In the March 2025 Economic and fiscal outlook, we were unable to assess the economic effects of certain elements of the Pathways to Work Green Paper that had been incorporated into our fiscal forecast, as the Government had not provided sufficient information at that time. We have now related the full assessment of these policies in this box.
In the March 2025 Economic and fiscal outlook, we were unable to assess the economic effects of certain elements of the Pathways to Work Green Paper that had been incorporated into our fiscal forecast, as the Government had not provided sufficient information at that time. We committed to undertake a full assessment of these policies ahead of the current forecast. In doing this, we have not applied our refined significance threshold (set out in Box 3.1) as these policies were incorporated into our fiscal forecast before this change.
Our economy forecast now incorporates the net effect of the changes to universal credit (UC) policies which remain in force following the policy changes made in July. We estimate these will add around 15,000 average hours equivalent (AHE) to labour supply in 2029-30. This reflects the net effect of:
- the increase in the generosity of the UC standard allowance, which is expected to reduce recipients’ financial incentive to enter or remain in employment, leading to an estimated 11,000 AHE reduction to labour supply; and
- the reductions in the generosity of and eligibility for health-related benefits in UC, which are expected to lower income for new claimants, increasing work incentives, and resulting in an estimated 26,000 AHE increase in labour supply.
We have also assessed the new employment support programme announced in the Green Paper. Based on evidence from similar past schemes, combined with the Department for Work and Pensions’ range of estimates of the numbers of individuals that could be provided with support, we estimate that the programme could support 20,000 to 40,000 inactive claimants into work by 2029-30. The upside risks within this range include potential cost-saving efficiencies, which could free up resource for the more effective elements of the scheme. The downside risks relate to expected volumes of enrolment, which vary widely depending on whether enrolment is mandatory or voluntary, and uncertainty around the level of engagement from the target population.
However, over at least the past 10 years, successive governments have provided several similar employment programmes, which will have supported the recent employment levels that provide the baseline for our economy forecast. Our assessment of indicative levels of spending on employment programmes over the forecast period, including both existing programmes and the new spending funded at the Spring Statement, suggests that overall employment support
spending in the coming years will be broadly similar to its average level over the past ten years, at around 0.1 per cent of GDP in real terms. We have therefore not adjusted our forecast to account for the impact of the Spring Statement employment support policy, as it is not clear that this new scheme meets the additionality criteria, described in Box 3.1, of materially increasing the level of government employment support provision relative to the support provided by
previous schemes.
This box was originally published in Economic and fiscal outlook – November 2025