Spring Budget 2023: What does it mean for HR?

Hunt: UK business must close the productivity gap
Hunt: UK business must close the productivity gap

Chancellor Jeremy Hunt gave his 2023 budget announcement to parliament yesterday (15 March), prioritising expanding the workforce and changes to pensions.

Many of Hunt’s changes focussed on filling labour shortages and getting the economically inactive back in work. 

He said there were one million vacancies in the UK but seven million adults of working age who are not in work, many of whom are economically inactive. This budget intends to break down the barriers to employment for these people.

Though economically inactive people are a diverse group, the three demographics the new budget policies focussed on long term illnesses, working parents and over 50s.

More about the labour shortage:

UK business struggling with worker shortages - HR Magazine

Recession fears might worsen talent shortage, says REC

Employers tackling skills shortages with recruitment rather than training


Support for disabled people and people with long term illness

The chancellor announced a new system, Universal Support, to help disabled people in their job search.

Hunt also addressed those who left work due physical or mental health issues by announcing a £400 million plan to increase the availability of mental health and musculoskeletal resources, and expand the Individual Placement and Support scheme, an employment support service integrated within community mental health teams.

He also announced two consultations on how to improve occupational health and said the funding for small company subsidies will be doubled. 

Ben Willmott, head of public policy for the CIPD, said these measures make important improvements to employee healthcare.

He said: “Supporting the health of workers throughout their working lives will decrease absence levels and reduce early exits from the labour market. 

“The provision of timely access to support for those with musculoskeletal or mental health issues could reduce the likelihood of these conditions becoming chronic. We know these are the two main causes of long-term sickness absence.” 

Lindsey Zuloaga, chief data scientist at talent experience platform HireVue, said although the proposals are helpful and necessary, a more adaptable hiring process and inclusive workplace culture is also needed.

She said: “Even as they bemoan the skills gap, employers often unintentionally overlook people with disabilities or primary carers by limiting the days, times, and locations in which interviews are available. 

“A person who is homebound can’t be expected to commute for interviews, and a parent balancing full time employment with a child’s schedule, is all but excluded from interviews during normal office hours.”


Support for working parents 

The chancellor recognised that many parents are affected by the high costs of childcare, particularly women. 

He argued almost half of non-working mothers said they would prefer to work if they could arrange suitable childcare.

“For many women, a career break becomes a career end,” he said.

To combat this, he announced 30 hours of free childcare for children over the age of nine months in households where all adults are working at least 16 hours.

This was previously only available for three and four year-olds and means free childcare will be available immediately after maternity or paternity end leaves, so parents can return to work more easily.

There will also be an increase in funding for ‘wraparound care’ for school age children, providing childcare at both ends of the school day between 8am and 6pm.

Willmott praised the plans as a game changer for working parents.

He said: “The plan will enable many more working parents, particularly women, to return to work much earlier than they can currently. This can help avoid the loss of skills and confidence that can be caused by spending too long out of employment and boost gender equality.” 

Abi Adamson, founder and DEI director of diversity consulting firm The Diversity Partnership said it was crucial the chancellor was able to support childcare services enough to meet demand.

She said: “There’s no doubt this is a significant financial commitment that will prevent many working parents - particularly working mums who still carry the burden of childcare - needing to sacrifice their careers. However, the government must ensure they do not cause more problems than they’re trying to solve by bolstering supply to meet the new demand.”

Steve Herbert, wellbeing and benefits director at insurance firm Partners&, raised concerns about effective communication of the changes to potential and current employees. 

“Employers can help with this issue by perhaps signposting their workers and potential job candidates to these new elements of support, and also highlighting other areas of state support such as the often overlooked financial support available via Tax-Free Childcare,” he said.


Pensions changes and support for workers over 50

According to Age UK, there are currently 3.5 million over 50s of pre-retirement age who are not part of the workforce, an increase of 320,000 since before the pandemic.

Hunt announced a number of strategies to combat this, including bolstering its Midlife MOT programme, which provides financial, health and career guidance ahead of retirement. 

Returnerships, apprenticeships targeted at over 50s, will be introduced, focussing on flexibility and previous experience to reduce training length.

Hunt announced a dramatic change to pensions, pledging to abolish the Lifetime Allowance which previously was limited at £1 million. 

The move is designed to prevent employees, especially NHS Doctors, from taking early retirement due to pension tax thresholds.

The government will also increase the pensions annual tax-free allowance by 50% from £40,000 to £60,000.

Emma Burrows, head of employment and pensions at law firm Trowers & Hamlins, said although tax changes will encourage people to stay in work for longer, employers also need to provide specific and proactive support for older employees, including menopause support.

She said: "ONS data published in September 2022 shows that of those between 50 – 54  who had left work since the start of the pandemic, 19% left due to stress, and 17% because they did not feel supported in their job. 

“So while the government can use financial incentives, it is sensible for employers to consider how they support employees over the age of 50 better.”  

Catherine Foot, director of longevity think tank Phoenix Insights, said although the measure provides incentives for top earners to continue working, it fails to consider the needs of lower earners.

She said: “Huge saving gaps already exist between income bands, with over 15 million people in the UK not saving enough for retirement. Without support for lower earners to increase their savings capacity as well, we can expect to see a widening of wealth inequalities.”