SUSE have teamed up with 50 Degrees to bring you regular updates and insight into policy, funding opportunities and developments that will impact our sector.

In their first article, David MacDougall (Managing Consultant at 50 Degrees) focuses on welfare reform and the impact this is having on economic inactivity in Scotland.

Back to the Past?

October 21 was Back to the Future Day. A day remembering Marty McFly and Doc as they travelled in the DeLorean time machine to October 21 (2015). Rather than the future, our concern is that we are entering a Back to the Past moment in welfare policy and the impact on economic inactivity in Scotland.

Post Covid-19, we have seen a remarkable bounce back in employment rates (albeit with local engrained hot spots of long-term unemployment), and a more alarming and sustained rate of economic inactivity. 50 Degrees has been supporting local government, city regions and employment and healthcare organisations to make sense of these trends and put in place solutions designed to progress people back into sustainable work that pays a fair wage.

Welfare Reform

Employment & Support Allowance (ESA) is traditionally the primary benefit people claim when they are diagnosed with a health condition or a disability. ESA has remained stubbornly high over the last five years (180,000 claimants across Scotland), especially in older industrial areas such Glasgow, Ayrshire and North Lanarkshire where around 65% of claimants have been in receipt of ESA for over five years and a further 30% between two and five years (DWP, Oct, 2023).

However, the ESA eligibility criteria changed during the final rollout of Universal Credit (UC) in 2018. The introduction of the “new style” contributory based ESA represents a significant policy change. Eligibility for new style ESA is based upon the amount of national insurance contributions claimants have paid over the last two or three tax years. Anyone who does not qualify for new style ESA needs to make a claim for UC and undertake a Work Capability Assessment (WCA).

From a policy perspective, this change to benefit eligibility is important. New claimants not eligible for new style ESA now need to claim UC and undertake a WCA. Analysis of the UC caseload highlights a worrying and alarming trend. Claimants who are deemed not fit for work are now put in to the UC ‘No Work Requirement’ group. This means they are not required to engage with Jobcentre Plus unless their status changes (normally after a further WCA or change in circumstances).

The bar chart below outlines this dramatic increase in UC claimants with No Work Requirement in a pre and post Covid-19 in Scotland

The graph shows a dramatic increase in UC claimants with No Work Requirement in a pre and post Covid-19 in Scotland. Dates range from 2019 to 2023, showing a steady increase from just over 50,000 to over 200,000 claimants.

Emerging Trends

Over the last 18 months there has been significant debate to identify the primary causes of economic inactivity. This is a research topic we will be exploring in our future series of articles. However, there are clear trends emerging:

  • Increase in Claimants over 50: Covid has displaced a large cohort of older workers who have been unable to be reconnected back into the labour market and require more intensive support and interventions to address underlying health conditions (mental health, musculoskeletal conditions).
  • Upsurge in Youth Unemployment: Younger people are more inclined to enter Further or Higher Education rather than access training and support to find employment (this includes apprenticeships). There has also been a sharp increase in young people claiming economically inactive benefits due to a health condition (mental health is the primary condition due to the impact of Covid)
  • Accessing Support and Integrating Services: There is a high demand for phycological therapy services and claimants struggle to access the support they require due to high waiting lists.

What might those interventions and levers be. Our reflections based on engagement and support with commissioners and policy makers globally suggest multiple options:

  • Investment in local health services: Addressing economic inactivity will require greater investment in local health services and interventions. In Scotland, over fifty-five per cent of ESA claimants cite mental health as their primary condition and a further twenty per cent possess a musculoskeletal condition.
  • Effective Community Engagement Strategy: There is a tendency for economically inactive claimants to not access formal support through JC Plus unless they have to (through mandation). Research suggests they are concerned about the impact this may have on their benefits, despite their willingness to look for work. Claimants are more inclined to access Informal channels of engagement facilitated through trusted community networks. This requires a mature, sequenced  and integrated network of support interventions.
  • National and Local Policy Consistency: The devolution of Personal Independence Payments (PIP) to Social Security Scotland provides an extra layer of complexity. There needs to be greater clarity about what the future claimant assessment service looks like in Scotland and unravel what the impact of abolishing the WCA will be on future Scottish Government policy. This level of detail is key to developing long term solutions to addressing economic inactivity and ensuring it does not increase further and lead to another forgotten generation of claimants who have spent the majority of their working age in receipt of benefits.
  • Developing a Robust Future Employability Strategy: The increase in UC claimants with No Work Requirements needs a coordinated localised approach that is consistent across Scotland. The Nobody left behind strategy provides a roadmap to addressing inequalities, but more detail is required to determine what provision will be put delivered to replace FairStart Scotland (if any). We understand this detail is currently being worked through, but a clear and coherent strategy needs to be articulated to address economic inactivity that identify roles and responsibilities combined with transparent key performance indicators.
  • Future Programme Commissioning: A more strategic and coordinated approach to programme commissioning is required given the size and scale of the challenge. There is merit in commissioning a national programme to address economic inactivity and complement local service provision but the role of DWP, the Scottish Government and Local Authorities needs to be agreed and build upon the recommendations of the Smith Commission. Previous experience shows that commissioning national programmes in isolation risks alienating key stakeholders and stifling local integration.

We are in danger of re-creating the ills of the 1980s and 1990s by stealth. Asking ourselves tough questions now and making firm policy commitments will enable us to avoid a Back to the Past moment – and ensure the 2020s are not looked back on as lost opportunity to tackle economic inactivity across Scotland.

Photograph of David MacDougall standing in front of a large window with a city view. David is wearing a green jumper and leaning on a railing, smiling at the camera.

David is an experienced and respected business leader who has worked in a variety of operational and strategic development roles across the Employment, Skills, Justice, Health, Economic Development and Regeneration sectors. Working across a wide portfolio of opportunities David has successfully led bid teams and won contracts and business to business sales worth in excess of £1.5bn.