Long-term unemployed numbers are higher than in France or Germany, and that hurts growth
Keir Starmer says Britain “simply isn’t working” and has launched welfare reforms aimed at getting two million of the country’s nine million economically inactive people back into work.
So what? Growth won’t happen without them. But incentivising the unemployed and long-term sick to find a job is only half the battle. Ultimately it’s employers who decide whether to hire someone who has been out of work for a while – and right now they’re feeling pinched.
- Nearly half of UK businesses surveyed by the CBI say that they plan to reduce rather than increase their headcount due to tax rises in the budget.
- Bloomberg analysis says the hike to employer National Insurance could cost 130,000 jobs.
Sick notes. Starmer has at least identified a metastasizing problem: Britain is struggling with sickness.
By the numbers:
1 in 15 – people of working age now off work owing to long-term illness, a rate 69 per cent higher than Germany’s and more than twice Italy’s.
£101 billion – estimated cost of sickness benefits by the end of this parliament.
£4,320 – increase in annual Universal Credit if a claimant is long-term sick with no work requirements.
Long Covid and long waiting lists have clearly contributed to a rise in sickness claims, but experts also say there’s a “structural incentive” to claim the benefits that require a diagnosis and fewer forms.
First steps. Getting two million people back into work could take a decade, but the “Get Britain Working” whitepaper is a sorely needed start. Proposals include:
- rebranding and expanding job centres;
- a “Youth Guarantee” offering every 18 to 21-year-old in England an apprenticeship, training or help to find a job;
- providing cash for the North East and Yorkshire to stop people leaving work because of ill health;
- expanding mental-health support and efforts to tackle obesity; and
- a review of what employers are doing to promote health and inclusive workplaces.
Margaret Casely-Hayford, former Chancellor of the University of Coventry and non-executive director at the Co-op Group, welcomed the package but said that “resources will be stretched very thinly” and “important detail is missing”, particularly regarding
- how the Department for Work and Pensions (DWP) will partner with skills and education bodies;
- how the Apprenticeship Levy will be reformed; and
- whether panels will be set up to gauge sentiment for the reforms among young and disabled people.
Poor from giving. DWP secretary Liz Kendall’s target of 80 per cent employment won’t be met through these measures alone. Employers have to be on board. But a rise in the minimum wage and a looming package of employee rights (which the CBI chair calls an “adventure playground for lawyers”) have made them more hesitant to hire.
Meanwhile, pain from the NI increase is being felt across sectors. Some, including social care and charities, have tried to argue for an exemption – but the chancellor has made it clear she’s not for turning.
“The National Insurance increase will cost us a considerable sum of money,” says Paul Taylor, Director of Finance at NSPCC. “These crucial funds, which would have been spent supporting babies, children and young people, will now have to go directly to the Treasury instead. We face a huge challenge just to stand still.”
What’s more… Employers may squawk that the budget will affect hiring in the short term, but the reality is many sectors – especially hospitality, construction and agriculture – are still facing worker shortages. Starmer’s choice is simple: get Britain working or continue relying on high net migration to fuel the economy.
