit those on low and insecure incomes. Joseph Rowntree Foundation analysis has suggested some families will spend 54% of their household income on energy bills when the price cap goes up on 1 April. With energy and food prices continuing to rise, those with the least amount of disposable income are going to be unable to absorb these new costs.

Targeted support is needed, and this could be delivered through Universal Credit. 5.6 million people are on Universal Credit, with 74% of claimants either in work, searching for work or preparing to be looking for work soon. As things stand, Universal Credit will be uprated by just 3.1% in April 2021, falling 4.1% behind the expected level of inflation. At a minimum, the Chancellor must ensure that benefits increase at the rate at which inflation is now expected to peak, so that those least able to cope with the cost of living crisis can make ends meet.

2. Has the Chancellor announced further measures to support working families?

On 3 February 2022, Rishi Sunak admitted that the cost of living increase was going to hit all working families, “It’s not just those families who are on benefits that are going to feel the pinch, it’s actually middle income families as well. Families that are working hard, they’re not on welfare; this will be a significant increase for them”.

This was before the Ukraine War impacted global petrol and food prices. The planned National Insurance Contribution increase and the freeze in Income Tax thresholds both stand to increase the tax burden of working families at a time when many will struggle to afford it. Finding ways to mitigate this, by either delaying the rise in NICs by a year or raising Income Tax Thresholds will be key.

3. Has the Chancellor announced a ‘Plan for Participation’ to support those in economic inactivity back into work following the pandemic?

Employers across the country are struggling to recruit, with vacancies reaching 1.3 million in March 2022. A big part of the challenge is rising economic inactivity – with 359,000 more working age people (16-64) exiting the labour market since November-January 2019/20. The majority of these people are over 50 years old, and have cited retirement, stress and mental health reasons and wanting a change of lifestyle as to why they are no longer looking for work.

While it is clear that the Plan for Jobs was successful in preventing an unemployment crisis and protecting income and living standards throughout the pandemic, the Chancellor now needs to go further and launch the next phase of support – a Plan for Participation.

In particular, this plan must include further investment in tailored employment support for older workers looking to return to the labour market, as well as working with employers to develop an employer campaign and accreditation programme to promote inclusive flexible working practices, making flexible working the default for all employees, with flexible options included in all job adverts.


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