The Department for Work and Pensions (DWP) is set to unveil a "groundbreaking" White Paper this autumn, aimed at tackling rising unemployment and long-term sickness in the UK.
The plan comes as unemployment levels have increased by 63,000, prompting what officials are calling "the greatest employment challenge for a generation".
Liz Kendall, Work and Pensions Secretary has launched the Labour Market Advisory Board, bringing together experts from business, unions, and academia to address the root causes keeping people out of work.
The board's first meeting focused on strategies to support the Government's target of achieving an 80 per cent employment rate.
This initiative is particularly crucial as the UK remains the only G7 nation where employment figures have not rebounded to pre-pandemic levels.
Speaking at the launch of a report by the Institute for Employment Studies, Alison McGovern MP pledged to "turn the page on years of failure", saying there has been too much focus on welfare and social security and not enough on helping people into work.
The UK unemployment rate fell from 4.2 per cent to 4.1 per cent in the three months to JulyPAShe said the employment challenges the country faces now are similar to the mass unemployment of the past - with 2.8 million people out of work sick and over nine million people economically inactive – neither in work nor looking for work.
The IES report describes the UK’s employment service as ‘the least well-used in Europe’, arguing it often acts more as an extension of the benefits system.
The organisation has called for a "clearer separation between employment support and social security delivery".
Recent figures from the Office for National Statistics (ONS) paint a concerning picture of the UK's employment landscape. Between May and July this year, Scotland's unemployment rate for those aged 16 and over stood at 4.2 per cent, slightly above the UK-wide rate of 4.1 per cent.
The situation is particularly dire for young people. Nearly 900,000 individuals aged 16-24 are not in education, employment, or training - an increase of 74,000 from the previous year.
Alarmingly, there has been a 29 per cent rise in the number of 16-24-year-olds who are inactive due to long-term sickness since the pandemic. This figure has jumped from 184,000 to a record high of 237,000.
Overall, approximately 2.8 million people are out of work due to long-term sickness, with a total of 9.4 million economically inactive individuals across the UK.
Kendall said: "Spiralling inactivity is the greatest employment challenge for a generation, with a near record 2.8 million people out of work due to long-term sickness. Addressing these challenges will take time, but we're going to fix the foundations of the economy and tackle economic inactivity."
Paul Gregg, Chair of the Labour Market Advisory Board, added: "Having studied the UK's labour market across several decades, it is clear that the current labour market faces a deep-seated set of challenges. We have seen a sharp increase in economic inactivity and long-term sickness, most notably in our young people post-pandemic."
A Get Britain Working Again White Paper, to be set out in the Autumn, will outline plans to overhaul jobcentres, deliver a youth guarantee, and devolve powers to Mayors and local areas to deliver work, health, and skills plans.
A new youth guarantee for 18-21-year-olds is also on the agenda, aiming to provide work, apprenticeships, and skills training to those in need.
McGovern emphasised the need to move away from an "obsession with welfare" and focus on boosting employment.
She said: "The lockdown generation has been failed - consigned to the scrapheap because they have been denied the support and opportunities to find work, get into work, and get on at work.
"It’s truly shocking that we have businesses crying out for staff at the same time there are queues round the block for foodbanks – a dire situation that we’re determined to put right.
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"The obsession with benefits management must end if we’re to bring about the change the country is crying out for, and that’s why we have a plan to get Britain working again. That is how we will deliver on our mission for growth across the country and ensure future generations are never abandoned by their government again."
The IES report comes as McGovern set out plans to make a fundamental shift to active labour market policies that break down barriers to opportunity, tackle the root causes of inactivity and help deliver the Government’s ambition to reach an 80 per cent employment rate.
The Government has taken immediate action to transform Britain’s workforce through Skills England, while plans to cut NHS waiting times will get Britain back to health and back to work.
