Only 1 per cent of people out of the workforce for health reasons find a job within six months, even though 20 per cent want one, according to research that underlines the challenge the government faces in cutting the UK’s spiralling welfare bill.
The Learning and Work Institute said its findings, published on Tuesday, showed the need to change the financial incentives for ill and disabled people to work, but that better support would be more effective than slashing benefits abruptly.
Only one in 10 disabled people received help to find work each year, the think-tank said. Its intervention reflects growing fear among disability charities that pressure on the UK’s public finances will lead ministers to pursue short-term savings at the expense of vulnerable people, rather than reforms that would pay off in the longer term.
Liz Kendall, work and pensions secretary, will publish plans to overhaul working-age health and disability benefits before next month’s Spring Statement. The twin aim is to boost employment and cut spending on the benefits — which has risen 40 per cent in real terms since 2013 and is on course to reach £100bn a year by the end of the decade.
The focus so far has been on the roughly 3.5mn people receiving so-called incapacity benefits after being assessed as too ill to work or to look for work. This group, which has grown by a million people since the pandemic, receives £5,000 more per year than those on the basic rate of unemployment benefits, without any requirements to look for work.
L&W said the combination of skewed financial incentives, inadequate support to return to work and a lack of sufficiently flexible employers had “created a benefit trap”.
There has been an even sharper rise since the pandemic, however, in the number of people receiving disability benefits, or personal independence payments — which are paid regardless of job status to those who face higher living costs because of their health.
Stephen Evans, chief executive of L&W, said it would be a mistake if ministers rushed to cut and restrict either of these benefits without doing more to help people return to work.
“My worry is, it doesn’t sustainably cut costs. People are still there and struggling . . . in a sensible world investing a bit now will pay off in 5 to 10 years,” he said.
The former Conservative government had planned to restrict eligibility for incapacity benefits, with a saving of some £1bn a year between 2026-27 and 2028-29 that is still factored into the Office for Budget Responsibility’s fiscal forecasts.
Labour ministers are now intent on convincing the OBR that their own reforms can yield at least as much. But previous welfare reforms have repeatedly failed to cut costs by as much as intended, making the fiscal watchdog reluctant to “score” anything but sure-fire savings.
One option the government is considering — although it would be deeply controversial — is to scrap incapacity benefits entirely, channelling all financial help for the sick and disabled through personal independence payments, and redrawing the rules for these.
But ministers at the Department for Work and Pensions are also fighting to ensure that at least some of the money saved by restricting benefits goes towards support for disabled people to find work.
L&W’s report argues that spending some £450mn a year to increase employment support could yield savings of £4bn a year in the longer term, in the form of lower benefit payments and higher tax receipts.
Evans said this would allow for a doubling in the number of employment support places, and a new initiative to invite incapacity benefit claimants to quarterly “conversations” to discuss their options — rather than leaving them on state support for years on end.
A government spokesperson declined to comment on the specifics of the green paper, but said the reforms were aimed at ensuring “sick and disabled people are genuinely supported back into work, while being fairer on the taxpayer”.