Fraser Nelson

How are five million Brits without work?

The ‘giant evil’ of idleness is back

How are five million Brits without work?
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Last week, I came across a figure so staggering that I was convinced it was wrong: 5.3 million Brits (almost the population of Scotland) are on out-of-work benefits. How could this be, with ministers so regularly boasting that unemployment stands at a 40-year low? How could it be, when a national shortage of workers has been declared – and the aviation industry has been begging the government to relax immigration rules, saying that we’re out of workers?

I’ve spent this week looking into it, with the help of my brilliant colleagues in The Spectator data team, and look at this in my Daily Telegraph column today. What is an "out-of-work" benefit, and why is the total more that twice the official unemployment count? How big a factor is Brexit? Is the lack of workers a lockdown-related glitch that will resolve itself, or is it starting to look (a lot) more serious?

The whole picture is still being formed, but here are some pieces of the puzzle.

Brexit can’t be blamed for the worker shortage – immigrants now make up a record 19 per cent of the UK workforce. Even I had assumed that Brexit had hit our supply of migrant labour: that certainly seems to the consensus amongst employers. Steve Heapy, chief executive of holiday firm Jet2, said this week that ‘Brexit has taken hundreds of thousands, if not millions of people out of the employment market and that undoubtedly is having an impact. You hear this quite a lot: during the fog of lockdown there were reports of EU nationals going home and not coming back. But ONS data points to an unbroken momentum of immigration (defined as foreign-born) rising from 7 per cent of the workforce when Blair came to power to 19 per cent now. A record high as a proportion, and also in absolute numbers. The inflow is now back to the old days. So no, Brexit did not take ‘hundreds of thousands, if not millions’ of out the labour market. As we shall see, lockdowns did.

The DWP’s hidden total of those on out-of-work benefits.

We are told (a lot) about official unemployment, but we're not told about the (many) other forms of out-of-work benefits. The below chart uses DWP methods and counts: 5.33 million. That’s about one in nine Brits. Some 1.7 million are on long-term sick and on what was once called incapacity benefit. This figue is extraordinary. Are we really saying there are 1.7 million people so sick that they are incapable of any work?That's higher than the population of Estonia. Might these people have been written off too hastily, without more thought as to whether - with some more support and imagination - there might be some role in our economy for them?

The DWP does not publish the 5.33 million total, which is perhaps why this horrific figure is absent from our debate. But you can work it out from the DWP StatXplore data labyrinth. It's not an easy process and there’s a six-month lag on the figures, so the below - recently published - takes us to November 2021. It will have fallen since, but not by much.

The UK labour force has kept shrinking after the lockdowns. The below from the ONS shows the proportion of over-16s who are not in work or looking for it. Before lockdown, years of Tory refrom lifted this figure to a record high: lockdowns reversed a decade of progress. Alarmingly, there is little sign of a boundback. As Capital Economics has pointed out:the participation rate (the share of the working age population that is in or looking for work) is still, if anything, trending down. It is now at its lowest level since 2011.’ That's what ought to ring alarm bells.

And meanwhile, an unprecedented number of vacancies. When Labour kept five million on out-of-work benefits, there had been an economic crash. The Tories are have managed to hit this jobless high during the largest worker shortage in recorded history.

Early retirement ­– often cited as a post-lockdown factor – is a pretty small part of the UK story as the below chart shows. Yellow is retired, red is long-term sick. Again, from Capital Economics: ‘The rise in inactivity in the UK over the past few months primarily reflects a rise in the number of long-term sick. The latter could reflect long Covid, though it is unclear why that would be affecting the UK more than other countries.’ Quite. So why are so many Brits signing off work sick? A subject that needs far more investigation.

The 'lazy Brit' myth was dealt with in the last deacde. Record employment was achieved with the same people, but a better system. With the right kind of help, incentives and work-coaching you can absolutely solve this problem - and tackle poverty. The blame lies with the system, not the users. Under the Cameron reforms the incomes of the poorest rose far faster than that of the richest, as work replaced welfare. That's the opportunity now.

Welfare reform is about saving lives, not money. Behind all too many of these statistics will talents going to waste, communities wrecked by joblessness and children growing up in workless households. Beveridge had it right when he referred to the ‘giant evil’ of idleness. Studies show that unemployment leads to physical and mental health risks and that the longer you go without a job the harder it is to find one. This waste of human talent is what David Cameron dedicated his welfare reforms to reducing. And it’s something that, if left undressed, will be one of the most pernicious, scarring side-effects of lockdown. I presented a Channel 4 documentary about this in 2014 and it’s odd to see the same problems emerge under the guys who promised to solve them last time. They can be solved again, but only if the government acts. And does far more than it’s doing now.

A scheme has been launched to get half a million people off benefits by June, but this measure is flawed as it affects outflow – the problem is the overall (net) figure, that’s what should be targeted. And DWP systems struggle to keep count of how many people are on benefits: a sign that the system is being overwhelmed. The focus so far has been on those who say they are looking for work. But as the 2013 reforms found, it’s also necessary to look at those categorised as too sick to work. Is this always a fair categorisation? Might this be writing people off when they still have much to offer? Might it be better to assess them for what work they can do? Politically, this is difficult. But welfare reform is about saving lives, not saving money.

Thérèse Coffey has been pushing in Cabinet to bring back conditionality on welfare, to tighten the regulations. She deserves her colleagues’ support. The Tories used to own this agenda, having got it right before lockdown. Hundreds of thousands of people are now falling through the welfare net simply from lack of attention. To let welfare surge during a recession is bad. But to keep millions on benefits in the middle of the biggest worker shortage the economy has ever known is rather perverse – and politically indefensible. Especially when we have so much literature showing the damage that worklessness inflicts.

Moving from welfare to minimum-wage work works out as an extra £6,000 on average: so this, surely, is an effective tool to fight the cost-of-living crisis (as well as getting the economy growing). With the UK having one of the highest minimum wages in the world and more vacancies than ever, there might never be a better time to revive the welfare reform agenda.

PS. The DWP StatExplore database does provide a tally for all on out-of-work benefits as a share of total in regions (and sub-regions) of the UK. With the caveats presented above (it’s data from November 2021, and about a third are long-term sick) here is how the national picture looks. Click on a region to dive deeper.