Raise statutory holiday to 35 days: calculation note

Central fiscal result

+£5.0bn - Net public-finance impact in 2027-28

Low case: +£1.0bn. High case: +£15.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Increase minimum paid annual leave from 28 to 35 days including bank holidays.
• Baseline is current law and published official data unless stated.
• Private business costs are excluded unless they affect tax or procurement.
• Target year is 2027-28, with later years shown separately.

Affected population

• Unit is workers near the statutory leave floor.
• Most five-day workers currently have 28 days minimum.
• Central fiscal exposure is public and commissioned workers.
• Private employer costs are outside direct fiscal score.

Gross impact

• Baseline statutory entitlement is 28 days for five-day workers.
• Policy adds seven days, about 2.7% of working days.
• Central public/procurement exposure is £6.0bn.
• Tax offsets and lower profits reduce net fiscal cost by £1.0bn.

Fiscal build-up, central case

• Public-sector cover and downtime: +£3.30bn
• Commissioned-service pass-through: +£2.50bn
• Administration and disputes: +£0.10bn
• Tax and NI offsets: -£0.80bn
• Profit and receipt effects: -£0.10bn

Central net impact: +£5.0bn in 2027-28.

Behaviour and pass-through

• Low case assumes many workers already receive 35 days.
• Central assumes cover costs for exposed public services.
• High case assumes broad statutory-floor coverage.
• Some firms reduce hours or hiring.
• Productivity offset is not assumed.

Phasing

• 2026-27: +£0.2bn. Guidance and systems.
• 2027-28: +£5.0bn. Full leave increase.
• 2028-29: +£5.5bn. Rosters adjust.
• 2029-30: +£6.0bn. Steady-state cover costs.

Main source groups

• GOV.UK, "Holiday entitlement" (2026): Most five-day workers are entitled to 28 days paid annual leave, equal to 5.6 weeks; defines the baseline for a 35-day holiday floor.
• HM Treasury, "Whole of Government Accounts 2023-24" (2025): Whole of Government Accounts report £240.5bn staff costs and £263.7bn purchases in 2023-24; anchors paybill and procurement exposure.
• Department for Business and Trade, "Employment Rights Act 2025 - Economic Analysis" (2026): The ERA economic analysis estimates around £1bn annual direct business cost before social-care bargaining; provides official baseline costs and affected groups.
• HMRC, "Rates and thresholds for employers 2026 to 2027" (2026): HMRC thresholds define income tax, employee NI, employer NI and statutory-pay recovery; used for tax and statutory-payment offsets.
• Autor, Kerr and Kugler, "Does Employment Protection Reduce Productivity?" (Economic Journal, 2007): Employment-protection changes can reduce productivity where firms face higher firing and adjustment costs; supports caution on policies that raise dismissal, scheduling or adjustment costs.
• DiNardo, Fortin and Lemieux, "Labor Market Institutions and the Distribution of Wages, 1973-1992" (Econometrica, 1996): Labour-market institutions can compress wage inequality through wage floors and bargaining power; useful for distributional channels, not for claiming free fiscal gains.
• Green Party of England and Wales, "Workers' Charter 2026" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.