Workers (Economic Affairs Committee Report)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
My Lords, I am very pleased to close this debate on the Lords Economic Affairs Committee report Where Have All the Workers Gone?. I thank all noble Lords for their valuable contributions, particularly my noble friend Lord Bridges of Headley for initiating the debate. I also thank his committee for the work undertaken in producing its report. This topic is one close to my heart, following my long career in human resources in industry and the City. I really do know how important it is that businesses are able to get the right people with the right skills in a competitive labour market.
Where have all the workers gone? I start by echoing the views of the noble Baroness, Lady Sherlock, also picked up by the noble Lords, Lord Sikka and Lord Hendy, and my noble friend Lord Balfe, about the importance and value of the workforce. The noble Lord, Lord Hendy, spoke—quite rightly, too—about the importance of the unions, and my noble friend Lord Balfe mentioned looking after the workers and their dignity, giving them compassion and respect from the employer’s point of view, and of course he is quite right.
My messages today are the following. Workers must feel that they want to go to work. They should feel that they are paid properly—indeed they should be paid properly—and that they have a stake in the business. That does not have to be a financial stake, but they should at least feel that their views are heard and their skills respected, nurtured and optimally utilised.
To pick up an important point about pay raised by the noble Lord, Lord Hendy, he will know that we expect the increases to the national living wage and the national minimum wage to give a pay rise to around 3 million workers. My noble friend Lord Griffiths and the noble Baroness, Lady Kramer, made some good points about the spirit of this debate. The working population, their health and the numbers in employment really matter, with all the knock-on effects on the economy, particularly of inactivity. Those are my opening points.
This is an appropriate moment to take a step back and reflect on just how much the labour market has changed over time. Just over 50 years ago, four in 10 women were economically inactive, largely due to caring responsibilities. Today, I am pleased to say that the figure is down to 25%, with more women choosing to enter and remain in the workplace to build a career. To address a question raised by my noble friend Lord Griffiths, expanding the opportunities for people to do work that they find fulfilling and rewarding is very much at the heart of what we are trying to do in government.
This report focuses on the rise in both vacancies and economic inactivity following the pandemic. However, the House will note, as pointed out by my noble friend Lord Bridges himself, that the publication goes back to December 2022. To reassure the noble Lord, Lord Bilimoria, I am keen to emphasise that the Government understand the scale of this challenge and have since announced an additional £6 billion of investment in additional support aimed at increasing workforce participation—I will expand on that.
The UK is also not alone in the challenges we face, as most countries for which we have data have higher vacancies than before the pandemic. This issue was raised by my noble friends Lord Bridges and Lord Griffiths, and the key question was: are the statistics fit for purpose? Getting the data on the labour market right is vital. My noble friends will know that the ONS is an independent organisation that decides for itself the best way to produce labour market statistics. However, we engage regularly with it and understand that it has taken a number of steps to improve the quality of the Labour Force Survey, and that survey data is being reintroduced from next week. We review and monitor a wide range of labour market statistics to inform our view, not just the LFS.
The noble Lords, Lord Skidelsky and Lord Bilimoria, expanded on this and stated that we are worse than other countries. That is not entirely true. The UK still has economic inactivity rates that are well below the average for the European Union and the OECD, as well as being the fourth lowest in the G7—but I acknowledge the higher levels of inactivity, which of course is the theme of this debate.
The report makes a number of recommendations, which centre on three main themes: the rise in economic inactivity due to long-term sickness and disability; those choosing to retire and leave the labour market early; and the impact that migration changes may have on certain sectors. I will address each of these in turn. They largely mirror the main points raised in the speech of my noble friend Lord Bridges; I appreciate the detailed analyses of the reasons behind the inactivity from the noble Lord, Lord Skidelsky.
First, on the important issue of long-term sickness and disability, which is now the most common reason stated for economic inactivity, the Government share the concern of noble Lords here today regarding increased economic inactivity levels for those who are disabled or long-term sick. I share the comments of my noble friend Lord Bridges on the statistic that one in five in the 16 to 64 group are inactive. The 2.8 million long-term sick figure is certainly one for great concern.
As the noble Lords, Lord Londesborough and Lord Layard, and the right reverend Prelate the Bishop of Bristol mentioned, we know that rewarding work is hugely beneficial for mental health and well-being, which is why this Government have an ambitious programme of initiatives to support disabled people and people with health conditions, including mental health conditions, into employment. They include increased work coach support and disability employment advisers in jobcentres; the Work and Health Programme and intensive personalised employment support; Access to Work grants—I reassure the noble Baroness, Lady Sherlock, that the backlog is reducing; I will follow up with her on that and give some figures proving that that is correct—the Disability Confident scheme; the information and advice service; and employment advice in NHS Talking Therapies, which was raised by the noble Lord, Lord Layard.
The noble Lord, Lord Layard, made a point about support for addiction. We are investing £39 million to expand our individual placement support programme for drug and alcohol dependency across England by 2025. This programme provides employment support alongside clinical treatment, making employment a key aim of recovery. The NHS is also expanding the mental health aim of this important programme and we are testing a peer mentoring programme in selected jobcentre areas; peer mentors use their lived experience of addiction and recovery to inspire, motivate and support others to manage their dependency, access appropriate support and move towards employment.
My noble friend Lord Griffiths asked about the knowingly economically inactive and their wish to work. He is right: the ONS figures indicate that more than 600,000 people who are inactive due to long-term sickness would very much like a job.
The right reverend Prelate the Bishop of Bristol spoke about disabled people. Let me say a few words about them. The Government are determined to do more to help close the disability employment gap and help more disabled and long-term sick people into work. That is why we have announced even more support targeted at this group over the past year. I will quickly reel some examples off: expanding the existing additional Work Coach support programme; introducing universal support, a new supported employment programme for disabled people; launching WorkWell, which will bring together the NHS, local authorities and other partners in collaboration with jobcentres; introducing employment advisers to musculoskeletal conditions services in England; and, importantly, consulting on occupational health provision in the workplace, as well as expanding the funding for the forthcoming small and medium-sized enterprise subsidy pilot for occupational health services. This week, we also published the Disability Action Plan, setting out 32 practical actions that the Government will take forward over the next 12 months to improve disabled people’s daily lives; noble Lords will be aware that I updated the House on this on Tuesday evening.
The noble Lord, Lord Londesborough, asked whether the Government have up-to-date statistics on those taken out of the workforce for each year between 2020 and 2023 because of sickness, as well as on how many were able to rejoin in each of those years. It was a precise question, and I hope I can give a precise answer. The ONS data suggests that, between those years, almost half a million more people were inactive due to long-term sickness. The most common conditions among this group were depression, anxiety and nervous dispositions, which also had the largest increase. Once people become economically inactive and the main reason for doing so is long-term sickness, relatively few of them move back into employment; that is rather sobering. Between 2019 and 2021, only around 3% of those who were long-term sick inactive moved into employment, so the noble Lord makes an important point.
I turn to the next issue raised in by the report. When we are talking about early retirement, I say to the noble Baroness, Lady Sherlock, “Yes, we take this matter extremely seriously”. I am pleased to note that data from the ONS shows that the number of those who state they are economically inactive due to early retirement has been decreasing. I think it was mentioned that the average age of Members of this House is 72; perhaps we are a good example, as we should be, of a cohort—a very distinguished one—working past retirement age.
Picking up on the remark by the noble Lord, Lord Skidelsky, I believe that our role in this Chamber at least is a decent job. To pick up another point, raised by the noble Lord, Lord Turnbull, perhaps we should be defined as being of working age. We can mull that over after this debate. However, we know that those over 50 seeking employment may face additional barriers, which is why the Government are committed to continuing to deliver a comprehensive package of support to help older workers remain in and return to work. I think that answers the second question from my noble friend Lord Bridges. This includes the additional work coach time for eligible jobseekers aged 50-plus on UC, dedicated 50-plus champions working out of every job centre across the UK, and the midlife MOT, which I am sure the House has heard of. It is a review for workers in their 40s, 50s and 60s that helps them take stock of their finances, skills and health.
The report also questions whether pensions freedoms in the UK are driving more people aged over 55 to become inactive. I took careful note of the remarks made on this subject by my noble friend Lord Willetts and the right reverend Prelate the Bishop of Bristol. Where individuals do access their pension using pension freedoms, this does not necessarily mean they have become economically inactive, and the evidence supports this conclusion. The DWP’s research shows that people use pension income to supplement other activities such as childcare and helping to support younger generations in work. Importantly, accessing pension income can help significant numbers of individuals to change vocation, work flexibly or go part-time, which allows them to stay in employment where they may otherwise have left the workforce.
I will now turn to the last main theme of the report—migration. On 4 December 2023 the Government announced a new package of measures to curb immigration abuse and further reduce net migration. The Government have been mindful of the need to balance the impacts on the labour market against the need to reduce net migration. These reforms are the right package to support reducing net migration to sustainable levels while enabling the UK economy to access the skills and talent we need. We understand that some sectors may be concerned about their ability to fill certain roles. I strongly encourage any employer, of whatever size, sector or place, to engage with their local jobcentre or the DWP nationally if they are looking to recruit. Our jobcentres have a fantastic offer for employers, including help with job adverts and recruitment opportunities to connect directly with jobseekers at job fairs and other events, and access to government-funded training.
The hospitality sector, which is very close to the heart of the noble Lord, Lord Bilimoria, is mentioned in the report. This is a fantastic example of the DWP supporting vital sectors. Working with UK hospitality and employers such as Greene King, Hilton and Premier Inn Limited—and, I am sure, Cobra Beer—we recently launched a new destination hospitality pilot. These are innovative new schemes which combine training, work experience and a guaranteed job interview, and demonstrate the availability of motivated jobseekers for firms that are looking to recruit.
Turning to the theme of childminders and universal credit, my noble friend Lord Willetts and the noble Baroness, Lady Kramer, alluded to the relevant issue of parents entering the workplace. The Government very much know that the cost of childcare remains a critical barrier preventing many people re-entering the workforce. This is why we are delivering the biggest expansion in childcare support in England’s history—to help parents on universal credit who are moving into work or increasing their hours. Since last June, the Government have been providing additional support with upfront childcare costs. Last June, we also increased the childcare costs that parents on UC can claim back by nearly 50%, to up to £951 per month for one child and £1,630 for two or more children. Also, the Government are aware of the demand/supply issue in childcare and the increased demand for nurseries, and we are working very closely with the DfE to address this very point.
The noble Baroness, Lady Kramer, mentioned apprenticeships, and as you can see from the badge with the big capital A that I am wearing, this is National Apprenticeship Week. It would be remiss of me not to take this opportunity to promote apprenticeships as a further example of how firms can secure the staff that they need and support them to build their skills. My noble friend Lady Noakes, the noble Viscount, Lord Chandos, and the noble Baroness, Lady Sherlock, spoke about the workforce participation review, and the gist of their question was: is this the end of it all? Since last year’s Spring Budget, we have announced our back to work plan, investing another £2.5 billion to boost workforce participation. We continue to work across government to tackle barriers to work and decreases in activity. This is not the end of the story, as the announcements made at the Autumn Statement show. However, the Government will continue to consider how we can increase workforce participation. The best thing to do would be to write further on this because it is an important point.
We know that the labour market is complex; as the noble Viscount, Lord Chandos, put it succinctly, it is rather complicated. It is an oversimplification to think that, because we have nearly a million vacancies and many more millions of inactive people, it is straightforward to match the two to ease labour shortages. The Lords Economic Affairs Committee’s report skilfully set out many of the challenges in filling vacancies amid a changing labour market. As such, the DWP is continually analysing what skills are required to ensure that there is a plethora of support for our customers in this ever-changing landscape and to take the steps to tackle whatever barriers they face. For the avoidance of doubt, and for the benefit of the noble Viscount, I say that we certainly get the importance of this subject, but I hope I have given a flavour of the huge number of initiatives that my department is taking and how it is working across government on this important area.
I opened by reflecting on the significant progress we have made as a country over the last 50 years on female labour market participation. I will turn to the future of the labour market and the role that technology will play but, before I do, I will pick up a few more brief points. The noble Lord, Lord Bilimoria, mentioned that he was on the New Deal task force and asked if such a thing still exists. It does not, but the Government work with a wide range of stakeholders when developing and evaluating our policy interventions. He also spoke passionately about dentistry. As part of the NHS long-term workforce plan, we will build a pipeline of new dentists for the future by expanding dental undergraduate training places by 40% to more than 1,100 per year by 2031 up to 2032, with an additional 24% increase to 1,000 places by 2028-29. The Government will also consult this spring on the tie-ins for dentist graduates to the NHS and increase the number of dental therapists and other dental care professionals through a 40% increase to more than 500 training places per year by 2031-32. Lastly, the Government will make it easier for NHS practices to recruit overseas dentists who meet the UK’s highest regulatory standards.
My noble friend Lord Balfe raised a point that I alluded to at the beginning of my remarks about treating workers better, and he is right. The 2019 manifesto pledged changes to enhance workers’ rights and support people to stay in work. The Government have delivered on these commitments by supporting a package of six Private Members’ Bills, helping new parents, unpaid carers and hospitality workers, and giving all employees easier access to flexible working and giving all workers a right to request a more predictable working pattern.
Just before I conclude, I will address a couple more points that were raised by the right reverend Prelate the Bishop of Bristol and alluded to by the noble Baroness, Lady Kramer, on AI—a very important subject generally. The priority of the Department for Work and Pensions in the labour market is to ensure that people continue to have access to good and meaningful work. This involves adapting to structural changes in the labour market now and in the longer term. There is a lot going on in my department on AI, and I will add that to the letter I am writing, and I will copy in all Peers.
I conclude by reflecting on the fact that, this month 40 years ago, this House was debating the degree of emphasis on new technologies in youth training schemes. We have seen the positive impact that computers have had on the workplace since then. As new technologies such as AI emerge, the DWP’s key focus will be to understand their impacts on the labour market and harness their potential to better support people to work. I hope that, in another 40 years, this House will reflect on the contribution that these new technologies have made to similar improvements in the labour market participation of other groups.