“We believe in the dignity of work and we believe in the dignity of every worker.” So said the prime minister, Sir Keir Starmer, in making the case for a since neutered welfare reform programme.
Yet at the very same time, other government policies have compromised the ability of people to find that work, as the latest official figures make clear.
At 4.7 per cent, unemployment is now at its highest level in four years, while vacancies have fallen for three. The estimated number of openings came in at 727,000 between April and June 2025, 56,000 less than the previous three month quarter.
The number of employees on payrolls for June 2025 decreased by 178,000 (0.6 per cent) on the year, and by 41,000 when compared with May.
Wage rises also continued to trend lower. Their average was recorded at 5 per cent over the three months to May, from 5.3 per cent over the previous three month period. That represents the lowest rate of increase for nearly three years.
Looking ahead, it doesn’t get any more cheerful. The UK’s stats agency also found a sharp rise in the number of potential redundancies, which jumped by 17 per cent in June 2025 compared with May. The number of employers actually proposing redundancies rose by 2 per cent but that number was 42 per cent higher when compared with a year earlier. Over the same span, the number of potential layoffs leapt by 68 per cent.
Yes, the ONS has recently had all sorts of problems with its numbers and the Labour Force Survey is the biggest of those. However, there have been plenty of other independent survey data supporting the underlying premise, which is that the labour market is on the sick list, with more people battling for fewer jobs. The KPMG/REC report on jobs, released at the beginning of the week, said the same thing.
It probably won’t surprise you to learn that the TUC described this unhappy situation as “another toxic Tory legacy”.
It that fair? Some of the problems Labour is now grappling with do have their origins in decisions taken before it assumed office (looking at you, Brexit). Some. But not all. Because, as I have repeatedly argued, it was Labour that opted to fill the fiscal hole it faced after it won the general election by taxing jobs; by making employers pay more for every person on the payroll through higher national insurance contributions (NICs).
Chancellor Rachel Reeves really doesn’t need another headache, but there’s one on the way. The unemployment claimant count is rising (to 1.74 million) and that increases the strain on a threadbare public purse.
Increasing those employer NICs is proving to be a costly way of raising cash. The phrase “cutting off your nose to spite you face” comes to mind.
The problem is that we’re stuck with the policy. Having executed more U-turns than a stunt driver in a Hollywood car chase, the government can’t very easily reverse course on this one. With the public finances in a hot mess, it can’t afford to.
A minister might very well now ask what I’d do to fix this.
Sorry to say, there are no magic bullets to solve this knotty problem. Labour simply has to grow an economy that has lately looked stuck in the mud.
To that end, it is planning to deregulate the City of London in a bid to boost the UK’s chunky financial services industry, something that history tells us could easily blow up in all our faces. Anyone around during the financial crisis of 2007/08 can speak to that.
A debt funded investment spending spree is also on the way, which is less dangerous if the government can find a few winners. Yes, there are dangers here, but I think we should give Reeves the benefit of the doubt. The economy has long been in need of greater investment. This will help.
It’s worth pointing out that part of the reason for UK plc’s recent struggles is that it has been suffering from a hangover from the growth spurt it enjoyed in the first three months of the year that was driven by manufacturers going hell for leather to ship product to the US before the imposition of Donald Trump’s tariffs. That hangover has been nastier than anyone expected but we should see its end reflected in future ONS releases.
And one big consolation from the horrid figures in this latest missive is that it should lock in the expected interest rate cut from the Bank of England at beginning of next month, despite the unexpectedly steep rise in June inflation to 3.6 per cent.
The trouble is, while most forecasters expect the economy to grow in the second half of 2025, it isn’t expected grow quickly. There is also the impact of a tax raising budget to factor in, too.
There’s no sugar-coating it: Starmer and his team are caught in a nasty bind and the “working people” they keep saying they want to help are trapped with them.
What does ‘working people’ mean exactly, Prime Minister?
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