Next government 'must examine drivers of disability benefit spending, not rush to restrict'

Resolution Foundation calls for "serious strategy" involving the NHS and employers as well as DWP and the Treasury
Photo: Rosemary Roberts/Alamy Stock Photo

The next government must investigate the reasons for the rising working-age health-related benefits bill rather than treating it as a problem for the Department for Work and Pensions and Treasury to fix, a think tank has said.

Under Strain, a briefing note by the independent think tank the Resolution Foundation, urges politicians to focus on the reasons why more people are claiming disability benefits like Personal Independence Payments, rather than making “rushed attempts” to drive down spending by restricting access to welfare support.

The analysis finds that the biggest spending pressure on health-related benefits for working-aged people is the rising number of claimants, not more generous payments, “with a rising caseload of working-age recipients as Britain gets older, less healthy and has a higher prevalence of disability that restricts the ability to work or requires additional support”.

It calls for an "integrated approach" to addressing the problems highlighted in its analysis, which it says "is a task as much for the NHS, wider public services, and employers – who have a key role to play in boosting recruitment and retention of workers with a health condition – as it is for the Treasury and DWP".

The report’s authors found “no evidence” to support the popular claim that it has become too easy to receive disability benefits.

Instead, there is a more “straightforward explanation”, they said: the number of working-age people reporting that they have a disability has increased from 5.9 million in 2012-13 to 8.9 million in 2022-23.

“Rushed attempts to simply restrict benefit eligibility are therefore likely to result in people with acute needs having their support and living standards cut without improving their underlying health conditions and job prospects,” they warned.

'Dramatic rise' in health-related benefits

The report focuses on two working-age health-related benefits: the health element of Universal Credit, which is means tested and supports those with long-term conditions who are out of the labour market for an extended period; and non-means tested Personal Independence Payments, which go towards the extra costs faced by disabled and chronically ill people.

“Political anxiety about working-age health-related benefits stems largely, although not exclusively, from the growing share of public finance they absorb,” the report says.

Spending on health-related benefits for people of working age was broadly flat in real terms from the mid-1990s until 2013-14, at which point it “began to rise dramatically”, according to the report.

Between 2013-14 and 2022-23, real-terms spending on working-age incapacity benefits increased by 34%, and spending on disability benefits rose by 89% – taking the total bill for both from £28bn in today’s prices to £43bn.

Over the next six years, expenditure on these two benefits is projected to increase more rapidly, hitting £63bn in 2028-29 – a real-terms increase of almost 48%. Working-age health-related benefit spending is expected to be 2.1% of GDP in 2028-29 – up from 1.2% in 2013-14 and 1.6% in 2022-23.

The increase is driven mostly by disability benefits, which are forecast to increase by 215% over the 15 years to 2028-29. Incapacity benefits are forecast to rise by a "significant" 77%.

“The underlying causes of this upsurge are beyond the scope of this paper, but we estimate that this rising incidence of disability, combined with population change, underpins 87% of the increase in the disability benefit caseload between 2013 and 2023,” the report says.

'Advance cautiously'

It advises policymakers to "advance cautiously" on any interventions, "given the financial insecurity of so many of those who stand to be affected by any change".

And it urges the next government to seek to understand why there are 2.9 million more disabled working-age adults in Britain than there was a decade ago, asking: "How much of this trend relates to worsening population health, for example; a changing understanding of disability; cuts to the NHS and wider public services; or the changing world of work?"

"It is highly likely that any policy response to rising working-age health-related benefit claims will extend past the benefits system, and also include action focused on the education system, the world of work, public services and beyond," it adds.

Challenging the view that it has become easier to claim disability benefits, the authors note that award rates for new PIP claims have held steady – at around 45% – since 2015-16, and were “far higher” in previous years. Meanwhile, the award rate for those that have been moved across from the predecessor benefit Disability Living Allowance has also stayed steady.

“What is clear, however, is that PIP has been a ‘stickier’ benefit than anticipated,” the report says.

“Claimants spend more time on the benefit than policy makers originally expected, because both award lengths are longer and reviews less frequent than intended, both of which push caseload numbers up.”

The report also identified other changes to the benefits system over the last decade that it says “have strengthened the incentive to claim incapacity and disability benefits”. These include a drop in the value of basic out-of-work benefits – with the amount awarded to a single person on Jobseeker’s Allowance falling from £98 a week in today’s prices to £91 today, “a loss especially hard-felt in the cost-of-living crisis”.

Another relevant policy change is the decision to scrap the lowest level of support within PIP, which the report says has pushed payments up, not down, on average awards.

“It is hard not to conclude, then, that alongside an ageing and more disabled population, changes within the benefits system have also contributed to rising working-age disability benefits spending,” the authors said.

'Serious strategy' needed

The report also stressed the importance of considering incapacity and disability benefit trends “in the round”.

While health-related working-age benefit spending has increased over the last 15 years, the share of GDP spent on all working-age benefits over that time has “barely changed” at around 3.9%, it says.

“It is both fiscally and socially responsible to examine the growing share of GDP being devoted to working-age incapacity and disability benefits,” the report says.

“But the analysis in this briefing note suggests that restricting eligibility for such benefits, without fully understanding the complex set of underlying drivers, is risky in the extreme, not least because those in receipt are financially insecure (more than four-in-ten PIP claimants are in the bottom fifth of the income distribution).

“Instead, a serious strategy to control spending on working-age incapacity and disability benefits requires two far more difficult things: addressing Britain’s health and disability crises; and ensuring the benefits system, as a whole, provides adequate support to all.”

Lindsay Judge, research director at the Resolution Foundation, said there are "no easy fixes" to the problem of the rising benefits bill.

“This isn’t down to people gaming the system, or support somehow being easier to claim. Nor is it the case that a so-called ‘benefits clampdown’ would produce easy, pain-free savings," she said.

“Instead, the growing health-related benefit spend reflects the fact that Britain is becoming older, sicker and experiencing more disability, and that previous reforms have often been poorly designed. We therefore need to focus more on enabling people to enjoy longer, healthier working lives – a goal that requires an integrated strategy involving the NHS and employers, as much as the Treasury and DWP.”

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