Neil O’Brien was until recently a Minister at the Department of Levelling up. He is MP for Harborough.
With war tipping economies into a downturn across the world, jobs and unemployment will be near the top of the in-tray for the new Prime Minister. But there are bigger questions about working age welfare which they will have to grapple with. A white paper on this is due soon.
If we could help get more people who are long-term sick into work, that would be both brilliant for them personally, and free up large amounts of taxpayers’ money. DWP estimate moving a long term sick person into full-time work saves taxpayers £15,000 a year. Last year, we were due to spend a record £58 billion on benefits for people with health conditions.
The good news..
The steps we took to keep unemployment down during the pandemic were remarkably successful.
Employment has recovered. For 25-49 year olds, employment is close to record levels. For over 50s, the recovery is slower, but still above historic levels. Rates for young people have trended down since the late 90s, because of the raising of the school leaving age and Tony Blair’s push for half of young people to attend university.
Unemployment is lower than expected. In July 2020, the Office for Budget Responsibility forecast unemployment of 10 percent in 2021. It peaked at just over 5 percent and this May was just 3.6 percent, the lowest since recent records began.
… and the bad news
About a quarter of working age people don’t work – just over ten million people. Many are looking after family (1.7m), or students (2.5m) or early retired (1.2m). But nearly one in ten working age people aren’t working because they’re unemployed or sick. That’s a lower than proportion than when we came to office, when it was nearly one in eight, but that’s still about 3.8 million people. A substantial proportion of them could work.
While unemployment has been falling fast, the proportion not working because they’re sick is bigger, and it’s roughly the same proportion as when we came to office, despite record numbers of job vacancies.
The long-term sick and disabled
At the end of 2020 there were: roughly a million people claiming non-work-related disability benefits only, roughly a million claiming sickness benefits for being out of work only, and a further 1.5 million claiming both: a total of around three and a half million people. These are where the big long-term challenge is.
Currently one in three working age people in the UK has a long-term health condition and one in five people aged 16-64 in the UK report a disability. Both have gone up over time, increasing benefit claims.
The Institute for Fiscal Studies noted in a report last month:
“The number of people on disability benefits has been steadily rising – from 2% of the working-age population in the early 1990s (591,000) to 6% in 2020–21 (2.2 million).”
They note that:
“Four-fifths of the rise in the number of disability benefit recipients over the past two decades is accounted for by those with psychiatric conditions (such as mental health problems and learning disabilities) as their main disabling condition. They now make up almost half (44%; 944,000) of all working-age disability benefit claimants.”
What are we going to do about it?
What hasn’t worked
During the coalition years we replaced DLA with PIP. The idea was that disability benefits would be more focussed on those who needed it most, and that spending would fall. Yet spending on benefits for disabled people is at a record level, despite successive projections saying it would decline.
As the IFS point out, “spending on disability benefits has increased – and at a faster rate than spending on DLA was growing before PIP.”
While some of the upward pressure reflects good things like improved survival prospects for people born with serious conditions, it largely reflects growth in mental health problems.
While health policy is crucial, welfare policy also has a big role. In the Disability Green Paper we announced we’d test the creation of a “severe disability group”.
The thought is that there are a number of people who it’s absolutely pointless to put through an assessment – their conditions are severe, and won’t improve. Dropping one assessment could simplify things.
For the severely disabled, the Work Capability Assessment (WCA) is droppable. It was introduced under Blair, based on concerns that people were being parked on Incapacity Benefit and forgotten about. The hope was to triage claimants to see if they could work.
This does weed out some who don’t need the benefit. But the WCA means that those who apply for ESA or UC are directly incentivised to prove that they cannot work. If you are judged unable to work, you get a higher award – £117.60 a week in the “support” group, compared to £77 for those judged able to work in the future.
Fans of the WCA could point to the fact that employment among people with disabilities has increased since 2012. But some argue it is unhelpful: that incentivising people to show how unable they are to work sets up the wrong dynamic.
A third view would be that the assessment is not doing what was hoped. The WCA now puts two thirds of people in the support group and finds only a fifth fit for work. Some people on disability benefits will never be able to work. But for those who would be able to try working, or to undertake specific, limited forms of work, we need a system that enables them to, without the fear that they will lose their benefits.
The alternative to the WCA would be to use the PIP assessment, independent of their ability to work, then passport people who have severe needs to an equivalent top-up appropriate to their condition. Such a fundamental reboot could refocus resources on those who need it most.
That might not save money short-term. It is risky and we should test it before we leap. But if it reduces worklessness, it produces longer-term savings. It could have immediate practical benefits: average waiting times for assessments are long and freeing-up resources via one assessment could reduce waiting. Reducing the number of double-assessments would be welcome by disabled people sick of being asked for the same info repeatedly.
But we also need to do more to stem the underlying growth in claims caused by mental health problems. I’ve written before about the possible causes. Britain isn’t alone in facing these challenges.
It’s time to try a whole bunch of bold experiments to divert people from needing benefits in the first place. Business as usual simply isn’t affordable: neither the cost to taxpayers or – more importantly – the human cost.
I think the key point to make is that the current binary WCA system of ‘either you can work or you can’t work at all’ simply doesn’t match up to the modern world of work where all sorts of different working arrangements coexist, like working from home, part time working, and other reasonable adjustments. This means that there are multiple shades of grey between working and not working. We are writing people off by saying that they can’t work when this will actually only be true of a proportion of those assessed as ‘not fit for work’.