- Almost 900,000 people living in the nation’s most acute welfare hotspots
- Sir Iain Duncan Smith warns mass worklessness is “hiding in plain sight” as almost 19,000 local areas identified with over one in three on out-of-work benefits
- Working-age welfare bill now up by £50 billion in real terms since 2019/20 – £1,200 extra for every income taxpayer
- Landmark Welfare 2030 report to be published on Tuesday ahead of crunch Budget
The full scale of Britain’s worklessness crisis is to be revealed this week by a major inquiry into the benefit system.
Almost 900,000 people are living in areas where over half of working-age adults are claiming out-of-work benefits, the inquiry found.
The research by the Centre for Social Justice (CSJ) identifies 3,369 “welfare hotspots” across England and Wales with concentrations of worklessness otherwise concealed by national and regional estimates.
The hotspots, comprising around 250 residents on average, are collectively home to 860,000 people – a population larger than Leeds.
In almost 19,000 neighbourhoods, out-of-work claimant numbers are higher than one in three working-age adults. Together, these areas are home to almost six million people.
The findings are to be published in State of Dependency, a 250-page report and part one of the CSJ’s landmark Welfare 2030 inquiry chaired by former Work and Pensions Secretary, Sir Iain Duncan Smith MP.
The inquiry is the spiritual successor to the think tank’s landmark Breakdown Britain and Breakthrough Britain reports nearly two decades ago, which helped to lay the foundations for Universal Credit.
It draws on evidence from hundreds of frontline charities, employers and claimants, concluding that Britain’s apparently low unemployment rate disguises a much larger crisis of “hidden unemployment”, fuelled by soaring 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.
The new analysis examines the crisis at Output Area level, neighbourhoods containing only a few hundred residents.
Birmingham contains 166 neighbourhoods where out-of-work claimant numbers exceed half of the estimated working-age population. It is followed by Liverpool with 112, Sheffield with 82 and Bradford with 81.
The report also reveals extreme differences within individual cities, street by street.
In two neighbouring areas in Bradford, the out-of-work claimant rate rises from 26 per cent to 83 per cent. Their centres are approximately 300 metres apart.
One participant in the CSJ’s Big Listen event in Newcastle said: “I had a spreadsheet of every single young person and where they lived, and I realised they all lived within particular areas of the city – within five or ten streets of each other.”
The report warns that generations can grow up in these communities surrounded by fewer working adults and with weaker everyday connections to employment.
Comparable divides were identified in Nottingham, Leicester and Sheffield, showing how concentrations of worklessness can change within only a few streets.
In total, around 22 per cent of neighbourhoods in Liverpool and 18 per cent in Birmingham have out-of-work claimant numbers equivalent to at least 40 per cent of the working-age population, compared to just two per cent in London.
The report found that worklessness today increasingly appears as “incapacity” rather than unemployment. Mental health is a key driver, with 3.2 million more working-age people reporting a mental health difficulty than in 2012.
Since 2019, the number of working-age benefit claimants facing no requirement to seek or prepare for employment has increased by almost 1.7 million. The incapacity benefit caseload has risen by 6161 per cent – making Britain an international outlier – while the prevalence of disability among the working-age population increased by 16 per cent.
Sir Iain Duncan Smith said:
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.
The reforms I introduced, including Universal Credit, helped drive worklessness to record lows before the pandemic. With political courage and determination, it can be done again.
Leaving 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 working-age benefit bill is set to reach £136.1 billion in 2026/27, up £49.6 billion in real terms since 2019/20 – that is, around £1,200 extra per income taxpayer.
Working-age benefit spending is forecast to rise by £30 billion in cash terms over the course of this Parliament, reaching almost £150 billion in 2029/30 – with the incapacity benefit caseload set to exceed four million – casting doubt on whether the Government’s flagship reviews match the scale of the challenge.
For scale, the entire £8.1 billion spent annually on benefits for 16 to 24-year-olds – as identified by the Milburn Review – is equivalent to little more than a quarter of that increase. The Timms Review, meanwhile, says it will “operate within the OBR’s projections for future PIP expenditure”.
While detailed proposals will follow in part two of the inquiry, the report calls for an overhaul of health-related benefits to restore work incentives and replace a system that writes people off with personalised support towards employment.
It argues that welfare reform must be matched by investment in weaker local economies, ending the use of welfare transfers and mass immigration to compensate for economic failure. Without change, it warns, millions face a “tragedy of wasted potential”.
Its full findings will be published on Tuesday 13 October.
Notes to editors
State of Dependency: How a broken benefit system is holding Britain back is the first report from the Centre for Social Justice’s Welfare 2030 inquiry. The full report will be published on Tuesday 13 October 2026.
Methodology: The analysis covers Census Output Areas in England and Wales. March 2026 out-of-work claimant figures from the Department for Work and Pensions’ Benefit Combinations statistics were compared with official ONS mid-2024 Output Area population estimates for people aged 16–64. Areas with fewer than 50 working-age residents or failing population-consistency checks were excluded, accounting for around 0.4 per cent of Output Areas.
DWP expenditure and caseload tables show working-age benefit expenditure is £136.1 billion in 2026/27 compared to £86.5 billion in 2019/20 (in 2026/27 prices). The Milburn Review estimates that £8.1 billion a year is spent on key benefits for people aged 16 to 24, equivalent to 27 per cent of the £30 billion nominal increase in working-age benefit expenditure forecast between 2024/25 and 2029/30. Figures have been rounded. The £1,200 figure was calculated by dividing the £49.6 billion real-terms increase by approximately 41 million income taxpayers.
Table 1. Local authorities containing the largest number of welfare hotspots
| Local authority | Neighbourhoods where out-of-work claimant numbers exceed half the estimated working-age population |
| Birmingham | 166 |
| Liverpool | 112 |
| Sheffield | 82 |
| Bradford | 81 |
| County Durham | 80 |
| Blackpool | 77 |
| Manchester | 66 |
| Rotherham | 54 |
| Wirral | 54 |
| Newcastle upon Tyne | 53 |
| Nottingham | 53 |
Table 2. Local authorities with the highest share of neighbourhoods that are welfare hotspots
| Rank | Local authority | Areas with more than half on out-of-work benefits | Areas with more than one in three on out-of-work benefits |
|---|---|---|---|
| 1 | Blackpool | 15% (77) | 34% (173) |
| 2 | Hartlepool | 12% (39) | 41% (131) |
| 3 | Redcar and Cleveland | 8% (40) | 25% (119) |
| 4 | Middlesbrough | 8% (36) | 31% (144) |
| 5 | Liverpool | 7% (112) | 34% (555) |
| 6 | Knowsley | 7% (33) | 33% (169) |
| 7 | North East Lincolnshire | 6% (35) | 22% (122) |
| 8 | Neath Port Talbot | 6% (31) | 24% (117) |
| 9 | Rotherham | 6% (54) | 21% (181) |
| 10 | Blackburn with Darwen | 6% (27) | 22% (100) |
| England and Wales | 2% (3,369) | 10% (18,971) |
CSJ analysis of DWP Benefit Combinations (March 2026) and ONS mid-2024 population estimates. Ranked on unrounded figures.