Labour Back-to-Work Plan Puts Off Hardest Calls to Next Year
(Bloomberg) -- Keir Starmer’s government set out plans to get more Britons back into work, spur economic growth and reduce the welfare bill, but the prime minister risked further accusations of indecision by putting off the most contentious decisions.
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Work and Pensions Secretary Liz Kendall published the “Get Britain Working” white paper on Tuesday, as the government tries to tackle the inactivity holding back economic growth. The plan includes a guarantee of education or training for every young person, and the removal of benefits for those who refuse.
Speaking in the House of Commons, Kendall called the measures the “biggest reforms to employment support in a generation,” and said they represent the first steps toward reaching the government’s ambition — first announced in July — to increase the employment rate to 80% from 74.8%.
People who “can work, must work,” she said.
Reforming Britain’s benefit system — which now costs £137 billion ($172 billion) — is a typical pledge for any new administration, but the stakes are particularly high for Starmer’s given his promise to rebuild public finances and deliver growth. The Labour government is following through on £3 billion of welfare spending cuts budgeted by the previous Conservative administration.
Kendall said job centers would be changed to focus more on job creation rather than benefits, and the government will launch an independent review running to next summer looking at how employers can be better supported to employ people with disabilities or health conditions.
Other major decisions are also put off until next year, particularly on which benefits will be cut and how. The direction of travel, though, is clear. In a news release ahead of Kendall’s announcement sad the government will seek to “overhaul” health and disability payments to get costs down.
A consultation on the changes will open in the spring “to put the views and voices of disabled people at the heart of any policy changes that directly affect them,” the government said.
Any cuts will be particularly contentious, given many in the Labour Party hoped its return to power after 14 years would lead to a more generous approach to benefits. That may explain the ministers’ reluctance to set out details.
Chancellor of the Exchequer Rachel Reeves said “tough decision” would need to be taken on welfare, but has not spelled out how they will be implemented. Alison McGovern, the employment minister, said last month the government “will deliver savings through our own reforms, including genuine support to help disabled people into work.”
The government argues that the issues are complicated and that the challenge is stark. An estimated 9.3 million working-age adults are economically inactive, 700,000 more than before the pandemic. Long-term sickness in the UK has reached a record 2.8 million people, while one in eight young people are not in education, employment or training.
While the official data points to a surge in inactivity, economists still debate the scale of the problem.
Bank of England Chief Economist Huw Pill said Tuesday that Office for National Statistics data may “overstate the role of long-term sickness” after major doubts over the accuracy of its Labour Force Survey. The ONS is currently working on a new survey covering estimates for unemployment, employment and economic inactivity after a plunge in response rates.
In a hearing in the House of Lords, Pill said the ONS long-term sickness estimate is “quite significantly higher” than a figure implied by government administrative data looking sickness and disability benefit claims. He also said that BOE analysis echoes recent research by the Resolution Foundation suggesting that employment is much higher than official data shows.
Still, the government has made it a priority, though several of Starmer’s most contentious changes are being pushed into consultation rather than immediate action. That’s the case for National Health Service reform, which the back-to-work plan relies on to get waiting lists down. Labour’s slumping poll ratings part reflect voters questioning whether the party had a plan for power.
The counter argument is the one Reeves’ used to justify her tax-raising budget, that the fiscal inheritance from the Tories’ has tied Labour’s hands.
Her Conservative predecessor, Jeremy Hunt, had baked in welfare savings by outlining plans to stop unemployed people who were not looking for work — due to long-term sickness or disability — from claiming free prescriptions and discounted bus travel. Another plan was to scrap the controversial Work Capability Assessment used to determine if people can receive additional benefits payments due to a health condition.
Hunt never had to implement the cuts because the Conservatives lost the general election, but the savings were budgeted and Reeves has chosen to find a way to match them.
--With assistance from Tom Rees.
(Update with economist on scale of inactivity problem from 12th paragraph.)
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