The enduring impact of closing factories and shutting coalmines in the 1980s has been revealed in new research showing that the drain on the exchequer from former industrial areas is responsible for up to half the government’s £55bn budget deficit.
In the first comprehensive analysis of the cost to the state of the de-industrialisation that began three decades ago, Sheffield Hallam University said the annual bill was at least £20bn and was perhaps as high as £30bn.
The report found that the cumulative legacy of the hollowing-out of manufacturing and the year-long miners’ strike of 1984-85 was a far heavier concentration of people claiming incapacity benefits than in the richer parts of Britain and a more widespread use of tax credits to top up the wages of those in low-paid jobs.
The report’s co-author, Prof Steve Fothergill, said: “The long-term effect of job destruction in older industrial Britain has been to park vast numbers out of the labour market on incapacity benefits, these days employment and support allowance (ESA). The cost to the Treasury is immense, especially if all the top-up benefits are included.
“Added to this, low wages in these weaker local economies have jacked up spending on in-work benefits such as tax credits and reduced income tax revenue. None of these impacts have diminished over the years, despite the recent upturn and efforts to cut claimant numbers.