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LONDON: COVID, the gig economy and perverse welfare incentives are fuelling the worklessness crisis. Millions are deemed too ill to work, rising numbers due to mental ill health, and reversing these trends is a huge task.

Under a stone archway at Nottingham Council House, 24-year-old Marie sits down and rolls a cigarette as her friends play music on a portable speaker. A plaque on the building celebrates trailblazing women, including Nottingham’s first female council member in 1920.

Another features a quote from DH Lawrence heralding women as “giantesses” who will “break through everything”. But Marie, who was born and bred in the East Midlands city, is not bound for high office, or indeed any office. She is one of a growing number of people in Britain signed off work as long-term sick. She has not had a job since a brief stint in a fish and chip shop aged 18.

Marie, who did not want to use her real name, said she had been diagnosed with a series of mental health conditions, including ADHD and autism, as a teenager. She receives universal credit, as well as a monthly personal independence payment, or PIP, and her benefits come without any conditions, meaning no trips to the jobcentre are needed. Asked if she felt she could apply for work, she said: “Not at the minute, no. I’ve had a job so I know how I feel. The thing is, it stresses me out and then I snap. There is so much stress that comes with a job.”

In the three months to January 2024, 9.3 million Britons were economically inactive — neither in work nor looking for a job — according to the Office for National Statistics (ONS). The figure, equivalent to one in seven adults, is a ten-year high and 819,000 more than before the pandemic.

The main cause of the increase is sickness, fuelled by people such as Marie who are signed off long-term due to mental health conditions, a trend exacerbated by the pandemic. A million more people say they are struggling to function because of poor mental health than three years ago, making it the leading cause of disability among working-age adults.

About 2.7 million people in the UK are economically inactive because of long-term illness, and their status, quietly over recent months but with increasing force, has become one of the biggest headaches for this and a future government. Spending on health and disability benefits is forecast to rise by a third, or £25.2 billion, to £90.9 billion by 2028-29, according to the Office for Budget Responsibility (OBR).

Mel Stride, the work and pensions secretary, took the first steps this week to address the issue. He said Britain’s approach to mental health had “gone too far” and strayed into “labelling the normal ups and downs of human life as medical conditions”.

He announced plans to make 150,000 people signed off with “mild” conditions look for a job. Yet the problem appears to be both wider and deeper, a confluence of the pandemic and furlough, the burgeoning gig economy and its zero-hours contracts and Tory benefit reforms producing incentives for people to stay out of work.

In Nottingham, where 16,300 people aged 16 to 64 are classed as long-term sick, Marie said her mental health issues would have to be addressed first, if she was to get back to work. She said: “I have borderline learning difficulties so it’s sometimes hard for me to understand things better than everybody else. I’ve been like this for a few years — it doesn’t just come and go. It’s constantly there. I’ll have to figure out how to settle it away before I can (work).” In the meantime, her benefits cover most of what she needs. “My gas, electric and bills are all paid for. I don’t have to apply for any job right now.”

A fifth of young people aged 16 to 25 in Nottinghamshire said a mental health issue had stopped them from applying for a job in the past 12 months, according to a survey by The Prince’s Trust. In Nottingham, worklessness is a growing problem: 32 per cent of adults in the city were economically inactive in the year to last September, 11 percentage points higher than the UK average.

In the six months to September, the city’s total of long-term sick increased by 3,600, around 8.5 times the average increase in Britain over that time. The Institute for Public Policy Research (IPPR) counts the city as one of the ten areas of the country suffering the “double injustice” of high levels of sickness and low levels of economic activity. The most recent data suggests that one in four adults in Nottingham are off work because of long-term sickness, just below the national average.

Claire, 25, sitting in the city’s Old Market Square, was one of those 3,600. A former beauty worker, who has polycystic ovaries and mental health problems, she was signed off long-term sick in March last year, following a ten-minute phone call with an assessor. She said: “I had an assessment for my limited capability. They told me it would take an hour but I was on the phone for ten minutes. The woman said she had more than enough. Two days later they said I’d qualified.”

Claire also has no requirements on her sickness benefits and has had “no contact or communication” with the Department for Work and Pensions (DWP) since being signed off. She said that had made it hard to seek help for her financial problems.

Her friend Heather, 26, sitting next to her, is also signed off work and receiving benefits for depression and anxiety, as well as problems with her back and knees. Alongside this, she is being tested for autism. The mother of one has to go to appointments at the jobcentre once a month and receives £1,275 a month in universal credit and PIP payments.

PIP is a disability benefit introduced as part of the coalition government’s effort to simplify the welfare system. The centrepiece was the introduction in 2013 of universal credit, designed to ensure that work pays better than benefits. Overseen by the then work and pensions secretary Sir Iain Duncan Smith, it brought jobseeker’s allowance, child tax credit, income support, employment and support allowance, and housing benefit all under one umbrella of universal credit. PIPs, also introduced in 2013, aim to support individuals facing higher living costs caused by difficulties in mobility or needing help to carry out everyday tasks, and are not based on income.

Heather, who has been signed off since the age of 19, when she had her baby, said she didn’t see herself returning to the workplace “anytime soon” due to her mental health conditions. She said: “I would like to be out working but I cannot go out anywhere without somebody, and if I do I have to have music on. Being at work is a lot of strain. Whereas on benefits, there’s no added stress, so your health feels better.”

Mental ill health, as Stride noted, is one of the biggest drivers of the rise in worklessness. Half of those who are economically inactive report having suffered depression or anxiety. Across Europe, depression and anxiety disorders became more common after the onset of the pandemic, found a review led by University College London, which studied 20 countries. But although there were increases, researchers did not see a “second pandemic” of mental health problems. In Britain, though, with lengthening waiting lists for NHS mental health treatment, particularly for the young, the problem seems far more acute.

Sophia Worringer, deputy policy director at the Centre for Social Justice, a think tank co-founded by Duncan Smith, said that while there was “real need” among those out of work because of mental health problems, there was potentially an “overinterpretation or a misdiagnosis” of it.

She said: “The process of being signed off sick and the doctor saying you have a mental ill health condition to the extent that you can’t work is a very well-trodden path and an easy lever for people to pull. It’s a way people can go to the GP and pretty much 90+ per cent of those who go with requests for signing off work receive it. There’s not much push back at all.”

Worringer also worried that work had been presented to the younger generation “as something that is anathema to thriving and to a good life” instead of something that can help with self-esteem, a social network and putting structure into a day. “It’s not something that can only be done when you have perfect mental health. Good work can be part of providing a good environment for people’s mental health to flourish.”

There is also a sense in which the success of universal credit makes it open to exploitation by employers in today’s gig economy and causes people to hold off looking for work. People who qualify for universal credit — a monthly payment to cover living costs — can apply for extra sickness benefits via a work capability assessment (WCA). A single adult aged over 25, if deemed fit for work, is entitled to £368.74 a month in standard universal credit allowance.

Those deemed capable of work in the future receive the same amount, but must attend training courses. Once they begin work, this category can earn up to £631 a month before the government starts clawing back their benefits. (A third of those on universal credit are in work.) Those deemed unable to work receive an extra £390.06, more than doubling the standard award, with no conditions attached.

Worringer said the relative stability of welfare contrasted with the instability of the jobs market, which has seen a huge increase in zero-hours contracts since universal credit was introduced. This makes it feel “risky” for those going back to work, Worringer said, as they would have to reapply for benefits if their stint in employment did not work out.

Employers were also playing the benefits system to keep wages down. “Employers for the most part are relying on the welfare system to top up wages,” said Worringer. “While over time the hourly wage has increased, the weekly wage has stagnated over the past decade. I know that zero-hours contracts are very useful for some people, but … it seems to be serving the interests of employers.”

Some analysis also suggests that welfare reforms over the past 14 years may have incentivised people to seek out the higher bracket of benefits. Policy in Practice, a consultancy, estimated that 3.9 million people are now unemployed while claiming a range of means-tested benefits without any work requirements, up from three million in 2019. It also found that the number of people on out-of-work benefits who must look for a job or be prepared to do so — 1.6 million — has fallen by a third since 2020 after a surge during the pandemic.

Deven Ghelani, Policy in Practice chief executive, said previous reforms had created a “structural incentive” to claim incapacity benefits, with people on universal credit getting up to £4,320 a year more if they were long-term sick with no work requirements. One benefit reform in particular appeared to fuel this. In 2015, George Osborne axed a £30-a-week payment to those required to prepare for work. It has led to an increase in applications for more expensive benefits with no work requirements. Ghelani said “the harshness” of the back-to-work regime created incentives to “escape it by being sick”. One solution would be to boost statutory sick pay, to lessen the risks of falling ill while in work.

The Centre for Social Justice examined the structure of the benefits system in a report in December which noted that “long-term sickness has become an entrenched issue within the UK workforce and is continuing to get worse”. It said that 53 per cent of those inactive because of long-term sickness reported having depression, bad nerves or anxiety. The report authors were told by frontline charities that “a minority of struggling parents are leaning into health diagnoses for their children as a way of increasing welfare awards”.

The introduction of the two-child limit to child tax credit and universal credit has meant previous avenues to unlock further welfare support through more children are no longer open. Instead, parents are “looking to mechanisms” in the welfare system to increase their income. It gave the example of how a single unemployed parent in Jesmond, Newcastle, with two children would be entitled to approximately £20,142.60 a year in all benefits.

But if the parent had one child with a low-level disability, such as ADHD, they could be eligible for £27,024.12 a year under the disabled child element of universal credit and disability living allowance. If the parent also has a mental health condition, such as anxiety, the figure could rise to £33,103.68 a year.

Worringer said people could not be blamed for looking to incentives that exist to increase their household income. She said: “It’s more than just a financial calculation, it’s also about the nature of the work that’s available.”

Stride intends to rewrite guidance so that only people with the most severe mental health conditions can be signed off because work would pose a “substantial risk” to their health. He is separately introducing a requirement for people who suffer from milder problems, such as social anxiety, to take up jobs where they can work from home. But the reforms are not due to come into force until after the general election.

Liz Kendall, the shadow work and pensions secretary, insists there would be “no option of a life on benefits” under a Labour government, announcing plans to recruit 8,500 more mental health workers. Kendall promised that the sickness benefits bill would fall under Labour, but did not specify what tougher measures the party would take.

The OBR said that if the rate of working-age adults in employment could be returned to its pre-pandemic trajectory, it would add half a million people to the workforce and reduce borrowing by £18.7 billion by 2027-28. But on the streets of Nottingham, the idea of going back to work feels a long way off. “If I was to go back to work, I could only do it part-time,” said Claire.

“But the money I’d earn is basically what I’m getting now and I wouldn’t have the benefit of having things like (the cost of) my prescriptions covered … is it really going to be worth it?”

A Department of Work and Pensions spokesman said: “Our landmark welfare reforms will help an extra one million people break down the barriers to work, as this government makes work pay — cutting taxes for the average worker by more than £900 and helping people build better lives.

“We have reduced the number of workless households by one million since 2010 but we’re going further with a £2.5 billion Back to Work Plan that will help thousands into jobs, including the long term sick.

“This comes as recent Budget measures are estimated to boost the labour force by 300,000 workers, while our changes to the Work Capability Assessment will cut the number of people due to go on the highest tier of incapacity benefits by 370,000 — people who will now be supported into work.”