Chapter 1
The challenge
1 In the 1980s and 1990s the welfare state failed those who most needed its help. Instead of combating mass unemployment, the welfare state alleviated its worst effects and diverted people onto other benefits. Instead of helping people into work, it locked them into long-term dependency. By 1997, there were almost 5.5 million people on benefits, 3 million more than in 1979. The number of people claiming unemployment benefits had risen by 50 per cent, while the number claiming lone parent and incapacity benefits had more than tripled.
2 These stark statistics can tell only part of the story. They cannot fully reflect the impact on family and community life. Too many people had been written off and condemned to a life dependent on benefits, extending into poverty in retirement. Too many families had suffered inter-generational poverty, with little expectation of work. Too many communities had become breeding grounds for despair and low aspiration.
Progress to date
3 Since 1997, however, the UK has seen rising employment. What is more, the UK has broken with its past record of boom and bust. It has coped better with the global economic slowdown than its competitors. During this period employment fell in the US, Germany and Japan. In the UK it continued rising. The UK now has one of the highest employment rates in its history. Total employment is currently at record levels, having risen by over 2.3 million since spring 1997.
4 Furthermore, not only has the UK one of the highest employment rates in its history but it also now has the best pattern of employment and unemployment among the major industrialised countries. In particular, for the first time in at least 50 years the UK employment rate is the highest among these countries, and there are very few countries in the world with higher rates.
5 The rise in employment, combined with successful labour market policies, has led to an overall fall of around 1 million in the number of jobless people on benefits. The biggest improvement has been among the number of people claiming unemployment benefit, which has fallen by more than 700,000 since 1997 to levels last seen a generation ago. Since the start of 2001 it has remained consistently below 1 million – the first time this has happened since 1975.
6 The number of people on lone parent benefits has also fallen substantially, while the sustained growth in the incapacity benefits caseload slowed initially and has now been reversed. The number of people on incapacity benefits has now been falling for more than a year, after decades of continuous increase.
Figure 1.1: A comparison of employment (A) and
unemployment (B) rates among the G7 countries
7 The strong labour market performance of recent years reflects a conscious effort to build macroeconomic stability, combined with a new approach to welfare.1 The Government’s labour market policies are founded on five pillars:
- macroeconomic stability, to allow individuals and businesses to plan ahead with confidence. We gave independence to the Bank of England and set a clear fiscal framework for growth and stability;
- a regulatory framework for the labour market which sets clear minimum standards of employment but allows flexibility for employers and employees alike. We introduced the National Minimum Wage and family-friendly employment legislation, and have strengthened protection against all forms of discrimination;
- tax and benefit policies that ensure that work pays. As a result of personal tax and benefits changes since 1997, 4.8 million working households with children are better off;
- education, skills and training policies aimed at creating an adaptable, flexible and productive workforce. We have introduced provision for all adults with a skills deficit, the Train to Gain programme, enabling employers to upskill their workforce, and the New Deal for Skills; and
- an active labour market policy – the focus of this Green Paper – particularly aimed at preventing people from drifting into long-term unemployment or inactivity and becoming detached from the labour market. We have introduced the most comprehensive menu of help ever available, tailored to the needs of the individual and focused on work as the best route out of poverty.
Figure 1.2: Numbers of people on benefits, 1979–2005
