We must get thousands of people on long term sickness back into work for the sake of the economy

WORK and Pensions Secretary Mel Stride was right to say yesterday that boosting employment is the key to increasing the size of the economy, reducing government borrowing and paving the way to growth and tax cuts.

Yet whenever the question arises, politicians glibly refer to those who have decided not to go back to work after sitting at home during the pandemic — a figure which at one point stood at 650,000.

Yet that is not the real issue.

After all, there are now fewer people inactive due to early retirement than pre-pandemic.

No, the rise in economic inactivity we have seen since the pandemic — with some nine million people now outside the workforce — is up by almost 500,000 since 2020.

Tax burden

The real driver has been long-term sickness, where we’ve seen a 16 per cent increase since before Covid.

Data from the Department of Work and Pensions analysed by the Centre for Social Justice suggests there are some 1.6million more claimants since 2020, costing the state around £13billion more in welfare benefits.

Reducing this number by getting more people back into work will help the Government find the room it needs to invest in public services and reduce the tax burden.

The fastest-growing category of claimants is now those with “No Work Requirements”, totalling some 3.5million today.

Almost two out of three of these are individuals out of work due to long-term sickness and disability, with the greatest increase coming in mental health conditions.

Given their circumstances, they are exempt from welfare rules designed to help or encourage people into work.

Yet health practitioners know work can be a strong health treatment, particularly for those suffering from depression or anxiety, which are treatable.

While many may never be able to work, and should be treated with compassion and support, official survey data shows that at least 700,000 say that they would like to work with the right support.

That represents nearly twice the remaining shortfall Mel Stride cites, of 400,000 workers to take us back to pre-Covid levels of employment.

Chancellor Jeremy Hunt has now recognised the need to get people from sickness benefit into work.

In his spring Budget, he set out plans to help 50,000 people with disabilities and long-term sickness into work every year — removing the financial penalties people now experience when moving into work, and incentivising the system.

However, welcome as this is, DWP data shows that more than half of claimants with No Work Requirements who want to work are worried about being penalised — pushing them into the black market, rather than paying taxes.

Thanks to the CSJ recommendations, that is now about to change, which should free up many more to move back into the workforce.

Added to the supply problems, too many businesses take short-term decisions and fall back upon reliance on high-volume, low-wage immigration, which may raise gross domestic product but almost certainly does nothing for GDP per head.

In the end, this ultimately only adds to our welfare bill and tax burden.

I recall a conversation with a Belgian manufacturer, whose products are the dominant brand in the UK.

He spoke of the need for companies like his to maximise investment in new technology, to keep costs down and skilled wages up.

When I asked how he had succeeded in the UK so well, he replied, smiling, that many businesses in the EU and beyond call the UK the capital of cheap labour.

Too many businesses in the UK, he said, take short-term decisions about profits. Cheap labour, he said, is not a long-term answer.

Just take the social care system. By common agreement, it isn’t working effectively, is clogging up our hospitals and is costing vast sums in the process.

The search for low-paid foreign workers is also one of the main drivers in migration.

Yet this is another example of how we seem to be locked into a cheap-labour mentality.

Greater skills

Other countries have abandoned this failed model. They don’t employ an army of harassed, low-paid, low-skilled workers.

Instead, they use technology to monitor elderly and ill people in their homes.

As a result, they employ fewer people, who are better paid and with greater skills, and go where they are needed when help and support is required.

This takes the pressure off the health service.

Here in the UK, that model isn’t used. Instead, the search goes on for cheap labour.

For too long, a rising number of people not on Universal Credit have fallen through the cracks and been left to languish out of work.

Once the nettle of economic inactivity is gripped, thousands more people can be helped to gain the social, financial and health benefits of work.

Alongside that, we also need to see a change in the way too many of our businesses default to cheap labour, rather than technology, greater skilling and higher wages.

That is real levelling-up.