In the Budget in March 2023, the Chancellor’s focus on growth led to a range of measures to boost participation in the labour market. It looks like this will remain a key focus in his forthcoming Autumn Statement with a boosted package of support being announced in advance. While a step in the right direction, and a need to await the full detail in the Autumn Statement, the effect the additional support will have on employment in the near term appears limited given the scale and pace of rollout. The number of working-age people out of the labour market due to long-term health conditions has risen to a record high of 2.6 million – almost half a million more than before the pandemic.
The cost to the economy has been spelt out by the Office for Budget Responsibility, with the increase in ill health projected to cost nearly £16bn in higher welfare spending and lost tax revenues a year in 2023/24 – equivalent to around a 2p cut in the basic and higher rate of income tax.
There is also a huge cost to the individual. Poor health affects the type and amount of work people can do and, with that, their income – increasing the risk of falling into poverty. Being out of work due to illness with a minimal income can, in turn, worsen people’s health, making it harder for them to start work again.
Crucially, the costs and consequences of ill health are unequally distributed across the UK. This undermines the government’s levelling-up promises and compounds an already concerning health divide between richer and poorer areas of the country. It could also have political consequences. Our new analysis shows that many of the key battleground seats the Conservatives took from Labour in 2019 have much higher labour market inactivity rates due to ill health than the seats they held onto.
There is more that the Chancellor can do now. Improving support for people in and out of work is critical to ensure health isn’t acting as a drag on growth or the public finances.
First, access to existing employment support can be widened, and new employment schemes which are targeted at people with long-term health conditions (such as Universal Support) can still be ramped up faster and at greater scale. Recently announced plans to tighten the Work Capability Assessment will reduce eligibility for Universal Credit by making it harder for people with some health conditions to qualify as having ‘limited capability for work-related activity’. Increasing the threat of sanctions in an already punitive system and reducing access to financial support for some people with the most work-limiting health conditions risks being counterproductive. It is likely to leave people worrying about their finances rather than helping them overcome barriers to work. The latest announcements, which further ramp up the rhetoric on ‘taking taxpayers for a ride’ risk putting off people who need help from seeking it.
Second, the Chancellor can firmly signal the role that employers, big and small, can play in maintaining workers’ wellbeing and keeping them in work. Government plans to boost occupational health coverage by increasing tax relief risks doing little more than covering the cost of existing activity, with smaller employers likely to need additional financial support to boost their provision. Proposed fit-note reforms are a long way off taking effect and funding to do so isn’t clear. With 3.7m working age people now in work with a work-limiting condition, employers can do more now to help retain staff, including by keeping in touch with workers who are off sick and maintaining links with the workplace.
Third, it is important to make sure that people’s wider circumstances aren’t damaging their health in the first place. The cost-of-living crisis has left many struggling to eat and heat their homes, putting pressure on people’s mental health from the financial strain of trying to make ends meet. Prices remain high and further struggles are likely to persist into next year, including the risk that more people have problem debt. That’s why it’s crucial to raise working age benefit increases in line with inflation in April – as many Conservative backbenchers have urged the Chancellor to do.
Our nation’s health is our most valuable asset and a critical investment for the future. The number of working-age adults living with major illness is set to increase by half a million by 2030, according to projections from the Health Foundation’s REAL Centre.
The government can go further, faster in the immediate term. But government and employers need to find new and better ways to encourage people to return to the workforce and help employees remain at work and in good health in the first place. That’s why over the next 18 months, the Commission for Healthier Working Lives will partner with expert organisations to develop an evidence base and engage with employers, trade unions and other stakeholders to build a shared understanding of the growing challenge of working-age ill health and build consensus on the action needed.