Election 2024: Any policy change that limits increasing number of working-age health-related benefit claims without understanding the underlying drivers of the trend is ‘risky in the extreme’

Resolution Foundation also warns that curbing the £20 billion a year rise in spending expected by 2028/2029 must be a task for the NHS and employers, not just the Treasury and DWP

Any policy change that limits the increasing number of working-age health-related benefit claims without understanding the underlying drivers of the trend is ‘risky in the extreme’, the Resolution Foundation has warned.

In an election briefing note, that also forms part of a new research programme, the Resolution Foundation investigates trends in working-age disability and ill-health benefits making the key observation that spending on the two benefit types has risen by £15 billion (from £28 billion to £43 billion per year) in the decade to 2022/2023 (based on 2024/2025 prices) and is expected to increase further over the next six years to £63 billion.

Real-terms spending on working-age health-related benefits
and working-age health-related benefits as a proportion of GDP in Great Britain

In addition, the report identifies that the factors that are driving the increased caseload include that -

• an ageing population accounts for a quarter of the increase in the working-age disability benefit caseload over the last ten years – adding 272,000 to the caseload between 2013 and 2023 - and is partly driven by the higher state pension age meaning that more older people must apply for working-age rather than pensioner benefits;
• 8.9 million working-age adults in Great Britain in 2022/2023 (23 per cent of all working-age adults) reported that they had a disability (defined as having a long-standing illness, disability or impairment which causes substantial difficulty with day-to-day activities), up from 5.9 million (16 per cent) a decade earlier; and
• changes to the benefits system over the last decade have strengthened the incentive to claim incapacity and disability benefits – for example, the rate of unemployment benefits has fallen by 7.6 per cent in real terms between 2010 to 2024 - while claimants can also benefit from a move away from the universal credit conditionality regime even though this may not bring monetary benefits

The Resolution Foundation adds that increased spending is also being driven by a 21 per cent increase in average PIP awards over the last decade, noting that this is set to rise by a further 7 per cent by 2028/2029. Identifying policy design as one explanation for this trend, the report highlights PIP features including -

• the decision made in the early 2010s to not create an equivalent of the lower disability living allowance (DLA) care component within PIP has pushed up average awards rather than pushing them down as intended – around two-thirds of those who were in receipt of the lowest rate of DLA care received a PIP daily living award when they were reassessed in 2023;
• a tendency for the majority of young people to receive a higher award under PIP than under child DLA - with three-in-five (63 per cent) who had a re-assessment in 2023 receiving a higher PIP award than under DLA; and
• higher awards for some of the main health conditions where PIP claims are rising fast - including learning disabilities - where 95 per cent of this claimant group receives an enhanced rate of PIP daily living and 75 per cent receives an enhanced rate of mobility.

Placing its findings in the political context, the Resolution Foundation highlights some of the health-related benefit policy proposals from the Conservatives in recent years – including in the Health and Disability White Paper and the Modernising support for independent living’ Green Paper, and their Election 2024 manifesto commitment to cut £12 billion a year from the benefits bill by the end of the next Parliament - together with the Labour Party manifesto commitment to review the work capability assessment.

Concluding its analysis, the Resolution Foundation suggests that there are three lessons to be borne in mind by whoever forms the next government -

'First, policymakers must advance cautiously given the financial insecurity of so many of those who stand to be affected by any change … disability benefits do a good job of protecting incomes, even if they do not fully capture the extra costs of disability ...

Second, the next government should seek to understand why there are 2.9 million more disabled working-age adults in Britain than there was a decade ago. How much of this trend relates to worsening population health, for example; a changing understanding of disability; cuts to the NHS and wider public services; or the changing world of work? It is highly likely that any policy response to rising working-age health-related benefit claims will extend past the benefits system, and also include action focused on the education system, the world of work, public services and beyond.

Third, it is important to learn from the past, and seek to design a benefits system that does not create more problems than it solves. The fact that over the last fifteen years, the share of GDP spent on all working-age benefits has barely changed, standing at 3.9 per cent in both 2007-08 (on the eve of the financial crisis - a better baseline than 2010/2011) and in 2022/2023 suggests that policymakers have inadvertently been playing 'Whack-aMole' in this area: where standard rates of working-age benefits have been hit, some of that pressure has shown up as rising claims for health-related benefits which they then try to hit in response. This is not a strategy for future success.'

For more information, see Under strain: Investigating trends in working-age disability and incapacity benefits from resolutionfoundation.org

#election2024 #manifesto