Budget plans to encourage people back to work will have limited impact and cost £70,000 a job, a think tank says.

Value for money? – Owl

By Daniel Thomas, Kevin Peachey & Lucy Hooker www.bbc.co.uk

The changes are expected to bring 110,000 back to work, which the Institute for Fiscal Studies said was “just a fraction” of the those who’d left work over the past two years.

The government will spend billions to boost labour supply via tax breaks on pensions and expanded free childcare.

It said the plans would help to grow the economy and raise living standards.

Paul Johnson, director of the IFS, said the government’s forecaster had calculated the overall plan to boost workforce numbers will cost around £7bn a year and increase employment by around 110,000.

“That’s a cost of nearly £70,000 per job,” he says.

While the chancellor “might have some success” it was likely to be modest given the large number of people “lost from the workforce in the last couple of years”, he added.

UK economic growth has flatlined in recent months and the economy is expected to shrink his year. About a quarter of people of working-age – around 10 million people – do not have jobs.

Persuading workers to work for longer is part of UK plans to boost growth, with Chancellor Jeremy Hunt’s Wednesday announcement on tax and spending being dubbed the “Back to work Budget”.

Mr Johnson said the impact of annual net immigration numbers – assumed at 245,000 – would be far more significant for boosting employment.

The government said its independent finances watchdog, the Office for Budget Responsibility (OBR) had revised its outlook for economic growth upwards “by the largest amount ever in their forecasts” as a result of the Budget’s measures.

A spokesman added: “[The OBR] also says extending 30 hours of free childcare to parents of nine months to two year olds… will lead to many more increasing their hours – helping to grow the economy and raise living standards for everyone.”

The Budget also included measures to support disabled people who want to work, programmes to encourage retirees to take on jobs or apprenticeships, and changes to the rules around health-related benefits and universal credit.

On Wednesday, the OBR, noted that the impact of the back to work policies was uncertain, saying the final figure for the number of extra people in work could be half (or double) the main estimate of 110,000 workers.

That could, in turn, double or halve the cost-per-worker of the policy.

The OBR further estimate that extra workers will boost the size of the economy by 0.2% – equivalent to about £4.5bn, some of which the government will get back in extra taxes and a smaller benefits bill.