Destruction of industrial Britain costing the Exchequer billions

8th November 2016

Job destruction in older industrial Britain has left the Treasury with a crippling welfare bill and lowered tax revenue, says a new report released today (Monday 7 November).

The on-going cost to the Exchequer is at least £20 billion a year - and possibly nearer £30 billion. The report, from Sheffield Hallam University's Centre for Regional Economic and Social Research (CRESR), shows how the loss of manufacturing and mining jobs since the 1980s has resulted in permanently higher numbers on benefits. The numbers out-of-work on incapacity benefits these days Employment and Support Allowance (ESA) are up from around 750,000 to around 2.5 million. The highest claimant rates are nearly all in older industrial Britain, where typically 10 per cent of all adults between the ages of 16 and 64 are out-of-work on ESA. ESA and add-on benefits for ESA claimants cost the Treasury a staggering £34 billion a year, says the new report, of which a substantial part is attributable to job loss. In addition, low wages in former industrial areas have depressed tax revenue and increased spending on in-work benefits such as Tax Credits. The report shows that spending on several key welfare benefits is nearly three times higher in the older industrial areas of the North, Scotland and Wales than in the most prosperous parts of Southern England. The report also shows that welfare reform hits communities in older industrial Britain disproportionately hard. As the report points out, in effect they are now being meted out punishment for the destruction wrought to their industrial base. The new report is being released just a fortnight ahead of the Autumn Statement, when Chancellor Philip Hammond will grapple once more with the budget deficit. It also comes at a time when, in the wake of the Brexit vote, the Government led by Theresa May has voiced new concerns for the 'places left behind' and has promised to deliver a new industrial strategy. Co-author of the report, Professor Christina Beatty, says: -The Treasury has misdiagnosed high welfare spending as the result of inadequate work incentives and has too often blamed individuals for their own predicament, whereas in fact a large part of the bill is rooted in job destruction extending back decades. Co-author Professor Steve Fothergill adds: -Our figures show that approaching half the current budget deficit is the result of job destruction in Britain's older industrial areas. The new report, Jobs, Welfare and Austerity: how the destruction of industrial Britain casts a shadow over present-day public finances, by Christina Beatty and Steve Fothergill, can be accessed here. Today's report is the first in a series published to mark the 30th anniversary of the University's Centre for Regional Economic and Social Research (CRESR), one of the most successful, high-profile and influential research centres in its field. The report draws on research undertaken at CRESR over three decades and funded by a wide range of public sector, research council and charitable bodies.