Summary

The British economy has altered radically in the last three decades. While international trade in goods still exceeds that in services, employment in manufacturing has halved to just 15% of the total.

After eight years of economic growth, unemployment has fallen back markedly from the historic highs experienced in the early 1990s. Male employment remains at comparatively low levels, part-time employment has risen to 25% of the total and women now account for 45% of the workforce.

There is an increased financial premium on education and a polarisation in wage levels and between employment-rich households, with more than one worker, and employment-poor households, with none.

Population growth has been sluggish for 30 years but demands on the social security system have been increased by growth in the retired population, an almost threefold rise in the number of lone parents and a growing recognition of the needs of disabled people.

Spending on cash benefits has more than doubled in real terms since the early 1970s and now accounts for 30% of total public expenditure. Coverage is comprehensive and nationally uniform and comprises a mix of insurance, means-tested and other non-contributory schemes. Retirement pension is the most expensive element, accounting for 37% of the total, but means-tested schemes, which together absorb 32% of total expenditure, are more important than in continental Europe

Public support for the cash benefit system remains strong but, echoing political rhetoric, there is also concern about its possible disincentive effects and the existence of fraud. Benefit recipients themselves report financial hardship and a sense of shame associated with being a claimant.

A degree of consensus that employment is the principal defence against poverty has replaced outright ideological hostility towards the benefit system, evident among some politicians during the 1980s. Policies are currently being ‘modernised’ and made proactive so as to promote work for those who can and support for those who cannot.