Peers blame rising cost of UK health benefits on welfare system flaws

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The rise in UK health benefit claimants is due to design flaws in the welfare system, not worsening health outcomes or long waits for treatment, a peer review committee has said.

The House of Lords Economic Affairs Committee has called on ministers to take urgent action to prevent the annual cost of incapacity and disability benefits from rising from the current £64.7 billion to a projected £100.7 billion by 2029-30.

Its findings challenge the government’s assumptions ahead of a promised overhaul of the welfare system, while highlighting the burden of the growing benefits bill on other public service costs.

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 poor health or NHS waiting lists.

“People without jobs have incentives to claim health benefits; and after receiving them, have neither the incentive nor the support to find and accept a job,” it warned.

Committee chairman Lord George Bridges said: “This is a huge and growing social problem [government’s] the schedule does not reflect the urgency required.”

He added that before the ministers had promised to publish the plans welfare reform in the spring, this would be too late for any savings to be included in this year’s spending review.

The commission’s diagnosis of the problem differs from Kendall’s account of reforms to support jobseekers in the autumn, presented as part of the ‘Britain to Work’ plan.

He described the post-pandemic health crisis that made Britain the only G7 country to see its workforce shrink, with 2.8 million people considered economically inactive for health-related reasons.

Peers said problems with official labor market data clouded the picture and that it was unclear whether overall labor market slack was higher now than it was in 2019.

However, since the beginning of 2020, there has been an increase of 1.2 million people of working age receiving health benefits, which now stands at 3.7 million.

The committee said this reflected strong incentives for people to claim disability support in preference to unemployment benefits because of the “severe financial disparity” in the help offered.

People assessed as unfit to work or look for work could double their income and avoid heavy conditionality by switching from jobseeker’s allowance to incapacity benefit, the committee said. added it.

New claims for unemployment benefit have not increased enough to explain the rise in claimants, mainly because a higher proportion of claims are approved and fewer people exit or leave the system after reassessment.

The committee said the claims assessment process needed to be tougher, but the government also needed to give people more support to get back into work and ensure they didn’t lose out on taking a job.

It would have to reform both unemployment and disability benefits because of the interaction between the two, Bridges said, potentially easing unemployment benefit standards while tightening sickness benefits.

Some of the committee’s recommendations are similar to those by previous work and pensions secretary Mel Stride, which were not implemented, partly because of a legal challenge to the consultation process.

A government spokesman said it was “determined to get Britain back to work”, outlined first steps to boost employment and would consult on health and disability benefits reforms in the spring.

“We are clear that the current welfare system needs reform so it is fairer to taxpayers and people get the support they need,” they added.