The Notebook: Too many people are leaving the UK workforce. Here’s how to help

Where the City’s movers and shakers have their say. Today, James Reed, CEO of Reed, takes the pen to talk about the UK workforce and how Labour can help lower economic inactivity

How Labour can fight economic inactivity

If I was in the new government, top of my in-tray would be the problem of economic inactivity.

The UK is the only G7 economy where there is less employment now than there was pre-pandemic.

The economic inactivity rate for those aged 16 to 64 was 22.1 per cent in March to May, above estimates of a year ago. This is a huge problem, particularly among young people but also the older generation.

To tackle the issue, we need to address the growing part that mental ill health plays in economic inactivity.

Of course, some people with mental illness are genuinely unable to work, but my experience of running a welfare to work business, Reed in Partnership, for the last 25 years is that for others, going to work can have a protective effect against depression, anxiety and other mental health problems.

By contrast, being out of work only makes matters worse because of the social isolation that it engenders. I’m worried that too many young people are being signed off when in many instances, it would be better to support them in maintaining work, with as much workplace flexibility as possible.

When it comes to older workers, too often they are still subject to ageism in the workplace and bias in recruitment.

It’s supposed to be illegal but it’s still there and we need better enforcement. Ministers also need to make the case for older workers. With a declining birth rate, the fact is we as a society need people to work longer. If we want them to do so, we could put in place an inheritance tax waiver for anyone that works up to retirement age. A lot of highly skilled, well paid workers retire early because they can afford to.

If there was an inheritance tax break in place for those that stayed in the workplace, it would create a real incentive for them to keep going. The future cost of this measure would be offset by the extra income tax and National Insurance that the Treasury would take in.

If ministers are serious about tackling economic inactivity, it’s a measure they should consider for their first Budget in the autumn.

Workers’ rights could backfire

A lot of people in business are trying to reconcile the government’s new package of workers’ rights with the need to grow their firms and in turn the economy. This is particularly the case when it comes to the promise to guarantee employment rights from day one in a workplace. There has always been a ‘get to know you’ period for new workers and employers and that’s a good and necessary thing. I’m concerned that the government’s changes will affect the way businesses hire, with a shift towards temporary contracts, which would make workers less secure and have the opposite effect to that which ministers intend.

A promising Chancellor

It is very welcome to have the first woman chancellor in Rachel Reeves. She appears highly qualified and says she has always wanted to do this job. In my experience, that’s a very good sign. When someone really wants a job, and has wanted it for a long time, generally they put a lot of thought into what’s going to make it a success. That chimes with what I’ve heard about Ms Reeves’ efforts to visit and speak to businesspeople in the run-up to the election. I wish her well.

Climate justice?

A lot of people have expressed concern about the sentences of up to five years imposed on a group of climate protesters under public nuisance laws introduced by the last government. Personally, I feel that if you are going to interfere with the rights of other people to go about their business (and endanger anyone trying to use the roads to get to hospital), you should expect punishment of some sort. But a better answer might have been to make the protesters retrain and fulfil a certain number of hours of ‘green community service’ as retrofit engineers.

A recommendation

I highly recommend A View from the Bridge, an Arthur Miller play starring Dominic West which is playing at the Theatre Royal Haymarket. I managed to get front row seats for £20 with my daughter and it was like being in the room with the characters. The play is very topical, as it’s about illegal immigration and social integration in the US. West is brilliant, as is the narrator, played by Martin Marquez. Bag tickets while you can.