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- The Reformer Blog
21 September 2015
“Our shared aim is to transform Northern growth, rebalance the country’s economy and establish the North as a global powerhouse.”
Rt. Hon. Patrick McLoughlin MP, Secretary of State for Transport.
Rebalancing the national economy is a core part of the Government’s economic strategy. Creating the ‘Northern Powerhouse’ will depend not only on long-term investment, but on harnessing the people power of Northern city regions. This means that there must be an active pool of labour ready to support economic growth.
Evidence shows that employment status has a substantial impact on individual wellbeing: for the vast majority of people, being in work is good for them and being out of work is bad for them. Moreover, the longer someone is out of work, the more detached from the labour market they become. It is critical therefore that people with sickness and disability are defined by their capability not disability, and are supported by the benefit system to move into and stay in employment.
In February 2015, 2.5 million people were claiming out-of-work incapacity-related benefits. Despite significant reform, the number of people out of work claiming the main income replacement benefits – Employment and Support Allowance (ESA) and Incapacity Benefit – has flatlined. One in 14 working age people claimed these benefits in 2005 compared to one in 15 today. Like many other developed countries, the demographic of this group has changed markedly: the caseload proportion of older people aged 55+ has declined, while the proportion of younger people has increased. Mental illness prevalence has grown rapidly, while the caseload suffering from musculoskeletal problems is down by a fifth compared to five years ago. However, in contrast to dramatic changes in claimant characteristics, the regional distribution of claimants has remained the same, strongly concentrated in the North.
At 8.2 per cent of the working population, the proportion of people claiming incapacity-related benefits in the North East and North West is nearly double that of the South East and East of England. Of the 20 local authorities with the highest caseloads in England, 18 are located in the North. Of the ten local authorities with the highest incapacity-related benefit recipiency, nine are Northern, many in old industrial areas.
Figure 1. Proportion of the working age population who are claiming out-of-work sickness and disability benefits in February 2015
% of working age
This North-South divide comes as no surprise. In the past, the unequal national distribution of benefit recipients has been explained by shifts in industry, together with persistently high levels of unemployment relative to the national average. Beatty et al. argue the principal response to job losses from the coal industry in the 80s and 90s was not a rise in recorded unemployment but a marked increase in the numbers of men ‘economically inactive’ on incapacity-related benefits.
Since 2010, shifts in industry have slowed – in part explaining the declining proportion of older people claiming ESA. As the profile of incapacity-related benefit claimants changes from older to younger claimants, from physical to mental disability prevalence, it is important to consider: how far does ‘hidden unemployment’ still account for high caseloads in Northern areas? This must inform how ESA and labour market policy is reformed to help these groups, to drive greater equality between people with sickness or disability in Northern and Southern regions and use people to drive forward growth of the Northern Powerhouse.
Hannah Titley, Researcher, Reform