The noblest traditions of modern British policymaking were followed. First came dithering: worklessness from ill health rose sharply after the pandemic, but it was 18 months before Rishi Sunak’s government took a stab at tightening benefits in response. By then, around 1m people of working age had fallen out of the labour force since 2019, mostly because of supposed poor health. His changes ended up being blocked by the courts—the consultation was deemed insufficiently thorough—though not before a looming election gave an excuse for further delay. Labour won, and chose to procrastinate with a new long-term target: to get the working-age employment rate to 80%, a level Britain has never hit.
Eventually, two things concentrated minds: a genuine need to make room for higher defence spending, and an artificial crisis. Rachel Reeves, the chancellor, had left too little fiscal leeway in her budget in October. What was supposed to be a routine economic-forecast update on March 26th has turned into a scramble for cash. Because Ms Reeves was in danger of breaking her self-imposed fiscal rules, finding money from welfare cuts suddenly became urgent. At last Britain decided to take a proper look at worklessness and the welfare system.
Better late than never. On March 18th Liz Kendall, the welfare secretary, announced reforms to benefits that she says will save £5bn ($6.5bn, 0.2% of GDP) annually by 2030 and get more Britons into work. That figure may gain a few caveats when the Office for Budget Responsibility, the fiscal watchdog, gives its own assessment later this month. Ms Kendall wants to reduce the generosity gap between health and non-health-related benefits, tighten eligibility and shift back towards the pre-pandemic norm of running assessments in person rather than over the phone. Alongside those cuts, Ms Kendall took pains to emphasise, would be £1bn extra to help pay for job-seeking support, and a formal “right to try”, to help reassure claimants that an unsuccessful go at working wouldn’t punish them.
All that adds up to a sensible package, and one that goes further than the previous government’s efforts. But though £5bn of savings is welcome, that is only a quarter of the £20bn rise in spending on those benefits that the government has forecast for the end of the decade. Such an increase is alarming, particularly since—with the exception of mental health—surveys disagree over whether Britons have actually grown sicker in the past few years. After the fierce and protracted battle within Labour to propose even these reforms, Ms Reeves and Ms Kendall are unlikely to want to revisit the issue.
Unfortunately, they may have to. To see why, look at the labour market. One troubling aspect is that the recent rise in worklessness happened during an exceptionally strong jobs market. Unemployment hit a half-century low in 2022 and vacancies were the highest on record. But jobs are now harder to come by, and the labour market is softening fast. A recession could easily exacerbate the problem, and land another cohort on the sick rolls for good.
To make matters worse, much of the rest of Labour’s economic agenda is aimed at squeezing out the lower-paid jobs that are most likely to suit someone with a thin work history and health problems. From April the rise in employers’ National Insurance and a higher minimum wage will lift the cost of hiring some of the lowest-paid workers by around 5%. That could encourage a shift to fewer but better-paid and more productive jobs. It is unlikely to help many of Britain’s workless find an escape route out of benefits.
In foreign policy, defence, infrastructure and more, Britain’s government has recently acquired an admirable sense of direction and clarity. But on worklessness, Labour’s cross-cutting instincts have created a self-defeating muddle. ■
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