The Commission recommended a range of steps to boost employment income in low to middle income households in a constrained spending environment. The recommendations are fiscally neutral and set out both a long-term direction of travel and practical first steps.

New strategies for shared growth are needed

To support employment among parts of the workforce that have grown in importance, particularly women and older workers, by building pro-employment public services. The Commission recommended major new investment in childcare, providing three days a week of childcare to working parents with young children for £10 a week. And, to support employment among older people who may otherwise need to leave work to care, the Commission endorsed the recommendations of the Dilnot review.

To ensure that the tax and benefit system supports employment, the Commission recommended reforms to reflect modern working patterns. These recognise that today’s workforce contains many people making marginal choices, for whom incentives are vital. The Commission argued that:

• Parents should receive relatively more cash support when their children are young and relatively less once they start school, when more want to work;
• Dual-earning couples should be better supported under Universal Credit by giving second earners the same rights as first earners, allowing them to keep the first £2,000 they earn;
• Older workers should be rewarded for staying in work longer by raising National Insurance thresholds to £10k for those over 55, paid for by means-testing universal non-pension benefits as part of a new, pro-work settlement with the older population.

To combat low pay, the Commission argued for the need to go beyond a minimum wage to a genuine low pay strategy. As a first step, the Commission recommended that the Low Pay Commission be given a broader remit, including a new role of judging which sectors of the UK economy could pay an “affordable wage” above the legal minimum. This would be backed with new efforts to change pay norms, including a requirement that publicly listed firms report the proportion of their workforce paid below the Living Wage.

To renew skills policy for today’s polarising labour market, the Commission recommended new steps to raise demand for skills, including the establishment of new sectoral skills institutions. And, to boost skills supply in the areas that matter most, the Commission argued for a shift away from focusing on outcomes at 16 to outcomes by 18, arguing that the raising of the education participation age to 18 should be backed with a new standard leaving exam at age 18.

To pay for its recommendations, the Commission pointed to several possible sources of revenue. It argued for the lifetime allowance for pension tax relief to be reduced from £1.5m to £1m, for universal non-pension benefits to be means-tested, and for employee National Insurance Contributions to be applied past the state pension age.

Read the Commission’s recommendations in full, along with detailed policy costings, in the Commission’s final report, Gaining from Growth.