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Connecting People with Jobs

Activation Policies in the United Kingdom

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This report examines recent activation policies in the United Kingdom aimed at moving people back into work. It offers insight into how countries can improve the effectiveness of their employment services and also control spending on benefits. The United Kingdom's policies have helped limit the rise in unemployment during the crisis. It has been at the forefront of reform efforts by OECD countries to transform and modernise policies designed to help the unemployed find work, through major new programmes such as Universal Credit and the Work Programme. Although time is needed for these to gain momentum as well as for a full evaluation of their impact to be carried out, the report identifies a number of areas where consideration should be given to additional measures or adjustments to existing ones.

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Unemployment and related benefits

The UK benefit system has been transformed over the years as unemployment rose to high levels in the 1970s and 1980s, then the caseloads of incapacity and lone parent benefits rose to high levels, and more recently working-age expenditure on tax credits, and child, secondary disability and housing benefits has increased sharply. Much of the current benefit expenditure comes with no or limited labour market conditions, and applies high marginal effective tax rates to workers in low-paid jobs. Since the recession, restrictive measures have been introduced across the range of benefits. The Universal Credit, which is in the early stages of national roll-out, greatly reduces complexity in the structure of the benefit system and ensures that work always pays, but it is not expected to reduce marginal effective tax rates on low-paid workers and may encourage part-time and intermittent work. The traditional procedures for identifying unemployment situations will not be applicable and further development of the new procedures for out-of-work and in-work conditionality is needed.

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