Why are disability benefits numbers rising and what can we do about it?

A new report published by the Resolution Foundation think tank last week highlights the need for policymakers to place the recent rise in economic inactivity due to health and disability issues in a broader context amid the wider issues affecting the public sector. 

The report also counsels against further cuts and simple reforms, which tend to shift the pressure around the system. Decisions need to be taken carefully so as not to throw people into further insecurity and poverty, it states, while noting that real-terms spending on working-age incapacity benefits increased by a third over the past decade (2013-14 to 2022-23), and disability benefits by 89 per cent. This rise is forecast to accelerate over the next six years. 

The context

In the discussion that followed the publication of the report, Professor Paul Gregg, a Senior Research Fellow in Labour Markets at the LSE, set the context for recent rises in economic inactivity due to long term health issues and disability. The economic inactivity caseload has risen by 800,000 people since Covid, he said, after 20 years when numbers had been falling. Part of the reason for the pre-Covid fall is women being more likely to be in work, with stay at home mums and carers being a big factor in economic inactivity figures in the past. Male employment, however, has been falling while female employment has risen.

One longer-term problem Professor Gregg highlighted is the intensification of work which makes it difficult for people with health challenges to stay in work. Alongside this is the rise of benefits conditionality. The latter has led to people moving away from unemployment-related benefits to health-related ones. He added that the fall in economic inactivity numbers due to increasing incapacity issues in the 1980s was probably not because those people found new jobs. It is more likely they simply aged out of the system or died.

Professor Gregg said that after two years of being out of work and on capacity-related benefits, it is unlikely anyone will get back in. He therefore sees a ‘window’ to get people back to work or stop them falling out of the workplace of 18 months before they might leave to two years after they have left. “That is where policy has to focus,” he said.

Working mums

He advised policymakers and employers to look at what had worked with other marginalised groups, such as mums who had taken a career break to look after their children and had struggled to get back to work, particularly at the level where they left off. He called for sick leave to be treated more like maternity leave, including a longer period of both paid and unpaid leave so that people affected could stay in employment longer, with guarantees they could return to their job and not have to look for another, which would likely be on a significantly lower grade and lower pay.

This would create “an intermediate space” where employers still had links and empathy for the employee and could work with them to stop them from falling out of work. Both employees and employers should be incentivised to keep connected to the workplace, said Professor Gregg.

He also called for a big focus on public health, such as tackling diabetes, diabetes and mental health, and called for policy interventions to address them, such as a sugar tax, the money from which could be reinvested into, for instance, mental health treatment.

He added that economic inactivity for health reasons affects more than just the individual who drops out of work. It also affects the employment rates of partners and others who may have to care for them.

Poverty

Other speakers spoke of the need to see, for instance, mental health in the wider context of issues such as housing and social stigma. They called for greater workplace flexibility.

Eddy Graham, Director of Advice Services at anti-poverty charity Z2K, spoke of how austerity and benefits cuts had led to more people claiming disability payments. He said many people are now in the severely disabled category who would not have been 20 years ago. Removing them from that category would not help them get into work or out of poverty.

“Austerity and the design of the benefits system has pushed more people to jump into the lifeboats available,” he said, citing changes such as the housing allowance cut, the benefits cap and the bedroom tax which have left some people living below subsistence levels. He called for a move away from a punitive approach and for more support to get people back to work.

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