Experts blame the rising cost of health benefits in the UK on the shortcomings of the welfare system
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The rise in the number of health benefit claimants in the UK is caused by design flaws in the welfare system, not by worsening health outcomes or long waits for treatment, a committee of peers has said.
The House of Lords Economic Affairs Committee has urged ministers to act urgently to prevent annual incapacity and disability benefits from rising from the current level of £64.7bn to a projected £100.7bn by 2029-30.
Its findings call into question the government’s assumptions ahead of a promised overhaul of the welfare system, while highlighting the pressure the growing benefits bill is putting on other spending on public services.
In a letter to Work and Pensions Secretary Liz Kendall, published on Monday, the committee said there was “no compelling evidence” that the rising benefits bill was due to deteriorating health conditions or NHS waiting lists.
“People out of work have incentives to seek health benefits; and after receiving them, they have neither incentive nor support to find and accept a job”, it warns.
Lord George Bridges, chairman of the committee, said: “This is a huge and growing social problem. The [government’s] the schedule does not show the necessary urgency.”
He added that the ministers promised to announce plans for social welfare reform in the spring it would be too late to factor the savings into this year’s spending review.
The committee’s diagnosis of the problem differs from the narrative Kendall gave when she set out reforms to support jobseekers in the autumn, billed as the “Getting Britain to Work” plan.
She described the post-pandemic health crisis that has made Britain the only country in the G7 to experience a reduction in the workforce, with 2.8 million people considered economically inactive for health reasons.
They said that problems with official labor market data clouded the picture and that it was not clear whether overall labor market inactivity was higher now than in 2019.
However, since the start of 2020, there has been an increase of 1.2 million people of working age receiving health benefits, which now totals 3.7 million.
The board said this reflected strong incentives for people to claim incapacity benefit instead of unemployment benefits because of the “big financial difference” in the help offered.
People judged to be unfit to work or look for work could double their incomes and avoid tough conditions by switching from Jobseeker’s Allowance to Incapacity Benefit, the committee said. They then risked major income losses if they returned to a business that failed, it added.
New claims for disability benefits did not rise enough to account for the increase in the number of recipients. This is mainly due to the fact that a higher proportion of claims are approved and fewer people withdraw or leave the system after reassessment.
The committee said the process for assessing claims needs to be more rigorous, but the government also needs to give people more support to get back to work and ensure they don’t lose out by accepting a job.
Both unemployment benefits and disability benefits should be reformed, because of the interaction between the two, Bridges said, potentially relaxing the criteria for unemployment benefits while tightening sickness benefits.
Some of the committee’s recommendations are similar to proposals by the previous Work and Pensions Secretary, Mel Stride, which were not implemented, partly due to legal challenges to the consultation process.
A government spokesman said it was “determined to get Britain back to work”, had already taken the first steps to boost employment and would consult on health and disability benefits reforms in the spring.
“It was clear to us that the current social welfare system needs to be reformed, so that it is fairer to taxpayers and people get the support they need,” they added.
