Prime Minister Sir Keir Starmer has pledged to overhaul the UK’s job market by implementing reforms aimed at reducing unemployment and increasing workforce participation. The proposal includes changes to job centres, a significant increase in mental health funding, and a review of sickness benefits, which is set to begin next year. Starmer expressed that the government had inherited a country where the system “isn’t working” and these changes would address the primary drivers of unemployment and inactivity.
However, many details of the proposed reforms remain vague, and critics, including the Conservative Party, argue that Labour is not prepared to make the tough decisions necessary to reduce the benefits bill. The Conservatives also suggested that the plans would not address the larger issue of managing the growing welfare system.
These proposals come amid growing concern over tax hikes announced in last month’s budget, which many businesses argue could hamper job creation. The increase in National Insurance contributions and the rise in the minimum wage have led to fears that companies will be less likely to hire, counteracting the government’s goal of fostering economic growth. Chancellor Rachel Reeves defended the measures, stating that despite feedback, she had not heard substantial alternatives.
While unemployment currently stands at nearly 1.5 million, the number of economically inactive people—those neither employed nor actively seeking work—has risen to more than 9 million, exacerbated by the COVID-19 pandemic. Many of these individuals are no longer in the workforce, with some young people staying out of work and training, as highlighted by Gary Wroe, managing director of Birmingham-based Hockley Mint. Wroe expressed concerns that the National Insurance rise would make it difficult for his company to continue recruiting apprentices.
One of his apprentices, Abi, a 17-year-old, noted that many of her peers have left school without entering the workforce, attributing it to the impact of lockdowns. She and others believe that the job market recovery post-pandemic has been slow, especially for younger people.
In response to rising economic inactivity, the government has vowed to ensure that young people who refuse job or training offers will face benefits sanctions. Employment Minister Alison McGovern emphasized that when support is available, it is generally accepted, but benefits can be withdrawn from those who decline job offers or fail to attend job centre appointments.
The government’s ultimate goal is to raise the UK’s employment rate from 75% to 80%, which would put approximately two million more people in jobs. Sir Keir Starmer has said these reforms aim to end the culture of blaming those who have struggled to return to work, and instead, ensure they receive the support they need.
Further announcements are expected from Work and Pensions Secretary Liz Kendall, who is set to unveil measures to reduce waiting times for the NHS and tackle economic inactivity among those off sick. These measures include expanding mental health support and addressing obesity, which the government believes will help people get back into work.
Additional proposals include a “Youth Guarantee” offering every 18- to 21-year-old in England access to apprenticeships, education, or job training opportunities. Job centres will be rebranded as the National Jobs and Careers Service, and there will be a review of UK employers’ efforts to promote health and inclusive workplaces. Additionally, regions like the North East and South Yorkshire will receive funding to prevent people from falling out of work due to health issues.
These initiatives are part of the government’s broader strategy to increase productivity and stimulate economic growth by expanding the workforce. However, concerns about the viability of these plans persist, particularly regarding the impact of the proposed measures on those already struggling with mental health issues or other barriers to employment.
Some critics, like Helen Whately, the shadow secretary for work and pensions, argue that the government is avoiding difficult decisions about sickness benefits, which they say are essential for the sustainability of the welfare system. Others, like Peter Cheese, the chief executive of the Chartered Institute for Personal Development, acknowledge the positive direction of the reforms but call for a more ambitious approach to apprenticeships, making them a viable alternative to university.
Meanwhile, Catherine Parsons from the Big Issue cautioned that the government’s focus on sanctions could worsen the existing challenges. She emphasized that young people’s mental health struggles have already made it harder for them to secure stable employment, and additional threats of benefits cuts could worsen the cycle of economic inactivity and mental health issues.
The government’s proposal has sparked a wide range of reactions, with some optimistic about the potential for change, while others warn that a more comprehensive approach is needed to address the root causes of unemployment and economic inactivity.