Plans to cut inflation made harder by over 50s out of work

Research by the House of Lords Economic Affairs Committee said that the number of people not working has risen by more than half a million since the pandemic.

In its report “Where have all the workers gone?” published today, it said that an increase in early retirement was the biggest contributing factor which will damage growth and keep inflation high.

This rise in inactivity will mean there is less money available for public services such as the NHS, while the demand for those services will increase.

Peers also found that a switch from EU to non-EU migration had severely impacted some sectors, such as agriculture, who may be forced to move to automation due to the lack of labour from abroad.

Lord Bridges of Headley, Chair of the House of Lords Economic Affairs Committee, said: “Why have so many workers left the workforce, after years of declining inactivity?

“Earlier retirement seems to be the biggest reason. Those who are already economically inactive are becoming sicker, meaning they’re less likely to return to work.

“So, while other factors were previously masking the impact of an ageing population on the size of the workforce, they are now reinforcing it.

“Taken together these findings are, like mid-winter, bleak. The rise in economic inactivity makes it harder to control inflation; damages growth, and puts pressure on already stretched public finances.

“That’s why it’s critical the Government does more to understand the causes of increased inactivity, and whether this trend is likely to persist.”

The report suggested that the impact of “lifestyle changes” for over 50s, such as furlough and working from home, prompted many to consider early retirement, in addition to increased savings during the pandemic making the move easier.

It found that the majority of these people neither want to nor expect to return to work, and “appear reasonably well-off”.

Peers warned that a significant number of people who have stopped work since 2020 won’t be persuaded to go back to work.

It comes as the Chancellor, Jeremy Hunt, announced that he will set out a Spring Budget on 15 March next year.

Mr Hunt yesterday commissioned the Office for Budget Responsibility to put together a forecast on the economy to be published alongside it.

The Chancellor’s last budget saw Mr Hunt set out a series of “difficult” decisions designed to ensure a “shallower” recession for the UK, amid a backdrop of the war in Ukraine, soaring energy bills and the economic turmoil that spelled the end of Liz Truss’s short-lived administration.

In November, the OBR forecast that unemployment would rise by 505,000 from 3.5 per cent, to peak at 4.9 per cent in the third quarter of 2024.

Inflation was expected to be 9.1 per cent over the course of this year and 7.4 per cent next year, contributing to a dramatic fall in living standards.

However, it has been reported that Mr Hunt will extend the freeze on alcohol duty, which will “inject a much-needed flurry of festive cheer” for pubs.

Emma McClarkin, Chief Executive of the British Beer and Pub Association said: “The decision to extend the freeze on beer duty will be welcomed by pubs and brewers alike.

“In 2022 our industry has faced pressures and challenges like never before. This freeze will allow £180million to be reinvested into our sector at a critical moment and inject a much-needed flurry of festive cheer for pubs and breweries.”