The Economist: A growing number of Britons are on disability benefits

 

A growing number of Britons are on disability

 benefits

The government’s attempts to cut the welfare bill miss the bigger picture

In a community centre in Northampton, a town in central England, a group of mental-health patients are learning how to navigate the benefits system. A young mother with psychosis wants to know how a new job will affect her payments; a man with severe anxiety struggles to support his autistic son. Their guide to the welfare state, an ex-adviser to the Department for Work and Pensions (DWP), is sympathetic but slips unthinkingly into jargon. “Forgive me if I speak in TLAs,” he says.

Britain’s welfare state can be impenetrable to claimants. It is also immense: no government department spends more than the DWP. This year spending on social security in Britain is expected to pass £300bn ($376bn), the equivalent of 11% of GDP. It is forecast to reach £350bn by 2028.

Over half of this money goes to pensioners, but the biggest increases in spending are driven by people of working age who are sick or disabled. The cost of health-related benefits for 16- to 64-year-olds is projected to increase to £64bn by 2028-29, a 79% rise in a decade (see chart 1). The trend has coincided with record numbers reporting that they are too ill to work, a growing number of them suffering from mental-health conditions.

The Conservative government is trying to suppress the surge. On April 29th it launched a consultation about reforms designed to hold back rises in disability benefits. This follows several other measures aimed at getting more people back into work. The proposals contain some sensible ideas, but duck big problems.

At the moment people of working age receive health-related benefits in two main ways. The first is through top-up payments for unemployed (and low-income) recipients of a welfare payment called universal credit. Under a huge reform started in 2013, older income-related benefits like employment support allowance, tax credits and housing benefit are gradually being replaced by this single means-tested payment. Those deemed severely ill by a work-capability assessment do not have to look for work; they receive more than double the standard allowance.

There are very strong incentives to apply for this benefit. In 2017 the government withdrew a payment for short-term illness, nudging people towards the severe category of sickness. At the same time successive cuts have hacked away at the basic rate of universal credit for those who are deemed fit to work. The basic benefit for a single adult today after two months’ unemployment is equivalent to 17% of previous in-work income, the lowest proportion in the OECD, a rich-country club (see chart 2).

The government has already taken steps to tighten the work-capability assessment. As a result 424,000 fewer people are expected to be deemed severely incapable of working by 2028-29. But changing the thresholds for the assessment does not alter underlying conditions. The Office for Budget Responsibility, a fiscal watchdog, estimates that the changes will save an estimated £1.3bn but that helps push only 10,000 people back into work. Many who lose out will risk poverty.

The second type of benefit is awarded regardless of work status and income. For working-age adults this comes in the form of the “personal independence payment” (PIP), which was also introduced in 2013 and is intended to cover the extra costs of living with a health condition. (The government’s intention is eventually to replace the work-capability assessment with PIP.) In assessments for PIP, claimants are awarded points for things they say they cannot do, such as cooking or walking for more than 200 metres. To unlock payments of up to £184.30 a week, their points total has to exceed a specific threshold.

This black-and-white system incentivises gaming. To be able to surpass the points threshold, the trainer in Northampton urges students to think of their “worst day” during their assessment. “It seems like the harder you try to overcome your illnesses, the more they punish you for that,” says Carol Vickers, a small-business owner and PIP claimant. An assessment intended to reduce the disability bill may, paradoxically, have increased it.

The newly opened consultation to reform PIP does recognise that a one-size-fits-all approach to disability does not make sense. It explores possible options to target support where it is most needed, such as by changing the eligibility criteria, linking the assessment more to a person’s specific condition or moving away from cash to other forms of support, such as vouchers, one-off grants and even treatment. A more tailored approach to the assessment would be welcome: it makes sense to focus on those who genuinely incur costs because of their disability. But once these people are identified and approved, they should have flexibility to choose how to cover their expenses.

There is a trade-off between robust assessment and welfare spending. In Scotland, which has its own, different regime for disability benefits, assessors help applicants gather evidence for their claims. Outcomes are measured not only by waiting times but by vaguer factors such as kindness. The upshot, however, is higher spending: the cost of adult disability benefits in Scotland is expected to double between 2023 and 2028.

On the other hand, tightening the criteria for disability payments may curb spending but does not tackle the underlying pressures on the welfare system. Housing benefits cost more than the police service, in part because Britain does not build enough homes. Rising health-related benefits stem, at least to some degree, from rising levels of chronic sickness and long delays in the National Health Service. Some mental-health problems are being medicalised unnecessarily, but that does not mean they are imagined, particularly for those living precarious lives. In Northampton one student admits to feeling “guilty” for claiming. Some might see that as evidence of people playing the system. The truth is more complicated. ■

The Economist, May 2nd 2024