No one knows why UK benefit claims have outpaced peer countries

Good morning. Labour’s welfare reforms have two masters. The first is to make it easier for people to enter or re-enter the world of work, whether after a period of illness or living with a chronic condition. The second is to declare bankable savings to the Office for Budget Responsibility and keep within the government’s fiscal rules.

The problem is these two aims contradict each other. Some initial thoughts on that below.

The billion pound question

There are four underlying problems facing the UK as far as welfare policy is concerned. First, poverty in the UK has increased. Second, we are alone among our peers, in that our employment rate has not recovered to its pre-Covid level.

Third, we spend as much a share of GDP on working-age benefits as we did in 2007, even though we have more destitution in 2025. Fixing that may (and, in my view, will) require increasing the levels of at least some benefits. But there is also an underlying “what has gone wrong that we are getting less bang for our buck?” problem.

Fourth, the UK has experienced a bigger increase in the number of people claiming disability and incapacity benefits than its peers. Now, I would suggest, an important supplementary problem is that no one knows for sure why this is!

We know what is causing this: an increase in both claims for physical ailments among people over 45 and claims among people with mental ones among under-22s.

Now, this isn’t quite as binary as I am suggesting here, because many people with physical ailments also have a mental health issue. (61 per cent of people claiming benefits report having some kind of mental distress.) Yet something is happening in the UK that isn’t happening in peer countries, and we don’t know what. It might be the NHS backlog of people waiting for elective surgery. It might be something else. But one missing element of the government’s announcements yesterday was any attempt to find out what is going on.

There’s a reason for this, which is asking such questions might well result in answers that involve spending money. And part of the point of this exercise is for the government to say it is spending less. (I use the word “say” because the history of the past 14 years shows measures that have convinced the OBR the government will spend less on welfare have not, in fact, delivered lower spending on welfare.)

That has resulted in changes that are highly arbitrary. In moves that experts estimate will affect between 800,000 to more than 1mn people, recipients will no longer be able to claim the “independent living” part of the personal independence payment unless they score a four in any one single category.

What does that mean in practice? If someone needs assistance to be able to dress or undress their lower body (two points), needs an aid or assistance to manage incontinence (two points), uses a hearing aid (two points), cannot wash their lower body without assistance (two points), needs assistance to get out of the bath or shower (three points), and needs assistance to cut up their food (two points), they will not receive the independent living component of Pip. That’s because, although all those taken together exceed the points threshold for the “standard” rate, none of them alone is worth four or more points.

I struggle to conceive of any intellectual or philosophical justification as to why being unable to wash your lower body without assistance should exempt you from some government support, which being unable to wash your upper body (four points) should entitle you to.

The policy justification is obvious. The government needs to stop doing something if Rachel Reeves is to keep to her fiscal rules without raising taxes. So some cruel, arbitrary lines have to be drawn. But I would not want to defend that were I a Labour MP. And that the policy is indefensible at an intellectual, practical and moral level will become a very big problem politically, I think.

In addition, that all those two-point criteria are not a million miles away from more severe difficulties creates an incentive to over-claim. Given the UK’s benefits system is far from generous, an economic imperative for some claimants means this may well also fail to produce any real savings.

As I’ve said before, that we spend as much as we did in 2007 to get worse results is a reason to reform. There are measures in this green paper that would tackle that problem. But it’s not clear why reducing financial support for people the government itself believes are unable to work is going to produce a system that costs less or reduces destitution.

In some ways, that embodies the problem Keir Starmer and Reeves have created for themselves. The government is incentivised to find solutions that look like they keep it within its fiscal rules and allow them to avoid breaking their promises on tax, rather than find policies that fix the UK’s underlying problems — whether social or related to deficit spending.

Now try this

Dear England is back at the National Theatre. It really is a terrific play. Do check it out either at the National or at NTLive at your local cinema.

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