Report says early retirement is not the reason for economic inactivity rises

The Government should focus more on addressing long-term sickness and NHS waiting lists to bring down economic inactivity levels than getting people out of retirement, according to a new report.

The report by the consultancy LCP says the number of ‘long-term sick’ has risen by over a third of a million (353,000) since the start of the pandemic, accounting for more than half of the growth in inactivity over that period – with early retirement currently accounting for none of the increase.

It says the rise in long-term sickness seems to be because more people are ‘flowing on’ to long-term sickness, particularly those previously classed as ‘short-term sick’. The report says this could reflect NHS pressures as those who would otherwise have been treated or had their chronic condition better managed and be able to work now find themselves ‘long-term sick’ as they wait for treatment or live permanently in poorer health.

It says the number of people on sickness-related benefits has been rising steadily, with the growth pre-dating the pandemic, but now worsening. Although the Employment and Support Allowance is being phased out, the report says the number of people in receipt for over five years has gone up in recent years and now stands at over 1 million.

The report proposes that the Government should look at a local level at data on benefit receipt and on NHS pressures to see if NHS bottlenecks mean that more people are getting stuck on sickness benefits and remain ‘economically inactive’ for longer. The report finds that existing statistics on elective waiting lists provide little clarity as they include large numbers of those over pension age waiting for treatment, and this would not directly help to explain trends in working age inactivity whereas data on GP pressures capturing waiting times for people with chronic conditions such as back pain, depression and diabetes could provide greater insight.

Steve Webb, partner at LCP and former Liberal Democrat minister, said: “There is a real risk of the government ‘barking up the wrong tree’ when it comes to the growth in economic inactivity. Policy solutions which aim to reduce early retirement or to encourage the retired out of retirement are likely to have only limited effect in reversing recent trends. Instead, the policy effort needs to be focused around understanding why flows into long-term sickness have grown and on early intervention to prevent people’s health from deteriorating. Without action there is a risk of a growing core of people stuck in long-term receipt of sickness benefits with limited prospect of returning to paid work and damaged prospects for retirement”.

“Without urgent and targeted research and action we risk a generation of working age adults with poorer health, employment and productivity as a lasting legacy of the pandemic”

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