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Government Warned Benefit Sanctions Could Be "Costly" For Productivity

Benefit claimants must fulfil certain obligations to avoid being sanctioned. (Alamy)

4 min read

A leading benefits expert has warned the government’s policy of benefit sanctions will be “costly” for productivity – with warnings it will make “very little difference” for economic inactivity.

In March, Jeremy Hunt said sanctions would be pursued "more rigorously to those who fail to meet strict work-search requirements or choose not to take up a reasonable job offer" as part of the government's push to drive down economic inactivity. 

The government has staunchly defended its sanctions policies, arguing conditionality of unemployment benefits is an important incentive to ensure people look for work. 

There are four conditionality groups for claiming benefits, and there are also four sanction levels; in the most severe cases, claimants can be sanctioned for up 182 days – and can see a sharp reduction in the amount of money they receive. 

Professor David Webster, one of the UK’s leading academics on benefit sanctions, warned that they were not the answer to the UK’s issues with economic inactivity and a growing productivity crisis.

“It’s very costly, in terms of productivity, to push people into jobs that are below their level – and they don’t want, and where conditions are worse," Webster told PoliticsHome. 

"Obviously it's an encouragement to employers... but if you allow employers to buy very cheap labour that’s no help for productivity.”

Webster, formerly a senior local government official and a frequent contributor to select committees, also said focusing on workers that are able to be sanctioned misses the core drivers of economic inactivity.

“This government has its current economic rationale for cranking up sanctions because of supply-side labour shortages, their argument is conditionality will push people into labour market," he said. 

"But when you look at it the sanctions side of things is going to make very little difference – the major elements in the decline in availability of labour are early retirements, prosperous people who feel they can afford to retire, and also an increase in sickness, including sickness among young people, keeping them out of the labour market.”

Universal creditHis warning comes as latest data shows that benefit sanctions are currently extremely high, with 534,826 sanctions on all benefits imposed in 2022 – the most since 2014. 

According to data from the Office for National Statistics (ONS), around 21 per cent of people between the ages of 16 to 64 were economically inactive between January to March 2023. 

Data also shows monthly universal credit sanctions were on average 41,838 in the quarter to January 2023 – significantly higher from the average in the last full three months before the pandemic when it was 17,293.

Stephen Timms, chair of the work and pensions committee, told PoliticsHome "there is an important role for sanctions" – but added the current system is too "wooden". 

“I think ideally more flexible sanctions system, which recognises the reality of peoples situations, would be better," said Timms. 

“For example if someone has to go and see the doctor, you shouldn’t be sanctioned for doing so – but at the moment, people are quite often sanctioned… a bit more flexibility and ability to understand actual situations people are in would be good.”

However, he did add that it is unlikely the government's policy of sanctions will tackle the UK’s economic inactivity and productivity problems – arguing it risks “forcing people into the wrong jobs which they are not suited for”.

“I don’t think they’re very effective in tackling inactivity because on the whole people who are economically inactive are not in benefits system,” said Timms.

“Sometimes the emphasis that’s placed on sanctions is a bit inappropriate, because they’re not really addressing the problem they’re really concerned about.”

Labour peer and professor of social policy, Baroness Ruth Lister, told PoliticsHome there should be a "fundamental review for a more effective way of applying conditionality". 

Lister criticised the cumulative nature of sanctions, which can lead to months of reduced payments, suggesting they should only be applied for as long as a claimant fails to fulfil their conditions – rather than accumlating. 

Like Webster and Timms, she also said it was unlikely sanctions would help the government drive down economic inactivity. 

However, a spokesperson for the Department for Work and Pensions said sanctions make it more likely for people to search for work or prepare for work – with the government arguing it will help grow the economy. 

“The majority of claimants – 72% – agree that the potential for sanctions means they are more likely to look for work or take steps to prepare for work," they said. 

“Being in work provides financial security, is the best way for people to get on in life, and has other health and wellbeing benefits - all while growing the economy.

"That’s why we’re helping more people move into work by removing barriers and increasing work coach support.”

“People are only sanctioned if they fail to meet the conditions they agree to without good reason.”

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