When Work No Longer Protects

The Paradox of Work and Poverty

Work is supposed to be the best route out of poverty. Yet in Britain today, millions of people are employed but still struggling to survive. The government points to 725,000 vacancies as proof that jobs are plentiful, while promoting a policy of "getting people off benefits and back to work." But the reality is stark: jobs are not expanding, they are shrinking, and the quality of work is deteriorating.

The 2025 Budget has squeezed businesses with higher wage costs, frozen tax thresholds, and no meaningful relief on energy or trade. The result is a workforce under strain, where hours are cut, opportunities narrow, and families are forced into welfare dependence or competition for scarce full-time jobs.

Hidden Unemployment: When Hours Disappear

Headline vacancy figures mask what is happening on the ground. Across the country, workers are not just losing jobs, they are losing hours.

Take the example of a small shop in Hull. Since the Budget squeeze, trade has slowed, and the owner has cut staff shifts to save costs. My daughter, who works there, has already lost hours. The owner now covers more shifts themselves, not because the work has vanished, but because the cost of employing staff has risen beyond what the business can absorb with small profit margins.

This is the hidden unemployment of the Budget: people technically remain employed, but their hours shrink to the point where wages no longer cover basic living costs. National statistics count them as "in work," yet their lived reality is one of insecurity and poverty.

How Hour Cuts Affect Families

When hours are cut, families face immediate financial pressure:

• Rent and Bills: Housing costs are increasing annually with inflation, so reduced income makes it harder to keep up with rent and utilities.
• Childcare Dilemma: The government’s free childcare hours scheme helps, but part time or irregular work often doesn’t align with the hours provided. Parents may still face gaps in coverage or extra costs.
• Transport Costs: Families still need to pay for commuting, even if they’re working fewer hours, which eats into reduced wages.
• Pension Contributions: Fewer hours mean lower pension contributions, leaving households exposed to long term insecurity.
• Career Development: Reduced hours often mean fewer opportunities for training, progression, and skill development, limiting future prospects.

Welfare Dependence and the Shrinking Job Pool

For those losing hours, survival often depends on the welfare system. Universal Credit and housing support become lifelines, not supplements, as wages fall short of essentials. This reliance is not a sign of laziness, but of a system where work no longer guarantees security.

Others join the millions already seeking full-time work, competing in an ever shrinking pool of stable opportunities. The Joseph Rowntree Foundation (JRF) notes that 65% of children and working age adults in poverty now live in households where at least one adult works. The Budget's squeeze accelerates this trend: businesses cut back, hours vanish, and the promise of full time employment recedes further.

The Universal Credit Trap

Universal Credit's design creates perverse incentives when hours are reduced:

• Taper Rate: - The current taper rate is 55p in the pound, meaning for every £1 earned above the work allowance, Universal Credit is reduced by 55p.
• Work Allowances: Work allowances exist only for claimants with responsibility for children or with limited capability for work. They are relatively low (around £404 per month if housing support is included, £673 if not), so even small earnings quickly affect benefits.
• Administrative Burden: Claimants must report changes in hours and income through the online journal, which can be frequent and stressful for those with variable work.
• Uncertainty: Universal Credit is assessed monthly, so fluctuating hours or pay cycles can cause unpredictable payments.
• Cliff Edges: While the taper smooths reductions, cliff edges still exist, for example when entitlement to certain elements (like childcare support or housing benefit) suddenly drops off once earnings cross a threshold.

Policy Contradictions: Work Rhetoric vs. Shrinking Opportunities

At the very moment the government is pursuing a "getting people off benefits and back to work" agenda, the reality on the ground is starkly different. Job opportunities are not expanding, they are shrinking. Hours are being cut, vacancies are stagnating, and the pool of stable full-time work is narrowing.

This contradiction creates more stress and insecurity for working families. Those who lose hours are told to rely less on welfare, yet they cannot find the full time jobs that would make welfare unnecessary. Instead, they are trapped between reduced income and reduced opportunity, with the pressure of government rhetoric bearing down on them.

The Vacancy Myth

The government's focus on 725,000 vacancies obscures several critical realities:

• Quality of Jobs: Many vacancies are part time, temporary. The Health Foundation notes that in work poverty is increasingly concentrated in households with insecure work.
• Geographic Mismatch: Vacancies often exist far from where unemployed people live, making relocation or commuting impractical.
• Skills Mismatch: Available jobs may not match workers skills or experience, leaving many excluded despite headline vacancy figures.
• Wage Levels: Many available jobs pay too little to lift families out of poverty. The Joseph Rowntree Foundation (JRF) reports that 65% of people in poverty live in working households.
• Churn Rate: High vacancy numbers often reflect high turnover in poor quality jobs, not genuine expansion of opportunities.

Investment and De-industrialisation: The Missed Opportunity

If successive governments had invested strategically in the country in manufacturing, infrastructure, and innovation workers would be in a far stronger position today. Instead, decades of de-industrialisation have hollowed out Britain's productive base.

The Budget squeeze only exposes this weakness. With fewer industries to anchor stable employment, the UK has become a nation of importers, vulnerable to trade costs and global shocks. Rising minimum wages without matching productivity gains have accelerated offshoring, leaving workers competing for insecure service sector jobs rather than well paid industrial roles.

The Cost of Deindustrialisation

Research from the Economics Observatory shows that de-industrialisation has reduced living standards and weakened resilience:

• Job Quality: Manufacturing jobs typically paid higher wages with better benefits
• Regional Impact: Industrial decline has devastated entire communities
• Skills Base: Loss of technical skills and apprenticeship pathways
• Supply Chains: Dependence on imports makes the economy vulnerable to shocks
• Productivity: Service sector jobs often have lower productivity growth potential

Investment could have reversed this trend. A serious industrial strategy supporting green energy, advanced manufacturing, and domestic supply chains would have created resilience. Instead, we have an economy dependent on financial services and retail, both vulnerable to automation and global competition.

Building Investment and Job Opportunities: What Could Change

Crypto and Innovation Hubs

The UK has ambitions to be a global crypto and fintech hub, and recent legislation has moved in that direction. By classing crypto as property, the government has given investors and innovators legal protections that strengthen confidence in the sector. This was an important step forward.

But progress is undermined by a complex taxation system and regulatory uncertainty that continue to push innovation overseas. A bold policy could change this.

The result would be a win‑win: households gain breathing space, while the taxation system benefits from increased activity. With clearer regulation and simpler tax rules, Britain could anchor innovation at home instead of watching it migrate overseas.

Trade and Industrial Renewal

The recent government has begun to re-negotiate trade agreements, lowering import and export tariffs and repairing gaps left by Brexit. These deals put the UK in a better position, but the benefits will take years to materialise.

Coupled with targeted investment in domestic industry, green energy, advanced manufacturing, and infrastructure they could rebuild resilience and expand job opportunities:

• Green Energy: Offshore wind is already a UK strength, but solar and nuclear need greater investment to secure long term skilled jobs.
• Advanced Manufacturing: High tech production and reshoring supply chains can bring stability and reduce reliance on imports.
• Infrastructure: Digital networks (5G, fibre broadband) and transport upgrades will support productivity and growth.
• Research & Development: Innovation clusters around universities and regional hubs can compete globally.
• Skills Training: Apprenticeships and retraining aligned with green and digital sectors prepare workers for a changing economy.

Energy Bills and Market Mismanagement

Energy prices were rising even before the Ukraine war, then spiked with gas wholesale costs. Record profits for energy companies persisted, while households struggled. The ITV News analysis of Ofgem's £28bn grid investment shows bills will rise by £108 per household to fund infrastructure upgrades.

This demonstrates the policy gap: households are asked to absorb higher costs while companies profit, and regulators rely on blunt instruments like price caps instead of separating green energy tariffs to shield consumers.

Energy Policy Failures

Current energy policy increases costs for working families:

• Grid Investment: Infrastructure costs passed directly to consumers
• Market Structure: Profits privatized while costs socialized
• Standing Charges: Fixed costs hit poor households hardest
• Green Levies: Environmental costs added to bills without income support
• Regional Variation: Rural and Northern areas pay more for the same energy

International Examples: What Works Elsewhere

Other countries have shown more effective approaches to in-work poverty:

Nordic Model

• Universal Services: Free healthcare, education, and childcare
• Strong Unions: Collective bargaining ensuring fair wages
• Active Labor Market: Retraining and support for displaced workers
• Progressive Taxation: Higher taxes funding better public services
• Economic Democracy: Worker representation in corporate governance

German Industrial Model

• Apprenticeships: Strong technical education and training
• Industrial Policy: Government support for advanced manufacturing
• Regional Development: Investment in all regions, not just capitals
• Social Partnership: Cooperation between employers, unions, and government
• Export Orientation: High-value manufacturing for global markets

The Path Forward: Integrated Reform

Ending in work poverty requires reforms that are both structural and practical, balancing long term industrial renewal with immediate household relief.

Short term Interventions

While structural reform takes time, immediate action could help:

• Profit Clawback: Follow the Spain and France model by clawing back excess energy company profits and redirecting them into public services. This reduces the need to raise taxes or push up the minimum wage artificially.
• Energy Bill Relief: Peg green energy separately from gas, delivering immediate household savings.
• Benefits Reform: Reduce taper rates and increase work allowances to make extra hours financially worthwhile.

Long term Transformation

Sustainable solutions require long term commitment:

• Industrial Renewal: Support green manufacturing, advanced production, and innovation clusters to rebuild resilience.
• Regional Investment: Target left behind areas with infrastructure and industrial hubs.
• Skills Revolution: Commit to lifelong learning and adaptability for a changing economy.
• Ecological Transition: Anchor growth in sustainable development and green jobs.

Conclusion: Why In Work Poverty Persists

In work poverty is not the failure of individuals, it is the failure of policy. Since the 2000s, successive governments have treated wage rises as a cure all, while ignoring the structural costs that keep households poor, housing, energy, trade, and public service inefficiencies.

The 2025 Budget has deepened this pattern, squeezing businesses, eroding hours, and forcing families into welfare dependence or competition for scarce full time jobs. Workers are told to rely less on benefits, yet they are pushed into them by shrinking opportunities.

Without structural reform and investment in industry, affordable housing, fair energy tariffs, and genuine support for small businesses wage rises will remain temporary fixes. Employment alone no longer guarantees security.

Until governments confront the long term drivers of poverty, Britain will remain a country where work does not protect against hardship and where policy rhetoric continues to mask the reality of economic insecurity.