Frank Hoole, 50, was last in a job 11 years ago. That was the year he was made redundant from his job with TSB, the bank subsequently taken over by Lloyds.

Redundancy, followed by the break-up of his marriage, brought on stress and depression for Hoole, who lives in Wolverhampton. Having chosen not to work for the first two years after he was made redundant “for financial reasons” to do with his divorce, he has found it impossible to take on a job since.

A brief period as a self-employed financial consultant did not work out because, as he says: “I found that even more stressful than working for somebody else.”

Today he is trying to get back into work but is finding it hard. “You get good days and bad days,” he says. “There are certain times when you just can’t go to places because of anxiety attacks.”

Working at home does not provide a way out either. “You get even more depressed when you’re by yourself,” he says. “Things go into a downward spiral.”

He is one of 2.4m people in Britain on incapacity benefit. Add the 311,000 who receive the government’s severe disablement allowance and 2.7m are on health-related benefits, three times the figure in 1979.

An increasing number of people, like Hoole, are suffering stress and other mental health problems. Since Labour came to power in 1997 there has been a 38% rise in those getting incapacity benefit for such reasons. The figure now stands at 718,000.

They are not the only ones excluded from Britain’s apparently booming job market. Official figures show that these benefit claimants are part of a near-record 7.8m people of working age who are “economically inactive”.

This sits strangely with other government figures showing employment at record levels and the number claiming jobseeker’s allowance, the main unemployment benefit, down to a 29-year low of 876,300.

Gordon Brown, trumpeting those figures last week, declared that “Britain is working”. The chancellor, in a deliberate reference to the 1979 election poster that helped propel Margaret Thatcher into power, will be using this apparent success as a key plank in Labour’s re-election campaign.

“With the highest levels of employment and the lowest levels of unemployment in our history, full employment is now closer than ever before,” he said.

Independent experts disagree. “The figures sit very oddly with the idea that Britain is working,” said John Philpott, chief economist at the Chartered Institute of Personnel and Development. “The obvious riposte is that it is working, except for the record numbers of economically inactive people.”

There are many reasons for economic inactivity. Some of it reflects higher numbers of students, or women who were working and have taken time off to have children. Early retirement, particularly among men, and the legacy of the industrial shakeouts of the past, when men were left with obsolete skills, also account for some of the inactivity.