Rising Unemployment and Disability Benefit Claims Reflect Labour Market Challenges in Britain
The unemployment rate in Britain increased slightly to 5.1% in October, up from 5.0%, amid ongoing challenges in the labour market. Currently, 2.8 million people have dropped out of the labour market entirely, having stopped looking for work.
A significant factor influencing labour market participation is the prevalence of disability, with 10.4 million working-age people—about a quarter of those aged 16 to 64—reporting a disability. Approximately one in ten people claim incapacity or disability benefits, which collectively represent a benefits bill of £76.8 billion, or about 6% of government spending.
Incapacity benefits are means-tested and include a work capability requirement, providing a top-up of £4,994 above Universal Credit; recipients are not required to search for work. Disability benefits, such as Personal Independence Payment (PIP), are not means-tested and can be claimed while working, with amounts ranging from £1,500 to £9,610 per year. Around 45% of PIP claimants have mental health conditions as their primary diagnosis, and about one in six claimants are employed.
In fact, 86% of health-related-benefit claimants have a mental health condition as their main issue. This deterioration in mental health coincides with increased NHS mental health service contacts and rising antidepressant use. Additionally, deaths of despair rose to 3,700 in 2023, a 24% increase from pre-pandemic levels. Among individuals aged 45 to 54, deaths of despair have become a more common cause of death than heart disease.
Local reports highlight the impact of these issues, such as in Bidston Rise, Birkenhead, where 27.7% of residents experience depression and nearly 40% of working-age people are not seeking employment.
In response, the government is reviewing mental health diagnoses, including autism and ADHD, amid concerns about overdiagnosis. Kemi Badenoch, a government official, has called for action to crack down on the exploitation of the benefits system. Policy and economic factors linked to these labour market challenges include austerity-era cuts to housing benefits, the raising of the pension age for women, and the lowering of the benefit cap.
