The welfare system isn’t working – here’s how to fix it

Claims for incapacity benefits have gone up by 27 per cent while 35 per cent more have no obligation to look for work. The system needs radical reform, starting with these four changes, say Jean-Andre Prager and Dr Sean Phillips

Britain’s health and disability benefits system isn’t working.

The Office of Budget Responsibility estimates the current growth trajectory of spending on health and disability benefits combined could reach up to £100bn by the end of the decade.

If that were to materialise almost £1,500 per year per person across the UK would be spent on these benefits. One in every four pounds of income tax would be earmarked for this purpose in that scenario.

Individuals in receipt of the Employment and Support Allowance (ESA) or Universal Credit (UC) with a health condition (incapacity benefits) increased from 2.6m in 2019/2020 to 3.3m in 2023/2024 – a 27 per cent increase. 

The increase meanwhile for those on Universal Credit and placed into the so-called ‘Limited Capability for Work and Work-Related Activity’ (LCWRA) (a claimant cohort where there is no obligation to seek work, or to prepare for work) over the past five years is stark: increasing from 1.85m to 2.5m recipients – an increase of 35 per cent.

Awards of the Personal Independence Payment (a disability benefit designed to cover the extra costs of a disability) for a ‘psychiatric condition’ (which includes anxiety and depressive disorders) grew from an average of 2,600 per month in 2019 to 5,700 by January 2024, and in 70 per cent of cases for those under 25.

That clearly isn’t sustainable – and the government knows it. The Chancellor says she will “not hesitate to act” to drive down the benefits bill.  

The government has committed to making savings of £5.4bn from the welfare budget by 2029-30 and a Green Paper on health and disability benefits reform will shortly be published. 

Are Brits sick?

So what’s going on? Is it the case that Britons are just more unwell and more disabled? Do our issues lie in the structure of the economy more broadly? 

We believe these are factors, but it is the current benefits system itself – our approach to evidence and assessments and the incentives they drive – that are part of the problem and they have been underplayed in the public policy debate.

A new report, published today by Policy Exchange called For Whose Benefit? is clear the system isn’t working fiscally, technically or morally. It’s findings are backed by former Labour Work and Pensions Secretary, Lord Blunkett, who views these reforms as “painful and vital to the overall health and wellbeing of the UK.”

The current system incentivises claimants to prove what they cannot do, rather than what they can.

A radical evolution is needed over this parliament so there is a fundamental re-alignment in our system, engagement encouraged and greater expectations placed on claimants, but with more appropriate, assertive support provided in turn as a means of creating a new social contract.   

So what should be done? 

Firstly, PIP should become a ‘conditional’ benefit for those aged 16-30. Individuals in this age cohort should be required to look for work, to volunteer or be engaged in further education and training, except in exceptional circumstances, if they are not already in work. 

Those aged 16-30 should be required to look for work

Secondly, assessments should be streamlined through the creation of a ‘Single Assessment’ for all health and disability benefits, with the Work Capability Assessment scrapped. Medical evidence should be provided to support every claim. It isn’t right that in 20 per cent of Universal Credit health claims today this isn’t the case, for example. 

To create a more dynamic and joined-up system of support, assessors for health and disability benefits (who work for an assessment provider on behalf of the DWP) should have the ability to signpost and to refer claimants to other DWP support during the assessment process itself.

Thirdly, Parliamentary scrutiny over reforms to benefits should become far more commonplace. A ‘health panel’ – a bit like the Joint Committee on Vaccination and Immunisation (JCVI) – should be established to propose changes to ministers on the assessment and eligibility criteria which should be put to parliament. 

Fourthly, the DWP programme Access to Work needs significant reform. Regarded as the Department’s ‘best kept secret’, this programme which provides a range of support to help disabled people into work – has seen a 72 per cent growth in successful claimants in the past two years alone (from 2022 and 2024). Backlogs and current levels of demand could render the scheme unviable. Reforms should be made to create ‘packages’ of tools, specialist aids and equipment to improve overall levels of support and speed and to maximise the advantages of ‘bulk buying’ target items.

The purpose of these reforms is not to demonise a section of society but to inspire people to contribute to their life chances and the wealth of the nation. 

This is a task that could not be more urgent for the new government to address.

Jean-Andre Prager is a Senior Fellow at Policy Exchange and a former special adviser for the department for work and pensions to the Prime Minister 

Dr Sean Phillips is head of health and social care at Policy Exchange.