The OBR, the Treasury, HMRC, DWP, DfE and DHSC have established a set of monitoring and evaluation arrangements for the 13 policies for which impacts have been explicitly incorporated in our potential output forecast as indirect effects since the Spring Budget 2023. In this box, we provided an update on monitoring and evaluation of these policies, and used the new evidence to assess how implementation and delivery align with our original judgements for indirect effects across the forecast horizon, culminating in a downward revision to labour supply in 2028-29 of 0.04 per cent.
The OBR, the Treasury, HMRC, DWP, DfE and DHSC have established a set of monitoring and evaluation arrangements for the 13 policies for which impacts have been explicitly incorporated in our potential output forecast as indirect effects since the Spring Budget 2023.a We use this to assess how implementation, delivery, and new evidence on policy effects align with our original judgements for indirect effects across the forecast horizon, and potentially make adjustments in future forecasts. This is similar to the approach we have used for some time to evaluate and re-cost the fiscal impacts of major policies, and will help inform our approach to assess the supply-side impacts of other policies in the future
Monitoring of policy implementation
Monitoring of the delivery of these policies to the timetable assumed in our forecasts suggests that most of the more significant labour supply reforms are on track for delivery at this early stage. However, there are potential risks to the delivery of the following policies:
- Although the first phase of the policy announced in March 2023 to offer 30 hours a week of free childcare for working parents has concluded successfully and rollout remains on track, we continue to closely monitor the delivery of the policy, as, looking ahead, there is a risk of a shortfall in the supply of funded places and staff for the September 2025 expansion, which will be the largest one yet.
- Initial monitoring information suggests that the take-up of the policy announced in March 2024 to raise the High Income Child Benefit Charge (HICBC) threshold has been somewhat lower than expected among some population subgroups, but its current profile is not inconsistent with the expected economic impacts.
- The consultation for the reforms to the Work Capability Assessment (WCA), announced in November 2023, is under judicial review, which could cause delays to implementation.
Further, there are three policies for which implementation looks to be clearly behind schedule or low take-up poses a serious risk:
- The rollout of Universal Support was paused due to the elections and timelines are being re-worked, which will slow down its labour market impacts.
- The rate of appointments offered under the policy announced in March 2023 to strengthen conditionality for parents and carers of one- and two-year-olds claiming Universal Credit is still well below the original policy assumptions and so is the eligible caseload for this policy relative to our initial assumptions.
- And, so far, almost none of the extra take-up that we had assumed as a result of the March 2023 addressing upfront childcare costs in universal credit measure has materialised since its implementation.
To reflect the crystallisation of these downside risks to the implementation of these policies, we have downgraded our labour supply forecast in 2028-29 by 15,000 AHE (average hours equivalent) (0.04 per cent).b
Evaluation of policy impact
With most policies still in their early stages, and in many cases not yet showing up in official economic statistics, evidence to evaluate many of their effects is only now beginning to emerge.
DWP, HMRC, DfE and DHSC, the departments leading on the 13 policies in scope, have all written to the Treasury restating their commitment to evaluation and setting out their plans for evaluating the policies’ economic impacts: c
- HMRC and the Treasury, who are responsible for the tax policies in scope, noted that data, methodological and resourcing issues may hamper the evaluation process, and that it can be challenging methodologically to isolate policy effects. For these policies, formal and detailed evaluation plans are yet to be set out.
- DWP are yet to develop evaluation plans for WCA reforms and addressing upfront childcare costs in universal credit measures, and have stated that the evaluation of the labour market impacts of some aspects of the strengthening conditionality for lead carers claiming Universal Credit policy may not be possible, partly due to the delivery issues. Evaluation plans for Restart and Universal Support are concrete.
- DHSC has confirmed unreserved commitment to evaluation, and its plans, which will depend crucially on data linkage projects for the relevant datasets, are broadly in place.
- Regarding the 30 hours a week of free childcare for working parents policy, DfE has presented comprehensive formal plans for evaluation, with detailed timelines.
We aim to conduct preliminary analysis of the early impacts of the November 2023 and March 2024 NICs cuts, as well as the impacts of frozen tax thresholds, when the relevant Annual Survey of Hours and Earnings data starts to be released. In doing so, we will consider the consistency of our modelling approach to personal tax policies with that of the employer NICs measure introduced in this Budget.d Around the same time, we also aim to examine whether the early impacts of the 30 hours a week of free childcare for working parents measure can be seen in the Labour Force Survey through preliminary analysis, although isolating this from other simultaneous changes may not be straightforward.
This box was originally published in Economic and fiscal outlook – October 2024