In his Budget speech, Jeremy Hunt made a great play on how Conservatives value work. Tories love talking about this but in fact they have just presided over a catastrophic increase in benefits. Before the pandemic there were 4.2 million on benefits: at the last count, 5.2 million. Given the mass worker shortage, this is quite a scandal. So what is being done to change this?
Hunt referred to tighter conditions in welfare conditionality, but the OBR don’t seem to think it will move the dial, with just 10,000 moving back to work. It does think the £20 billion package on childcare will help, broken down as follows:
- 60,000 more in (part time, 16h/week) work from more childcare subsidies for the under-twos
- 15,000 more in (part time, 16/week) work from more childcare for parents on benefits
- 15,000 more in work from tighter welfare conditionality for parents and carers
- 10,000 more in work from tighter disability allowance
Add to the above the 10,000 from general welfare reform, you get 110,000 in total. But that’s not where Sunak is going to get most of his new workers from. The OBR says that we’ll end up importing far more workers than we’ll recruiting from the tanks of the unemployed with 160,000 more (!) than it was expecting just four months ago. It stresses these are extrapolations, not forecasts. But on the post-Brexit immigration evidence so far, it says, we can expect a lot of new arrivals – but no more likely to contribute to the economy than those already in the country. At present, immigrants make up about 19 per cent of all UK workers: this ratio may steadily increase.
It’s possible that the OBR is underestimating the impact of welfare reform: after all, it did so all through Iain Duncan Smith’s reforms ten years ago. I personally regard the shameful pile-up of benefits amidst a worker shortage crisis the most urgent (and indefensible) problem facing government today. It’s also a brake on economic growth: as we argue in the leading article in tomorrow’s Spectator, how is an economy expected to fire on all cylinders if 13 per cent of its working-age people are on benefits?
Rishi Sunak does recognise this problem. The tightening of conditionality he has put through today will be difficult, but we don’t yet know the details – save for the negligible effect that the OBR thinks this will have on the total welfare numbers. The return of Universal Support is welcome and the work in helping the disabled back to work is expected to see 10,000 more jobs: that’s welcome news. But it has to be put in the context of 5.2 million on out-of-work benefits.
The big problem is sickness benefits: a massive problem that the Tories simply do not have a handle on. In a sobering and instructive section, the OBR says the problem is bad and is expected to get a lot worse. New claims for PIP (i.e. disability benefit) involving mental health has more than doubled since the pandemic. Before the lockdowns, 8 per cent of the UK population received a health-related befit. The OBR expects this to hit 12 per cent within five years. So today’s story is about the problem getting much, much worse.
As we mark the ten-year anniversary of the last welfare reform I’d have liked, today, to mark a new chapter of Tory welfare reform. But the figures provided by the OBR today suggest that the Tories will instead do precisely what they accused Labour of doing before 2010: relying on imported workers while leaving millions on benefits.
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