More than 100,000 people in part-time work could face a benefit cut if they fail to properly look to do more hours, Kwasi Kwarteng is set to announce in his mini-budget on Friday.
The chancellor is set to reveal a significant shake-up of the welfare system, with claimants working up to 15 hours a week on the National Living Wage required to take “active steps” to increase earnings.
If they fail to do so, under Mr Kwarteng’s new plan, their benefit payments as part of the Universal Credit system could be reduced.
Mr Kwarteng has described the policy as a “win-win” – pitching it as a way to fill 1.2 million job vacancies across the country.
It comes as Liz Truss told an audience of US corporate giants in New York that Britain has too many “economically inactive” people following the Covid crisis – vowing that the mini-Budget would “encourage more people to go into work”.
Labour accused Ms Truss of branding British workers lazy during after she said British workers needed “more graft” in a leaked audio recording that emerged during the Tory leadership contest.
Sir Keir Starmer’s was quick to respond to the benefits plan – with the shadow work and pensions secretary making reference to Ms Truss and Mr Kwarteng’s intention to scrap the cap on bankers’ bonuses.
“So Tory ministers think reason we have over a million vacancies is because the low paid aren’t working hard enough and need to be threatened with sanctions but bankers needs bumper bonuses,” shadow work and pensions secretary Jonathan Ashworth tweeted.
The Labour frontbencher added: “We need a serious plan to support people to return to work and increase labour supply.”
Billed by the Treasury as a gradual expansion, the latest move will be an increase from the incoming 12-hour threshold for a more intensive work search regime and is expected to take effect from January.
Under the changes, claimants aged over 50 will also get extra support from work coaches, while the newly unemployed will receive nine months of targeted sessions.
The Treasury believes that rising economic inactivity among the over-50s is contributing to a shortage in the jobs market, driving up inflation and limiting growth.
A return to pre-pandemic economic activity among over-50s, according to a government estimate, could boost GDP by up to one percentage point.
“Our jobs market is remarkably resilient, but it is not perfect. While unemployment is at its lowest rate for nearly 50 years, the high number of vacancies that still exist and inactivity in the labour market is limiting economic growth,” Mr Kwarteng said.
“We must get Britain working again. These gradual changes focus on getting people back into work and maximising the hours people take on to help grow the economy and raise living standards for all.”
The latest announcement comes ahead of a mini-budget on Friday, at which Mr Kwarteng is due to set out plans to boost growth and attract investment – including how it will pay for the energy price guarantee for households and businesses.
As well as reversing the hike in national insurance contributions and scrapping a planned increase in corporation tax, it has been reported that the chancellor will cut stamp duty in a further attempt to drive growth.
Ms Truss told bosses of firms including Google, Microsoft and JPMorgan Chase that she wants “lower, simpler taxes” to attract businesses to the UK during a speech in New York on Wednesday.
It comes as almost 400,000 employees get a pay rise after an increase “real living wage” agreed by thousands of businesses and organisations was brought forward.
