Building a healthier labour market: immediate priorities for the new government

Last week, a new government was elected with a mission to kickstart growth in the UK’s stuttering economy. Economic growth relies on a thriving and healthy labour market. However, Labour’s victory comes at a challenging time. A record 2.8 million people are unable to work due to long-term health conditions. Growth in the UK workforce is stalling, and spending on health-related benefits is rising, adding pressure on public finances. The Department for Work and Pensions (DWP) has a critical role to play in delivering economic prosperity.

Today, while visiting a Jobcentre in Leeds, the new Work and Pensions Secretary, Liz Kendall, declared that ‘economic inactivity is holding Britain back’. Here are three key actions she and her team must deliver to build a healthier labour market and support growth across the economy. 

1. Support people to return to work

Labour’s 'back to work plan' includes: 

• combining careers support with Jobcentre Plus to create one integrated service
• introducing a ‘youth guarantee’ to help people aged 18–21 find training and support to enter the world of work
• devolving funding and responsibility to local areas to tackle economic inactivity.

A locally led approach has promise. There are wide inequalities in health and work outcomes between different places. Local actors can understand the key health and work issues in their areas, and local services like health, skills and housing play a key role in helping people move into good jobs.

However, the speed of delivery is key. We know that the longer someone is out of work, the harder it is for them to return. So, the government must act quickly to engage people who have recently left the labour market.

Opening up employment support on a voluntary basis to those currently without it can help people who have been out of work for a long time. However, successful engagement will require a reset of DWP’s relationship with social security recipients, focusing on support rather than policing entitlements. The approach outlined today is an important step forward.

It should also be recognised that the majority of the 2.8 million people out of the workforce due to ill health have already been out of work for an extended period. They are likely to face multiple barriers to returning to work, not just their health. Helping people navigate these barriers will take time and requires the delivery of intensive, joined-up support.

The new Secretary of State for Health and Social Care has emphasised cutting NHS waiting times to speed up the return to work. However, addressing health-related barriers to work is not straightforward. The Office for Budget Responsibility has shown that reducing waiting times will likely have only a small effect on flows into employment. The most reported conditions are musculoskeletal and mental health conditions, which are often treated by services (such as physiotherapy) not included in headline waiting lists and which are currently underfunded and in short supply.

To add to the challenge, treating one condition is unlikely to be enough. Of the people who are economically inactive because of ill health, nearly two-fifths report having five or more long-term health conditions. Working-age health issues have also become more complex over recent years, with an increase in fluctuating conditions such as mental health problems.

2. Go further in strengthening support for people in work

Following today's speech, it would be good to hear more from the Secretary of State on supporting the 3.7 million people with work-limiting health conditions who are in employment. People often move in and out of work, with disabled workers leaving jobs nearly twice as often as non-disabled workers. Yet our current system remains too reactive, and public debate focuses more on moving people off benefits than helping them stay in employment in the first place.

Labour’s manifesto set out reforms to statutory sick pay as part of plans to strengthen employment rights around flexibility and job security. Based on pre-election plans, the new government is expected to explore extending statutory sick pay eligibility by removing the lower earnings limit that excludes some lower earners, and increasing the amount paid. 

While such changes are long overdue, the new government needs to go much further to incentivise employers to support the health of their staff, and to help people with health conditions to stay in work. 

That’s not to say employers don’t want to help or don’t recognise the problem. We have heard from businesses across the UK that they want to do more to support employee health, but often lack the skills, capacity and access to information about what to do, particularly smaller businesses. Employers also report mixed experiences of finding and commissioning quality occupational health and vocational rehabilitation services. 

The DWP may want to retain the previous government’s Occupational Health Taskforce but should expand its remit beyond developing voluntary guidance. The task ahead involves creating an effective market for high-quality occupational health and vocational rehabilitation services, ensuring that all employers – both large and small – utilise them.

3. Having the political will, leadership and capacity to deliver

Delivering change won’t be easy. These are complex, long-term problems and policy progress has been hard. Since the introduction of Employment Support Allowance and Dame Carol Black’s review of the health of the working age population, both in 2008, reforms to work and health have either been piecemeal or not sustained. 

The Work Capability Assessment has failed as a mechanism to find and support people with health needs back into work. Wider changes to social security have left us with a punitive and inadequate benefits system, which can discourage people from seeking employment or work against them. 

Getting Universal Credit in place has used a lot of DWP resource and focus. But, notwithstanding design issues with Universal Credit or challenges with the transfer of final cases across to the new system, with rollout nearing completion there should be more capacity to focus on a longstanding labour market challenge – improving employment and pay for people with disabilities or long-term health conditions.

It’s reassuring to hear from Liz Kendall that tackling the root causes of economic inactivity is a top priority for the new government. However, it will require sustained commitment, the political will to take bold action, and leadership to drive change to address rising ill health among working-age adults, and to build a healthier labour market. 

Watch this space…

The Commission for Healthier Working Lives is working towards the programme of policy and action needed for a more effective and sustainable work and health system. The Commission will share interim conclusions ahead of the new government’s first Spending Review, with a final report due to be published in early 2025.