Hunt to set out plans to tackle surge in long-term sickness

 Chancellor vows to fight labour shortages as Sunak urges restraint on executive pay

Source - Daily Telegraph 15/11/22

Link

Jeremy Hunt is preparing to announce measures to help the long-term sick back into jobs on Thursday, as figures showed that a record 2.5million people are now unable to work because of persistent illness. 

The Chancellor is expected to use Thursday’s Autumn Statement to warn that labour shortages are fuelling spiralling inflation by reducing the workforce and pushing up wages. 

Data from the Office for National Statistics show that the number of people classed as long-term sick rose by 133,000 in the three months to September, bringing the total to 2,519,000. This is the first time the number has tipped over 2.5m since records began in 1993.

It came as Rishi Sunak, the Prime Minister, called on top executives to exercise pay restraint and declared that union demands for a 17.6pc pay rise for nurses are unaffordable.

The rise in long-term sickness has coincided with a surge in the number of people stuck on NHS waiting lists, prompting speculation that many of those ill are struggling to secure treatment that could allow them to return to work.

Negotiations were still under way on Tuesday night on possible extra money for the NHS to help deal with a post-Covid backlog, although sources said NHS England had been told that it would not get the £7bn being sought.

A Treasury source said Mr Hunt would announce a proposal to tackle long-term sickness in the Autumn Statement, but suggested this would not involve shaking up the benefits system or giving tax breaks to companies.

The source said: “There are pressures pushing up inflation beyond energy, and one of the main ones is the tight labour market.

“We have a record number of job vacancies, and hundreds of thousands have left the labour market due to long-term sickness.

“We need to look at the labour market as that is pushing up prices across the board, because employers are finding it hard to get people.”

Another source said the Government would be seeking extra information on why many over-50s and women are unwilling to return to the labour market after having left, such as whether they need help in gaining new skills.

Mel Stride, the new Work and Pensions Secretary, has already tasked officials with doing further work on understanding the root causes of economic inactivity.

It is understood other departments will be told to help with cross-government efforts to address the issue after tomorrow's statement.

Both Mr Hunt and Rishi Sunak have warned that there will be difficult decisions on spending and tax in the Autumn Statement.

On executive pay, Mr Sunak said: “Of course I would say to executives to embrace pay restraint at a time like this and make sure they are also looking after all their workers. I'd say that all the time.”

He added: “We have enormous gratitude for our nurses and, indeed, all the other workers in the NHS for what they do and have done for us over the past couple of years, but what the unions are asking for is a 17pc pay rise and I think most people watching will understand that's unaffordable.”

The Chancellor will unveil a series of stealth taxes in Thursday's statement, including a freeze on income tax and national insurance thresholds, in an attempt to fill a £60bn black hole.

The threshold for the top rate of income tax is expected to fall from £150,000 to £125,000, while a windfall tax on energy firms will be extended. Council tax is expected to rise, with town halls given the freedom to increase bills by 5pc without a referendum.

Mr Hunt will also announce billions of pounds worth of spending cuts.

The number of people available to work has been shrinking since the pandemic, making the UK an outlier among developed countries.

In addition, the overall share of economically inactive people, who are neither in work nor looking for a job, grew by 0.2 points to 21.6 per cent.

The employment rate is 1.1 points below its pre-pandemic level, now at 75.5 per cent.

However, there were signs that older workers are going back into jobs as the cost of living crisis squeezes household budgets.

The number of people who are economically inactive because of retirement has been falling for nine months, although at 1,157,000 it remains slightly higher than before Covid.

The ONS said: “During the latest three-month period, the increase in economic inactivity was driven by those who are long-term sick, who increased to a record high."

The data also showed that economic pressures are forcing rising numbers of businesses to hold back on hiring, as vacancies fell for the fourth straight quarter. There was a small uptick in unemployment, which is at 3.7 per cent.

The figures suggest that even as the number of job openings remains historically elevated, the labour market is starting to turn as higher interest rates and uncertainty bite.

There are around 1.2million vacancies in the UK, which while still high is the lowest level since September to November last year.

The signs of cooling in the labour market will take some pressure off the Bank of England, which delivered its first ever 0.75 per cent interest rate rise at its last meeting.

On Tuesday Mr Sunak refused six times to apologise for the chaos left by Liz Truss’s disastrous mini-budget.

But he admitted to the BBC that Britain’s reputation had taken a “knock”.