Nearly 900,000 people live in neighbourhoods where more than half of working-age adults claim out-of-work benefits, according to a new report from the Centre for Social Justice (CSJ). The think tank identified 3,369 welfare hotspots across England and Wales, exposing concentrations of worklessness that can be concealed by national and regional unemployment figures.
The areas, which contain around 250 residents on average, have a combined population of 860,000 – larger than the city of Leeds. In almost 19,000 neighbourhoods, more than one in three working-age adults claim out-of-work benefits, with almost six million people living in these areas.
Report warns of hidden crisis
The findings are contained in State of Dependency: How a broken benefit system is holding Britain back, the first report from the CSJ's Welfare 2030 inquiry, chaired by former Work and Pensions Secretary Sir Iain Duncan Smith. The report warns that Britain's apparently low unemployment rate disguises a much deeper crisis of hidden worklessness, increasingly driven by health-related benefit claims.
Around 6.7 million people across England, Wales and Scotland now receive at least one out-of-work benefit, equivalent to one in six working-age adults. Sir Iain warned that the scale of the problem had become normalised, despite the damage it was causing communities.
He added: “Britain is now living with levels of worklessness that would once have been treated as a national emergency. Yet because much of that worklessness is recorded as incapacity rather than conventional unemployment, it has gradually become accepted as a fact of life since the pandemic. This is not good enough. Lives are being ruined and yet this issue hides in plain sight.”
City-by-city breakdown
The analysis reveals stark differences between neighbourhoods, even within the same city. Birmingham has 166 neighbourhoods where out-of-work claimant numbers exceed half the estimated working-age population. Liverpool follows with 112, Sheffield has 82 and Bradford has 81.
In two neighbouring areas of Bradford, the claimant rate rises from 26% to 83%, despite the centres of the areas being just 300 metres apart. Liverpool and Birmingham have particularly high concentrations of welfare hotspots. Around 22% of neighbourhoods in Liverpool and 18% in Birmingham have out-of-work claimant numbers equivalent to at least 40% of their working-age population. In London, the equivalent figure is just 2%.
Blackpool has the highest proportion of neighbourhoods where more than half of working-age adults claim out-of-work benefits, with 15% of its areas meeting that threshold. Hartlepool follows at 12%.
Health and intergenerational impact
The report warns that children growing up in communities with fewer working adults risk having weaker everyday connections to employment, potentially allowing worklessness to become entrenched across generations. It also highlights the growing role of ill-health, particularly mental health difficulties, in keeping people out of work.
Since 2012, the number of working-age people reporting a mental health difficulty has increased by 3.2 million, according to the report. Since 2019, the number of working-age benefit claimants with no requirement to seek or prepare for employment has risen by almost 1.7 million. The incapacity benefit caseload has increased by 61%, while the prevalence of disability among working-age people has risen by 16%.
The findings come as the working-age benefits bill continues to climb sharply. Spending is forecast to reach £136.1 billion in 2026/27, an increase of £49.6 billion in real terms since 2019/20. That is equivalent to around £1,200 extra for every income taxpayer. The bill is projected to rise further to almost £150 billion in 2029/30, with the incapacity benefit caseload expected to exceed four million.
Sir Iain said: “Abandoning millions of people in left-behind areas without the purpose, security and dignity that come with employment is neither compassionate nor sustainable. This report proves beyond doubt that it is time for the next generation of welfare reform.”
The CSJ is calling for an overhaul of health-related benefits to restore incentives to work and replace a system it says risks writing people off with personalised support towards employment. It argues that welfare reform must be accompanied by investment in struggling local economies. The full findings of the 250-page report are due to be published on Tuesday, October 13, ahead of the Budget.
