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TUC submission Autumn Budget 2025

Author
Geoff Tily
Head of Economics
Report type
Policy proposal
Issue date
Action to deliver stronger growth and higher living standards

Below we set out both the key wider policies the country needs both to secure stronger growth and higher living standards.

Direct support to raise workers’ living standards

  • Introduce a new domestic energy billing structure that provides a low and fixed rate for sufficient energy to cover essential needs (variable according to family size, property architype, receipt of benefits, and energy requirements for those with disabilities) along with several higher rates for high and luxury usage.
  • Adjust VAT on domestic energy. Current flat 5% VAT rates could be replaced by a 0% assessment for essential usage levels along similar lines to the above, with higher usage being taxed at 10%, and luxury usage (for example for private swimming pools) taxed at 20% or more.
  • Reverse the Conservative policy of the two-child benefit cap and repeal the wider benefit cap to ensure all children feel the full benefit of the change.
  • Remove the five-week wait for Universal Credit payments and redesign the system to ensure more regular payments and longer assessment periods to reduce fluctuations in income.
  • Recommend a minimum wage rise that takes the rate beyond two-thirds of median wages and ask the Low Pay Commission to chart a course towards a 75% bite target.

A consistent focus on more and better jobs

  • Introduce a shared cross-government set of metrics for labour market policy including commitments to: secure progress towards an 80 per cent employment rate; return the number of young people NEET to pre-covid levels by the end of the parliament; and drive improvements in job quality, committing to a reduction in the number of people in insecure contracts and faster wage growth in deciles below the median.
  • Establish a central labour market unit to oversee the development and implementation of these ambitions. This would help ensure job quality and quantity measures are consistently reinforced across policy and that those groups currently furthest from the jobs market are not left behind in policy design.
  • Prioritise more resources for the employment tribunal system to ensure that cases can be resolved swiftly. This should sit alongside a tripartite review of the system, to ensure it is fair, accessible and fit for the future – involving unions, employers and Acas.
  • Ensure the establishment of the Fair Work Agency is supported by a funding settlement that enables it to discharge its new functions and powers effectively. This should be supported by ensuring that new powers to recoup the costs of investigations/enforcement actions from employers who are found to have broken the law are switched on as soon as possible.
  • Deliver a fair funding approach for the Central Arbitration Committee. We estimate that the CAC will require a budget increase of around 50 per cent to carry out its significant new duties to a sufficient standard.
    Invest in the Health and Safety Executive and the Equality and Human Rights Commission, committing to bring their budgets back to their pre-financial crisis position in real terms.
  • Ensure the effective implementation of the Employment Rights Bill with the introduction of additional support to equip managers and union reps with the knowledge they need to put new rights and protections into practice.  
  • Implement an ambitious jobs guarantee for young people, with early access for those young people at highest risk of becoming NEET. Jobs should be by government to pay at least the minimum wage alongside training that provides a pathway to a level 3 qualification.
  • Put in place effective support for more disabled people to stay in work and return to employment if they are out of work, including through introducing a time limit on decisions regarding reasonable adjustments and ensuring excellent employment support is available, ideally extending a jobs guarantee approach.
  • Increase apprenticeship participation and completion rates through expansion of the Growth and Skills Levy to include more SMEs, and greater engagement with trade unions to improve apprenticeship standards and apprentices’ experiences.  
  • Ringfence additional funding for the tertiary education sector to address the workforce recruitment and retention crises in further and higher education, recognising that these will be key barriers to skills and labour market policy delivery if unaddressed.
  • Pilot a new £5-10 million union learning agreement fund, with an overarching aim to raise collective bargaining coverage with regard to skills.
  • Take a consistent approach to developing and implementing workforce strategies across the industrial strategy sectors.
  • Ensure delivery of large infrastructure projects, involves employers with the TUC and affiliated trade unions to secure framework agreements, promoting secure jobs and high labour standards.
  • Design social value criteria to capture the potential of procurement to stimulate re-industrialisation and good quality, unionised jobs across the country. 

Full support to futureproof industry 

  • Provide strategic transitional investment to drive innovation in foundation industries, via a new fund. 

  • Retain existing commitments including:

    • £1.8bn National Wealth Fund investment in ports
    • £500m National Wealth Fund investment in hydrogen
    • £2.5bn investment in steel
    • £1.5bn NWF investment into gigafactories
    • £2.5bn DRIVE35 investment in automotive, including support to transition the Internal Combustion Engine supply chain and develop EV supply chains
    • £21.7bn investment over next 25 years in Carbon Capture, Utilisation and Storage (CCUS)
    • Wider support via the National Wealth Fund and British Business Bank for electrification, grid infrastructure and other decarbonisation technologies. 

    - Government should launch a ‘Business Transition Hub’ to provide pro-active guidance, technology insights and market intelligence to high-carbon sectors on futureproofing pathways, decarbonisation and diversification

  • Expand the Clean Industry Bonus by up to £1 billion over the course of the Parliament.
  • Aim to invest £1.1 billion a year into building up UK clean energy supply chains, through a combination of Clean Industry Bonus, National Wealth Fund and expansion of past grant schemes (e.g. Offshore Wind Manufacturing Investment Scheme and the Green Industries Growth Accelerator).
  • Establish a targeted public investment fund within the National Wealth Fund to support oil & gas supply chain firms to upgrade their infrastructure, technology or skills base, sufficiently to supply new markets.
  • Provide new funding to support the North Sea transition including by:
    • Establishing a “Your Country Needs You” redeployment programme to transfer oil and gas workers to sectors with skills shortages.
    • Putting in place a time-limited furlough or a short time working scheme, for workers who fall through the gaps from other interventions.
  • Set a clear goal to achieve industrial electricity price parity with EU competitors, with a plan towards getting there.
  • Take further action to bring down industrial electricity prices including bringing forward the British Industrial Competitiveness Scheme or failing that introduce an interim support scheme to be available to industry on the brink of closure due to energy costs.
  • Introduce an electrification business model to incentivise fuel switching within appropriate industrial processes.

Sustained investment in world class public services

  • Ensure investment in public services is now sustained. Services remain overstretched, understaffed and unable to meet the needs of our communities.
  • Engage in dialogue with public services unions on a plan to restore public sector pay, recognising that more than a decade of pay restraint has exacerbated the recruitment and retention crises across much of the public sector and the financial hardship faced by many public services workers.
  • Ensure evidence to Pay Review Bodies (PRBs) does not dictate a headline percentage pay award. This negates the independence of PRBs and their process, and becomes a de facto cap.
  • Fund future pay awards with additional expenditure so that public services and devolved governments are not forced to reallocate budgets and make cuts elsewhere to meet the value of pay awards.
  • Reinstate a structure like the Public Services Forum as a ministerial advisory body to guide the overarching approach to delivering government’s priorities in public services, including AI adoption and public services reform.  
  • Ensure the welcome Fair Pay Negotiating Body for Adult Social Care and School Support Staff Negotiating Body have the resources they need to address deep-seated recruitment and retention problems.
  • Make greater investment in public-interest regulation and scientific resilience so that all relevant bodies are fully-resourced.
  • Restore fair and sustainable funding for local government – including restructuring or cancelling local government debt – both to retain and develop the local government workforce and protect and rebuild local public services.
  • Set out a roadmap for sustained investment in fire and rescue services.
  • Ensure public ownership and in-house delivery are the default setting for public services, with funding available to ensure this can happen. The public interest test should be introduced swiftly.
  • Strengthen the Procurement Act so that organisations that commit labour-related and other regulatory violations are subject to more robust exclusions criteria.
  • Ensure transparency around public spending and contracts, including suppliers’ contract performance, by establishing a centrally-held and managed Domesday Book of public service contracts and extending the Freedom of Information Act to be applicable to any entity delivering a public contract.

Provide direct support to raise workers’ living standards

Support for domestic energy prices 

We welcome the government’s ambition to lower domestic energy bills by growth of clean energy production and the electrification of an increasing percentage of domestic heating. But it remains the case that domestic energy bills are persistently high, and that the scale of current government commitments is not clearly aligned to a significant reduction that people can feel in their regular bills. We therefore recommend that the government should look to more immediate and demonstrable solutions to this situation.

Government should consider a new domestic energy billing structure that provides a low and fixed rate for sufficient energy to cover essential needs (variable according to family size, property architype, receipt of benefits, and energy requirements for those with disabilities) and introduce several higher rates for high and luxury usage along a rising-block tariff structure, with the highest rates reserved for such clear luxuries as heating private pools, heating unoccupied buildings and warming driveways.67  This could be introduced on a cost neutral basis, with premium tariff payers subsidising lower income users, but could be expanded by a government subsidy. Our initial assessment is that a subsidy of around £2bn could save the average household in the lowest income decile over £200 a year. 

This new structure (versions of which are already used across such different jurisdictions as Japan and California) would ensure that no households goes without the energy they need to cover their basic needs, with eradication of absolute fuel poverty becoming possible. It would result in reduced bills for the majority and introduce the logic of progressive liability to a key element of household expenses. Furthermore, such a new system would disincentivise very high consumption, reducing overall energy usage and incentivising households to take up offers of and seek out energy efficiency retrofit, promoting the aims of the Warm Homes Plan.

The government could also consider adjusting VAT on domestic energy with similar results. Current flat 5% VAT rates could be replaced by a 0% assessment for essential usage levels along similar lines to the above, with higher usage being taxed at 10%, and luxury usage taxed at 20% or more. This too would lower costs for the majority while increasing tax income overall, allowing new money to be redirected to expand delivery of the Warm Homes Plan.

Remove the two-child benefit cap

The government has made a welcome commitment to develop a child poverty strategy. This will need to address several policy areas – including social security.

A priority step must be to reverse the Conservative policy of the two-child benefit cap. Alongside this the benefit cap has to be repealed, as any financial gain for families could be erased should this wider cap remain in place.

Abolishing the two-child limit would be the most cost-effective way to reduce child poverty. Scrapping the two-child limit now would not only pull 350,000 children out of poverty overnight but it would stop another 150,000 being pushed into poverty over this parliament.68  Estimates for the cost of removing both policies are in the range of £3-4 billion a year by 2029/30.

Reform Universal Credit 

The design of Universal Credit can also exacerbate child poverty. We support the government’s recognition that Universal Credit needs to be reformed, and hope that the Universal Credit Review will achieve progress on removing the five-week wait, enabling more regular payments and putting in place longer assessment periods to reduce fluctuations in income.

A five-week wait for the first payment fails to recognise that most low-paid workers do not have savings to get them through this period. 

Along with redesigning the initial payment in Universal Credit, the whole monthly assessment period should be reformed. The monthly assessment periods are set based on the date of someone’s claim, rather than being aligned with pay cycles, thus causing a mismatch between the two. This means it is possible to receive two wage payments in the one assessment period which reduces the Universal Credit payment. USDAW report that 78% of their members on Universal Credit are paid four weekly, which means their Universal Credit payment can be reduced by £800 for one month a year, making it harder to budget.

In our 2022 report on reforming Universal Credit69  we recommended the removal of the monthly assessment period designed to include a monthly payment in arrears. We also set out the need for a longer three- to-six-month assessment period to reduce fluctuations and provide stability, and allowing claimants to choose more frequent payment options to better suit their budgeting needs.

A new bite target for the National Minimum Wage

The government made a manifesto commitment to make the minimum wage a genuine living wage. This will require ambitious increases which take the minimum wage above its current 66 per cent bite. This is in line with the government’s remit to the LPC which says the minimum wage should not fall below two-thirds of median wages. As the minimum wage has been at two-thirds of median wages for two years, the next increase should go beyond this.

Looking forward, the minimum wage should be increased to 75 per cent of median wages so that it reaches £15 as soon as possible. This would raise pay for millions of workers, improve living standards, and shift our economy away from an over-reliance on low paid work. A strong minimum wage underpins much of the government’s vision including making work pay, tackling poverty and delivering economic growth.

The Low Pay Commission should be responsible for charting an ambitious path towards a 75 per cent bite target. This would ensure that the process is led through social partnership by a body with authority to test the limits of minimum wage policy alongside consideration of prevailing economic conditions.

A consistent focus on more and better jobs

Achieving the government’s growth mission of “more people in good jobs, higher living standards, and productivity growth in every part of the United Kingdom” requires a sustained focus on improving both the availability and quality of jobs. Crucially, government must recognise that job quality and job creation are not in tension, but mutually supportive goals. 

A range of welcome interventions have been announced, not least the Employment Rights Bill and the wider plan to Make Work Pay. The Get Britain Working White Paper also proposes an important 80% employment rate target, which sits alongside recognition of the need to support more young people into meaningful routes towards the jobs market and ensure more disabled people can stay in work. The industrial strategy’s workforce and skills plans, and forthcoming skills and apprenticeship reforms, will also have important roles to play in securing success. 

Ensuring consistency across labour market interventions would benefit from a shared cross-government set of metrics. These should include commitments to: 

  • Secure progress towards an 80 per cent employment rate.
  • Return to the number of young people NEET to pre-covid levels – a 15% reduction by the end of the parliament.
  • Reduce flows from employment into economic inactivity because of ill health.
  • Shorten the average period of unemployment/gaps in average unemployment duration between local areas (a test of the success of both job creation and back to work policies)
  • Improve job quality, for example, committing to a reduction in the number of people in insecure contracts, or to securing faster wage growth in deciles below the median.
  • Increase investment in developing high quality skills, for example, committing to higher number of apprenticeship completions and levels of employer investment in skills compared to the European average. 

Government should establish a central labour market unit to oversee the development and implementation of its ambitions. This would help ensure job quality and quantity measures are consistently reinforced across policy and that those groups currently furthest from the jobs market are not left behind in policy design. 

Full implementation of the plan to Make Work Pay

The full implementation of the government’s plan to Make Work Pay is vital to ensuring an UK’s economic recovery with good quality jobs that allow workers security and prospects for development.

The TUC strongly welcomes new rights, including to guaranteed hours contracts, unfair dismissal protection from the first day of work and allowing all workers access to sick pay from day one.

The economic case for making work pay

Economic theories promoting highly flexible labour markets have been widely discredited. The empirical evidence demonstrates that such labour markets lead to inequality and low-quality jobs with low pay and job satisfaction and that economies characterised by labour market deregulation have high inequality, stagnant wages, poor living standards, and negative impacts on health outcomes. 

Newer evidence also shows that labour market protections lead to improved economic outcomes and a more equitable share of income between labour and capital. This is reflected in Deakin and Pourkermani’s research70  based on an extensive database of employment protection legislation across much of the world. They show that labour protections can increase employment, reduce unemployment and improve productivity while making sure the proceeds are shared with workers.

This economic consensus has shifted as the weight of evidence has grown, with economists and influential institutions like the World Bank and the OECD changing their minds on deregulated labour markets.

This turnaround in views at the OECD has been documented in detail by Evans and Spriggs.71  The OECD Jobs Strategy of 199472  played an instrumental role in promoting labour market deregulation. It argued that governments should weaken employment protections and weaken collective bargaining with the aim of creating flexible labour markets. But by its 2018 Jobs Strategy73  the OECD had decidedly shifted its recommendations. It concluded that countries which promoted job quality and inclusive labour markets performed better than those which focussed on flexibility.

Subsequent OECD work74  drew even starker conclusions, with better jobs giving as much life satisfaction as increasing national income by 25%.75  The study looks at 28 European OECD countries and finds that excessive working hours is associated with a welfare loss of 1.5% of national income. Job insecurity is equivalent to a loss of 4.5% of national income. Unemployment or inactivity amounts to 7.4% of national income. Tensions with management cause a welfare loss equivalent to 13.9% of national income. Improving these four metrics has the potential to deliver welfare value equivalent to 25% of national income, comparable to one or two decades of economic growth depending on the country. Improving job quality is central to boosting living standards. 

Deakin and Pourkermani76  highlight a similar shift in views at the World Bank: In its 2008 Doing Business report, the World Bank argued that” laws created to protect workers often hurt them”. It claimed that where legal protections were unduly burdensome or rigid, firms would be deterred from hiring, and the young and unemployed would find it more difficult to find work. However, in its 2015 report, the World Bank shifted its stance. It suggested that laws protecting workers against ‘arbitrary and unfair treatment’ could ‘increase job stability’ and, notably, ‘improve productivity’. Labour laws could be not just ‘too strict’ but ‘too loose’, leading to ‘losses of employment in an economy’.
 

Evidence from the success of minimum wage policy is also instructive. Opponents said that higher wages would mean less employment. This did not happen – instead workers were paid the minimum wage and employment levels grew. This suggests monopsony conditions, with powerful employers using their disproportionate market power to hold down pay. So as evidence from the minimum wage has shown with the wage floor, it follows that there will be a positive impact from a raised floor of employment rights under the same monopsony conditions. 

Economic assessment of the Employment Rights Bill

The shift in economic consensus is reflected in the government’s Employment Rights Bill, which is set to deliver an important uplift in employment rights. This landmark legislation will benefit millions of workers, especially those trapped in insecure jobs.

While public debate has focused on the reported costs of the legislation this interpretation fails to properly understand the government impact assessment. The Department for Business and Trade’s (DBT) cost–benefit analysis of the Bill’s provisions includes both an assessment of monetised costs and benefits, and wider economic assessment which looks at impacts that they have not been able to quantify. The assessments finds that total costs to business are estimated to be between £0.9bn and £5bn per year, including all monetised and non-monetised costs. The cost figure of £5 billion has been widely cited but this is an upper estimate of all total costs, monetised and non-monetised. It is calculated generously, by summing the upper bound cost estimates for the policies in the bill.  The assessment states that the government expects the upper estimate to be revised down as more evidence emerges, and as uncertainties are ironed out in secondary legislation.

As many of the costs represent a direct financial benefit to workers, the direct benefit of the Bill is similar in magnitude to the costs. The formal cost benefit analysis then finds net social costs of £280m per year,77  but the DBT sets out that this is incomplete as it is based only on monetised impacts. Many of the costs are easier to estimate than the wider benefits, so this £280m figure ignores wider economic benefits that are mentioned in the wider economic assessment. 

The costs are small in comparison to the total national pay bill of £1.3 trillion. They are equivalent to an uplift in the total national pay bill of between 0.1% (at £0.9bn) and 0.4% (at £5bn). For comparison, the average increase to the minimum wage has been 6.2% per year over the last decade. Minimum wage increases have been repeated and compounding, while increased costs from the Employment Rights Bill, once implemented, represent a one-off set of increases.

The wider assessment includes a thorough review of wider benefits that the legislation should be expected to deliver. These include benefits of improved workforce health and well-being, reduced workplace conflict and increased labour market participation.  The assessment says “were even some of these benefits to be realised then they would mean the Bill is significantly net positive for society.”  

Landman Economics has done an assessment of these wider benefits estimating that they fall between £4.9bn and £15.7bn. The central estimate is £10.3bn.

Table 15: Economic benefits of the Employment Rights Bill, £millions 

 

Estimated benefit (£m)

 

Lower bound

Midpoint estimate

Upper bound

Reduction in days lost to stress, depression or anxiety

487

974

1,461

Improvement in wellbeing

310

930

1,550

Improved compliance (going from being paid below NMW to being paid at NMW)

42

168

293

Reduced incidence of strikes

85

170

256

Reduced workplace conflict

2,705

5,410

8,115

Increased employment for people currently looking after family or home

1,331

2,662

3,993

TOTAL

4,960

10,314

15,668

Source: Landman Economics

The cumulative impact of even modest improvements would offset the costs of the Bill and stronger outcomes could generate even greater gains.

Funding effective enforcement 

Ensuring these returns can be realised will depend in part on the ability of workers to enforce their rights.

The Employment Tribunal (ET) system is an important backstop for employment rights enforcement, and there is a high risk that without further investment it will not be able to play its part in effective implementation of new rights. 

If neither employers nor their workforce has faith that tribunals will deliver timely decisions, then the effectiveness of new rights will be undermined.

Things are already tough for workers seeking justice. At the end of March this year, there were 491,000 open cases compared to 444,000 cases in March 2023, with the backlog steadily rising month after month. Some cases take years to reach a hearing, denying workers – and employers – swift resolution of workplace disputes.

That is often not the end of the ordeal. A recent investigation by the Bureau for Investigative Journalism found that even where an employment tribunal rules in favour, many workers never see a penny.78  It’s welcome, therefore, that the new Fair Work Agency has been given powers to enforce unpaid tribunal awards. It must be given sufficient resources to discharge this new power effectively.

The tribunal system requires more resources to ensure that cases can be resolved swiftly.

This should sit alongside a tripartite review of how to ensure the system is fair, accessible and fit for the future – involving unions, employers and Acas. Unions want to help workers resolve problems in the workplace, not the courts.

Investment elsewhere in the enforcement system would also reduce pressure on tribunals and allow access to justice.

Fair work also requires effective enforcement of health and safety laws and regulations. The rate of occupational ill-health has not fallen in recent years; work-related stress is on the rise and a major contributor to lost working. Britain also has the world's highest rate of asbestos cancer linked to workplace exposures. We also need to improve our pandemic preparedness, learning from Covid-19 occupational exposures.

The Health and Safety Executive (HSE), as well as local authority regulation, has suffered enormous funding cuts in recent years: more than 50% of the HSE's budget alone has fallen since 2010.79  With it, the number of inspectors and inspections has decreased, as well as the rate of enforcement activity.

To ensure people remain healthy in work, we need a regulator with the resources required to help prevent ill-health and injury. The cuts to HSE's budget must be reversed so it can continue to recruit, train and retain inspectors and carry out its crucial scientific work into occupational disease prevention.

The Equality and Human Rights Commission (EHRC) is a vital part of the legislative and institutional protections in Britain for people whose human rights are at risk or have been breached, including those facing discrimination and inequality. The EHRC also has an important role to play in issuing guidance, good practice and information on workplace equality protections.

The EHRC must have the requisite resources, powers and independence to advance workplace equality and enforce the Equality Act 2010. But its ability to deliver on its role and purpose have been undermined over the last decade, meaning that effective enforcement and advancement of workplace equality has been limited.  

In 2007 when the EHRC opened, it had budget of £70 million and a staff contingent of 525, based on its expanded remit with new policy areas including human rights, age, LGBT+ and religion or belief. Now it has a budget of around £17.5 million and around 200 staff which is roughly equivalent to the staff and budget of one of its legacy commissions (RRC, EOC and DRC). Its current staff and funding basis will not allow it to fulfil its full potential nor to deliver new responsibilities. Reverting to 2007 funding levels in real terms would require the EHRC’s budget to be increased to around £115 million. 80  

The state enforcement system requires further long-term resources, more inspectors, more proactive investigations and more enforcement actions. We fall well short of the benchmark established by the International Labour Organisation. To hit the ILO benchmark of one inspector per 10,000 workers, the UK would need 3,287 inspectors. There are currently 1,490. Another 1,797 labour market inspectors need to be recruited. The result is widespread noncompliance.

So the establishment of the Fair Work Agency must be supported by a funding settlement that enables it to discharge its new functions and powers effectively. The TUC campaigned for the new Fair Work Agency to be given powers to recoup the costs of investigations/enforcement actions from employers who are found to have broken the law. This is an important method for increasing resources in the enforcement system. It will be vital that this new power is switched on as soon as possible and that it is applied consistently, regularly and effectively.

The effective implementation of measures in the Employment Rights Bill to support greater collective bargaining in the economy could also help workers and employers by allowing issues to be resolved informally in the workplace at an earlier stage.

This will require a fair funding approach to the Central Arbitration Committee (CAC). Its future role will include ensuring that employers meet their obligations in giving trade unions access to workplaces and enforcing such rights. Building the capacity to undertake such work is likely to require significant increases in staffing at the committee.

Following a recent government consultation, it is also likely that tightened provisions on unfair practices during recognition will be introduced, further increasing the amount of work that the CAC will have to carry out.

The last CAC annual report detailed expenditure of £743,000, including for a nine-strong secretariat. We estimate that the CAC will require a budget increase of around 50 per cent to carry out its significant new duties to a sufficient standard.

Effective implementation of the Employment Rights Bill will also depend on employers along with workers and their unions knowing about the legislation and being supported to put it into practice. This will need new government support to equip managers and union reps with the knowledge they need.  

Boosting employment rates 

An ambitious jobs guarantee for young people 

The UK faces a growing crisis in young people’s labour market participation with rising numbers out of education, employment and training and for those in employment, too many trapped in low paid, insecure and poor-quality work. 

There are currently almost a million (948,000) 16–24-year-olds who are not in education, employment and training (NEET), up from around 800,000 in 2019.

Young people are paying a high price for years of underinvestment and lack of support by the previous Conservative government. They have been at the sharp end of austerity with cuts to education, youth and health services, sacrificed formative years of education and work during the Covid-19 pandemic, faced increases in the cost-of-living, and joined the workforce under poor working conditions, as access to apprenticeships were reduced. 

This combination of factors has left too many young people at crisis point, facing an uncertain future. With long-term unemployment and worklessness leading to lasting impacts for young people’s future employment, along with a higher risk of poor health outcomes, urgent action is needed to repair the damage done. Government must ensure that all young people have access to high-quality, well-paid work and opportunities for training, progression and development.

We strongly support the Youth Guarantee, along with the Chancellor’s recent announcement that a job guarantee scheme will be included in its scope. The TUC has made the case for a job guarantee scheme of this sort, and we recently published a report on the design such a scheme could take and the benefits it would bring.81  We would like to see the scheme provide early access for those young people at the highest risk of becoming long-term NEET. Jobs should be paid at least the minimum wage, and quality training should be provided that puts workers on a pathway to a Level 3 qualification. 

Our analysis shows the benefit–cost ratio of the programme is estimated at 2.81, with every £1,000 of (net) government spending on the programme generating £2,810 of net revenue for the Exchequer. With these outcomes assessed over 30 years, the scheme hits breakeven within a decade.

Supporting disabled people, including disabled young people

Removing access to the health element of Universal Credit for those aged under 22 would not be the right way to fund the guarantee. The small proportion of NEET young people in receipt of this support are often those with the highest needs, and removing entitlements from this group to fund support for all young people would not be a fair or effective approach. There is no evidence that access to the health element of UC is driving youth economic inactivity, rather a lack of wider support and routes to meaningful education and labour market engagement while on the benefit are the challenge. 

Similarly, the government must learn lessons from previous attempts to reform wider disability benefits. Instead of seeking to cut entitlements the focus should be on reforms that reduce flows out of work into economic inactivity and on measures that can support those workless disabled people who can and want to work to rejoin the jobs market. This should include measures such as: 

  • Improving access to reasonable adjustments by introducing a time limit on decisions regarding reasonable adjustment requests.
  • Improving Access to Work by removing the financial cap, ensuring flexible and personalised application processes, introducing in principle indicative awards for disabled jobseekers and ensuring consistent funding increases.
  • Fully-funding comprehensive rehabilitative services – encompassing mental health, physiotherapy, orthopaedic and occupational therapy.
  • Ensuring excellent employment support is available, ideally extending the jobs guarantee approach to older disabled people as well as to young workers. 

The TUC’s response to the Keep Britain Working independent revie86 w into the role of employers provides a full assessment of the changes that are needed. 82

Increasing access to quality apprenticeships

Apprenticeships provide brilliant opportunities for tens of thousands of workers and their employers every year, but challenges in uptake, quality and accessibility persist. The data is especially worrying for younger workers - between 2017/18 and 2023/24 apprenticeship start rates for 19–24-year-olds have reduced by 15 per cent, and by 26 per cent for under 19s. Achievement rates for under 19s fell by 44 per cent, and by 31 per cent for 19–24-year-olds.83

In 2023/24, on average just three in five apprentices of all ages completed their programme.84  The Sutton Trust found that the UK has a much higher drop-out rate than European countries with a dual system (which combines classroom learning with paid, hands-on workplace training). Apprenticeship dropout rates are also higher in the UK than for other education programmes.85  Reasons cited for leaving apprenticeships include poor quality training and financial issues.86

The Growth and Skills levy is the key lever to address these negative trends, with welcome steps already taken to raise employer uptake and improve access and completion rates for learners, including the removal of requirements for functional skills in some apprenticeships.

The apprenticeship levy currently applies to large employers with a payroll over £3 million - just 2% of UK employers.87  This narrow scope limits its impact and reach, and there is a strong case for broadening it. Currently, very few small and medium-sized enterprises (SMEs) contribute, which means they lack a direct stake in the system. Before the introduction of the levy, employers with fewer than 250 workers employed the majority (53 per cent) of apprentices,88  and accounted for almost three quarters of employer investment in skills (72 per cent).89

Expanding the levy would deliver a dual benefit, as set out by the Fabain Society.90  First, it would increase the overall size of the levy, with more employers paying in, and fewer employers reliant on the unspent funds from larger levy payers. 

Secondly, it would encourage more SMEs to invest in training, with more employers able to draw down funds to up- or re-skill their workforce. The Fabian Society forecasts that this would raise an additional £630m annually by 2029/30 if introduced incrementally and support up to 115,000 more apprenticeship starts per year.91  

Recognising the additional costs this brings, SMEs should pay in at a lower rate (0.5%) than larger employers and there should be additional support for SMEs with training and workforce planning, as they typically have limited HR capacity.

More broadly, action is needed to ensure that apprenticeship design and implementation meet the needs of learners/workers and the economy. Trade unions have a strong track record of negotiating for better training standards, ensuring apprentices receive sufficient training time, and working to improve the organisation and quality of apprenticeship programmes, which will reduce dropout rates and enhance the overall apprenticeship experience. 

Building on Skills England’s remit to engage unions as one of the key stakeholders in the skills system, we would like to work with government to explore how the role of unions and collective bargaining could be better embedded in apprenticeship policy. 

Solving the workforce crisis in tertiary education 

England’s post-16 education system is facing an unprecedented crisis, with universities and colleges under severe financial pressure, staff facing unsustainable workloads, and learners being denied access to the high-quality, inclusive education they deserve. 

Further education

As the Prime Minister recently set out, Further Education (FE) has long been treated as the “Cinderella service” of the education system - overlooked and underappreciated - despite its power to raise aspirations and tackle inequality.  The FE sector faces a deepening recruitment and retention crisis which, unless urgently addressed, will be a barrier to delivering key government policy, including plans for all 16–19-year-olds without a grade 4 GCSE in English and/or maths to be offered 100 hours of face-to-face teaching.

Vacancy rates in general FE colleges rose to 5.1% in 2023/24,93  and nearly half of FE teachers leave within three years - twice the rate seen in schools.92  This is driven by high workloads, stress, and a persistent pay gap, with FE teachers earning around £10,000 less than their secondary school counterparts. 94

The TUC welcomes the government’s renewed commitment to further education, including an additional £800m investment for 2026–27. This additional funding must be ringfenced to address the crisis in workforce recruitment and retention, including closing the FE pay gap, and government must work with unions representing the FE workforce on a strategy that aligns their vision for further education with a plan to improve working conditions in the sector. 

Higher education 

Higher education is also facing financial crisis, which is impacting the workforce, students and delivery. Half of universities are making job and course cuts, and up to 15,000 job losses are predicted in 2025, due to both the funding available and the model used to fund the sector. Higher education trade unions are calling for urgent government intervention to halt redundancies, protect courses, and reform the broken system, underpinned by public funding and equitable distribution of students between institutions.96   

Investing in workplace learning

Employer investment in training has fallen sharply. Real-terms spend per employee was down 29.5% in 2024 compared to 2011, contributing to a skills crisis that is holding back productivity and growth. Just between 2024 and 2022, employer investment in training per employee fell by £260 in real terms – around £6bn overall. 97  

Unions can help to reverse this trend by negotiating learning agreements with employers and securing employer match funding. Collective bargaining agreements on skills can improve access, outcomes and the quality of training provision within the workplace.  

At Sizewell C, for example, unions monitor training quality and standards, negotiate for greater diversity and inclusion in the apprenticeship programme, and embedded training and apprenticeships into the supply chain – in addition to the 1,500 apprenticeships at the main site.

The Union Learning Fund demonstrated the impact this could have when resource was scaled-up. Previous iterations of the fund supported 200,000 workers to upskill and retrain annually and delivered strong returns, including on employer co-investment and economic benefits more broadly. Impact analysis of one of the final funding rounds found that for every £1 investment in the Union Learning Fund, it generated a total economic return of £12.87 of which £7.56 accrues to individuals and £5.31 to employers. 98  

Investment in union-employer partnerships to deliver workplace skills would support a myriad of government objectives, including the uptake of AI and the net zero strategy. It could also support delivery of the Employment Rights Bill, through a dual emphasis on raising rights awareness in the workplace and improving reps’ skills. 

We would like to work with government to pilot a £5-10m Learning Agreement Fund, which would enable unions and employers to negotiate learning agreements and ensure greater participation rates from underrepresented groups in adult education and workplace learning. The overall objective of the pilot would be a national fund to support union and employer partnership working to raise collective bargaining for skills and improve the likelihood of upskilling and progression for priority groups. 

Meaningful workforce strategies for industrial strategy sectors

We are encouraged by the Industrial Strategy’s commitment to deliver workforce strategies for each IS sector and proposals in the immigration white paper to require this where sectors ask for greater flexibility to employ skilled workers from abroad.

Involving employers and workers in skills and workforce development is key to ensuring both that these strategies are effective, and that these stakeholders understand the government’s priorities for change.

As CIPD have found: “Almost every other country sees the need to organise employers around skills, work and economic development. Without collective organisation to support skills forecasting, co-production, and efforts to deliver economic development/business improvement and productivity improvement, most policies in these areas are doomed to operate sub-optimally”.99  

These workforce strategies should take a consistent approach, enabling learning from each other and setting out:

  • The workforce challenges in the sector over the next five years
  • Employer and government commitments to meeting these, and a plan to monitor their implementation
  • How the voice of workers in the sector has been consulted
  • How the sector will contribute to the overarching goals set out above.

They should be required to publish an annual report setting out progress. Providing analytical support for this work should be a core function of Skills England, enabling the bringing together of key intelligence from across these sectors.

Maximising the jobs impact from infrastructure investment and procurement

The 10-year Infrastructure Strategy and the Infrastructure Pipeline are important contributions to upgrading the UK’s infrastructure.

Ensuring that the jobs in infrastructure are good jobs will be essential to plugging the skills shortages the UK faces, as well as to delivering on time and on budget. A new approach to mega projects could help resolve job quality and skills investment disparities and ease competition for scarce specialised labour, by applying a common standard for job quality and terms across urgent large infrastructure projects. 

To deliver this, HMT and National Infrastructure and Service Transformation Authority (NISTA) should convene a process involving employers delivering large infrastructure projects, TUC and relevant trade unions, seeking to secure framework agreements across significant projects. This should define relevant responsible bodies for each framework agreement. For example, for electricity network upgrades, this could be led by Clean Power 2030 Mission, with the National Energy System Operator (NESO) Strategic Energy Planning Industry Working Group on the employer side. 

Unions support the designation of steel as Critical National Infrastructure, which would have a significant impact on domestic steel manufacturing through creating certainty of demand. Public infrastructure projects – from transport networks to energy installations – could serve as anchor customers for domestic steel production, providing the stable demand base needed for long-term investment and growth.

There is also a critical opportunity for public procurement to play a much more strategic role in stimulating growth in domestic industry, through:

i) Creating demand certainty for domestic production through direct procurement of goods

ii) Incentivising shorter supply chains in tendering for capital projects

Social value criteria should be designed to capture the potential of procurement to stimulate re-industrialisation and the associated impacts on economic resilience and good quality, unionised jobs across the country, delivering on the aims of the industrial strategy. Good work should be a standalone, ringfenced pillar, with robust conditionalities to ensure that contract award is conditional upon compliance with the selected criteria.

For example, on the direct procurement of goods government fleet procurement – covering everything from council vehicles to NHS transport – could be restructured to create anchor demand for UK-manufactured electric vehicles, provided they meet specified labour standards and local content requirements. 

The procurement of electric buses offers a key example of how direct procurement of goods can anchor and grow net zero bus manufacturing in the UK. Alexander Dennis (ADL) and Wrightbus are the UK’s leading bus manufactures in terms of employment, production volume and low-carbon innovation. International manufacturers such as Yutong, BYD and Volvo are increasingly competitive, particularly in the zero-emission vehicle (ZEV) segment. In the current context of the ‘low volume crisis’ across the industry, there is an immediate danger that the UK could lose this strategically important sector without support.

On the procurement of capital projects, the design of procurement frameworks should incentivise shorter supply chains and local sourcing through targeted bonus structures. For example, civil engineering projects under the updated National Procurement Policy Statement could award additional points to contractors who demonstrate measurable reductions in supply chain distances and increased use of UK-produced materials.

DESNZ has done important work in developing the Clean Industry Bonus (previously non-price factors) interventions to support shorter supply chains. This is not direct procurement, but shows how government can support local sourcing and investment within international trade law.

Futureproofing industry 

Supporting investment 

The government’s industrial strategy includes a welcome commitment to strengthen foundational industry, recognising the strategic importance for growth, economic resilience and national security. But achieving the step-change that is needed will require investment at scale. Government should focus on future proofing industry, rather than on industrial decarbonisation – an approach many already equate with deindustrialisation.  

As we have learnt from the power sector and many other historical sociotechnical transitions, such a shift requires significant strategic public investment to develop nascent markets and bring costs down through learning effects and economies of scale until market competitiveness is reached and widespread diffusion can occur. 100  

For industrial process, the technologies required for decarbonisation have largely not yet reached commercial viability (with the exception of lower temperature electrification of heat), and there is still a level of technology and policy risk which will preclude investment if left to the private sector. Since the Industrial Energy Transformation Fund was not re-instated, many companies now lack access to funding routes for decarbonisation.

Government should re-instate this fund, and together with the National Wealth Fund, British Business Bank and Great British Energy, use it to deliver the strategic transitional investment required to drive innovation – both in direct process decarbonisation, and the wider infrastructure required for systemic transition. 

The benefit to both the wider economy and to Treasury revenues would be two-fold:

  • preventing the negative impacts of decline and closure - including stranded technology, skills, workforce, capital stock

  • supporting the expansion of high-growth sectors and supply chains that underpin them. 

This investment is critical to modernise and futureproof British industry for a net zero economy, and in doing so provide the bedrock of national security and supply chain resilience required to power our Industrial Strategy.

At a minimum, it is therefore critical that all funding commitments in foundational industry and supporting infrastructure are stuck to.

  • Ports: £1.8bn allocation under the National Wealth Fund
  • Hydrogen: £500m under the National Wealth Fund
  • Steel: £2.5bn Steel Fund
  • Automotive: £2bn which should include support to transition the Internal Combustion Engine vehicle supply chain as well as develop Electric Vehicle supply chains + £500m for R&D under DRIVE35
  • Carbon Capture, Utilisation and Storage (CCUS): £21.7bn over 25 years
  • Wider industrial decarbonisation: the National Wealth Fund and British Business Bank should target electrification, grid infrastructure upgrades and other site- and sector- specific decarbonisation technologies in foundational industry (as well as advanced manufacturing)

To help businesses navigate the funding landscape and technological pathways towards diversification and decarbonisation, the government should launch a ‘Business Transition Hub’. Many manufacturers don’t have access to cross-cutting data and analysis on technology pathways or market diversification opportunities. This is especially the case for small and medium-sized British-owned companies. Accessing this information is expensive for individual companies with limited revenue – especially if the pathways and payback remain speculative.

A Business Transition Hub could provide pro-active guidance, technology insights and market intelligence to high-carbon sectors on futureproofing pathways, decarbonisation and diversification. The cost would be in the single-digit millions.

Additionally, existing institutions (e.g. Innovate UK, Scottish Enterprise – by Scottish Government agreement, Catapults) should be officially tasked with providing pro-active futureproofing advice and collaborating with the Business Transition Hub. 

For example, France’s public investment bank, Bpifrance,101  offers support to SMEs to develop detailed decarbonisation roadmaps, as well as sector-specific market diagnostics and ongoing advisory support through the implementation phase. This goes significantly beyond the energy audits and feasibility studies previously offered under the UK’s Industrial Energy Transformation Fund (IETF), in terms of level of detail and continuity of support.

A funded plan for the North Sea

Crucial to the North Sea’s energy transition is the need for a funded plan for the North Sea workforce to manage the decline of oil and gas in the basin and the transition to clean energy. This needs both action to create and protect jobs in the supply chain, and investment in redeploying workers. 

Create and protect jobs in the supply chain  

The UK’s industries of the future need to include both brand new facilities and upgrades to existing UK supply chains. This is notably the case for the North Sea energy transition, which requires both investing in renewable supply chains and futureproofing our existing oil and gas supply chains. This future proofing requires targeted investments for oil and gas supply chain companies seeking to diversify.

The economic benefit of futureproofing is two-fold, both preventing the negative impacts of decline, closure and stranded workforce/capital stock, and gaining capacity and activity in high growth sectors.

The government’s Clean Industry Bonus and £1 billion Clean Energy Supply Chain Fund under Great British Energy are crucial to address the UK’s past track record of underinvestment in renewables supply chains, to grow our domestic supply chains and to capture economic value and job creation from the projected massive build-out of offshore wind.

To create and protect jobs in the North Sea requires investment to:

  • Expand the Clean Industry Bonus by up to £1 billion over the course of this Parliament. In one estimate,102  the Clean Industry Bonus could deliver 30 upgraded or new manufacturing facilities, supporting 10,000 direct and 13,000 indirect jobs in industrial heartlands - but this would require an additional boost to the CIB funding of between £300 million and £1 billion.
  • Aim for public investment into growing UK clean energy supply chains to reach £1.1 billion / year, through a combination of Clean Industry Bonus, National Wealth Fund, GB Energy supply chain fund, and expansion of past grant schemes (e.g. Offshore Wind Manufacturing Investment Scheme and the Green Industries Growth Accelerator).
  • Establish a targeted public investment fund within the National Wealth Fund to support oil and gas supply chain firms to upgrade their infrastructure, technology or skills base, sufficiently to supply new markets. 

Invest in redeploying workers 

The transition from oil and gas to clean energy requires a coherent strategy and concrete support to ensure that workers leaving the oil and gas industry find employment that matches their skills. Any scheme to deliver a collective and efficient pathway for North Sea oil and gas workers to be matched with jobs in other sectors requires funding and coordination. 

To support workers to transition requires funding to:

  • Establish a “Your Country Needs You” redeployment programme to transfer oil and gas workers to sectors with skills shortages. This proactive North Sea Workforce Transition Scheme would match and redeploy oil and gas workers to specific quality jobs in growth sectors. It would engage employers and unions to provide practical recruitment and retention pathways into IS8 sectors.
  • Institute a time-limited furlough or a short time working scheme, for workers who fall through the gaps from other interventions, subsidising the bulk of wages for a limited period for companies affected by economic turmoil, dependent on part of the subsidised time being used for upskilling. 

The funded plan for the North Sea must also support supply chain jobs by upgrading ports and dockside spaces. 

Decades of underinvestment by private owners have left the UK’s engineering and maritime support infrastructure with limited capacity and unable to scale up quickly.

Companies that supply and service the oil and gas industry struggle to pivot to new markets like decommissioning, hydrogen or offshore wind in part because the UK’s port and quayside infrastructure is too small, out of date, unable to deliver economies of scale. 

Countries across Europe have dedicated substantial public investment to futureproof ports to supply new industries including offshore renewables. This European experience shows us that public investment in ports tends to leverage significant private investment.

As set out above, it is essential that government honour its manifesto commitment to £1.8 billion into port upgrades. 

Action to bring down industrial electricity prices

Whilst the announcements on industrial electricity prices within the government’s Industrial Strategy were welcome progress, they do not go far enough and are not fast enough to close the competitiveness gap with Europe nor alleviate the pressure that threatens much of our domestic industry. The government should set a clear goal to achieve industrial electricity price parity with EU competitors, with a plan towards getting there.

Levies and obligations continue to have a substantial impact on non-domestic energy prices (estimated at £76.2/MWh and £99.2/MWh for 2025-26 and 2029-30 respectively).103  While the British Industry Supercharger (BIS) scheme exempts most, though not all, electricity-intensive industries from the costs associated with the RO, CfD, FiT, and Capacity Market, the TUC’s position is that these costs should be transferred to the Exchequer. The uplift to the Network Charge Compensation scheme is a welcome development for industry benefitting from the BIS. It is essential that expediency is prioritised such that higher compensation rates can be backdated to April 2025. 

The TUC believes the British Industrial Competitiveness Scheme should be exchequer funded, and every effort should be made to bring its initiation forwards to 2026. Failing that, an interim support scheme should be available to industry on the brink of closure due to energy costs. Treasury funding would i) reduce the delivery risk associated with unclear funding route and ii) reduce the resulting political risk if bills end up being impacted or perceived to be impacted.

The TUC strongly supports the introduction of an electrification business model to incentivise fuel switching within appropriate industrial processes. Such a scheme would address the significant gap in electrification support as compared with other routes to decarbonisation of industry. This should be Exchequer funded, rather than levied on other bill payers or rebalanced on gas prices, which would significantly harm gas-intensive manufacturing industry facing wider barriers to electrification. It is also important that such a scheme closely considers non-OPEX investment barriers, such as capital costs, project development resource and grid connection delays, to ensure the incentive is sufficient to incentivise businesses to invest the time and capital into electrification projects.

As part of a longer-term approach, the TUC also supports ongoing investigations to structurally de-link the wholesale market from gas prices. 

Sustained investment in world class public services

While public sector pay awards in 2025 were broadly in line with inflation (when announced), public services unions are clear that there is a need for urgent workforce investment, with a long-term plan to address the damage caused by more than a decade of mismanagement and deliberate underinvestment which have left vital services overstretched, understaffed and unable to meet the needs of our communities.

Public sector workers are campaigning for pay restoration across public services by the end of this parliament, funded with additional expenditure so that public services and devolved governments are not forced to reallocate budgets. 

While there is some divergence in unions’ positions, there is a collective ambition for at least an element of negotiation to be introduced to public sector pay determination and a longer-term plan to restore pay. And public sector unions urge Treasury and individual departments to not include a headline percentage ceiling for pay awards in their evidence to PRBs, which effectively predetermines the whole process and serves as a de facto cap.    

Recruitment and retention 

Workforce recruitment and retention continues to be an issue across many public services, which will only be resolved through greater investment. 

In the NHS, recruitment freezes are causing additional strain on the existing workforce, resulting in concern about patient safety due to the impact on service delivery. For example, nearly half of Chartered Society of Physiotherapist workforce reps are reporting recruitment freezes or delays in filling vacancies, while two-thirds of NHS physiotherapists report unsafe staffing levels – at a time of high demand.104  This impacts the quality, safety, and sustainability of a service that supports hundreds of thousands of people with rehabilitation, therefore undermining government’s ambitions to reduce economic inactivity. 

Retention challenges are also endemic, with relatively low pay and highly stressful conditions cited by workforce unions as key reasons why people are leaving the NHS. Unions want to see a funding plan for the workforce and service-transformation commitments in the NHS 10-Year Plan, and are looking forward to engagement on this through the Social Partnership Forum. Crucially, the mandate to address the structural issues with the Agenda for Change contract needs to be fully funded, and the joint union call for negotiations on both the mandate and 2026-27 pay award should be recognised as both a sensible and efficient way forward which would require setting the NHSPRB process aside for this year.105  

In schools, unions have warned that the impact of not fully-funding the 2025-26 pay award will be redundancies, with schools losing experienced teaching and support staff in many of the 1 in 4 local authority maintained schools and 1 in 5 academies that cannot afford it. 106   

Reinstatement of the School Support Staff Negotiating Body and establishment of the Fair Pay Negotiating Body for Adult Social Care are both very welcome steps to improve pay, terms and conditions for some of the lowest paid workers in public services. Their success will depend on sufficient funding for the pay awards negotiated through these mechanisms. 

The Secretary of State for the Department of Health and Social Care has announced a £500 million investment in the initial fair pay agreement for adult social care in England. This is a welcome first step but significant additional investment will be needed to boost pay and working conditions sufficiently to address the deep-seated problems of recruitment and retention in the care sector.

AI and productivity in the public sector

We welcome the opportunity that AI and digital can play in transforming public services. This change has the potential to make public service jobs more fulfilling, improve services, and deliver better value for money. However, implementation is crucial – introduction of AI driven by short-term cost savings will undermine efforts to improve productivity and service delivery. Worker involvement and consultation should be at the heart of plans to integrate AI into public service delivery, with continuous engagement on how to improve productivity as a shared outcome. 

We reiterate our ask for a structure like the Public Services Forum to be reinstated as a ministerial advisory body to guide the overarching approach to AI adoption and public services reform. Currently, there is no cross-sector engagement between public sector unions and employers with government and therefore no structured work on policy development or co-design of relevant interventions. 

This restricts unions’ and employers‘ ability to identify and rectify issues with design and implementation from the outset, and means there is no opportunity to identify solutions which benefit all sides. Reestablishing this engagement would be mutually beneficial, and should be prioritised to ensure that major public services policy ambitions have greater buy-in and a better chance of succeeding.   

We welcome the government’s intention to review UK resilience and the publication for the first time of a version of the Chronic Risks Analysis.107  Trade unions also want to see greater investment in public-interest regulation and scientific resilience so that all relevant bodies, including incident responders, are fully resourced and invest to retain and develop their skilled staff. 

Local government and fire and rescue service funding

The effects of long-term underfunding have also been felt acutely in local government. Recent additional funding allocated through the Spending Review has been welcome, but councils continue to face an £8.5bn funding gap and well over £100bn of debt.108  

One in four councils are at risk of financial failure by 2026/27, with many already cutting services and staff due to a mounting debt crisis. The local government workforce has also faced real terms pay reductions and overwhelming workloads, while continuing to deliver essential services to communities. 109

Local authorities are key to delivering much of government’s Plan for Change, but their perilous financial situation will hold this back and reorganisation could add further pressures, especially in the short-term. Restoring fair and sustainable funding – including restructuring or cancelling local government debt – should be a priority for this Budget, both to retain and develop the local government workforce and protect and rebuild local public services, including libraries, youth services, community centres and ensure timely repairs to homes and roads.

Fire and rescue services have similarly endured years of underinvestment. There has been a 25% drop in the number of firefighters in England compared to 2008, equating to 11,000 firefighters.110  Welcome and important steps have been taken by the government to address the challenges facing the services – including establishing the Ministerial Advisory Group on Fire and Rescue – but the service needs sustained investment. The Fire Brigades Union is calling for an immediate increase of 5,000 firefighters to begin addressing this crisis in public safety.111   

Insourcing and procurement in public services

The TUC’s position is that that public ownership and in-house delivery should be the default setting for public services with trade unions closely involved in determining priority sectors and/or contracts to insource.112  Enabling a service to be delivered in a way that is directly controlled and operated by the responsible public authority, with directly employed public sector workers, can bring a range of benefits to the public authority and to public service workers, local economies and service users. 

These include decent work for public sector workers, flexibility for authorities to allocate resources where they are needed in a timely manner, improved democracy and accountability, and service quality improvements and greater efficiencies which help deliver value for public money.113   

It also means that public funds are reinvested back into services, rather than into excess private sector profits, excessive overheads and high consultancy fees. For example, NASWUT have identified a large increase in companies backed by private equity investors running private SEND schools.  SEND spending on independent education has risen overall from £1.5 billion in 2020-21 to £2.4 billion in 2023-24.114   

The government should prioritise implementing the ‘biggest wave of insourcing in a generation’ in line with Make Work Pay manifesto commitments. This includes ensuring adequate central government funding available to public authorities to support insourcing and delivery of services within fully in-house delivery models. Resources should also be available to ensure full harmonisation of terms and conditions with existing in-house staff when staff transfer into the public sector through insourcing arrangements.

It will be important to ensure coordination and action across government to maximise opportunities to insource and support in-house delivery of services. This includes new public entities such as Great British Railways to delivery of initiatives like the Warm Homes Plan.115  The TUC welcomes the engagement that has taken place with the government around insourcing and the Public Interest Test (PIT) – which will ensure that services that can be delivered effectively in-house are not outsourced. Government should place the PIT on a statutory footing and ensure its rapid implementation.

If outsourcing a service has been identified to be in the public interest, then procurement plays an important role in ensuring good work for all workers involved in delivering that service. A large slice of outsourced public services remains in the hands of companies that share similar characteristics. Large, opaque and complex conglomerates, lacking in specialism yet driven to accumulate ever-increasing public service contracts in the pursuit of maximising short-term shareholder value increasingly dominate the outsourcing landscape. Too often, public authorities have awarded contracts based on the lowest cost option, while the contractors find savings by increasing the squeeze on their workforce and suppliers. At the same time, service quality suffers.

Service quality and decent working conditions for all workers delivering public contracts should be prioritised over contracting for the lowest cost, in line with Procurement Act award criteria provisions around Most Advantageous Tender (MAT) and the principle of achieving public benefit from procurement, which includes value for public money. To achieve this, the TUC is calling for the government to amend the legislative and regulatory framework for procurement to mandate supplier adherence to good work as a pre-requisite to accessing and holding public contracts.116  

As set out above, the TUC recommends that the government undertakes a redesign of the social value model and includes clear good jobs criteria. The new model should be developed in close collaboration with unions, in line with Make Work Pay commitments to establish a new Social Value Council including trade union representatives.

The government should also clarify within statutory guidance how public benefit and MAT should be understood by contracting authorities and suppliers. This includes redefining the concept of value for money within the delivery of public contracts, in cases where the outsourcing of public services has been deemed to be in the public interest. 

It is also important that the government minimises public funds reaching suppliers who pose risks to ‘public confidence in the honesty, integrity and probity of suppliers in the delivery of public contracts’ and ‘protection of the public, the environment, national security interests and the rights of employees’.117   This includes strengthening the exclusions regime within the Procurement Act to ensure that organisations that have committed labour-related and other regulatory violations are subject to more robust exclusions criteria.118

Finally, the real-life impacts of a lack of transparency and clarity around government and supplier responsibilities – including huge wastage of public funds - were demonstrated following the collapse of Carillion.119  Government should ensure transparency around public spending and contracts, including suppliers’ contract performance, by establishing a centrally held and managed Domesday Book of public service contracts and extending the Freedom of Information Act to be applicable to any entity delivering a public contract. 

Contents
01
Securing the foundations
02
Action to deliver stronger growth and higher living standards
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