There are reports that the government may announce policies in
the Budget aimed at moving more incapacity benefit claimants into
work. This is an understandable aim - the number of claimants on
incapacity benefits has increased by 28% since 2019 to 3.2
million people - but will be challenging to deliver for three
reasons:
-
Four in five incapacity benefit claimants have been out
of work for more than two years. Two-thirds of
claimants have already been out of work for more than two years
by the time they start a claim. The longer someone is out of
work, the less likely they are to transition back into
work.
-
The government has assessed 83% of incapacity benefits
claimants as having the most severe level of incapacity
– a limited capacity to both work or prepare for work
(e.g. taking part in a training course or writing a CV). These
claimants are likely to be a long way from re-entering the
labour market.
-
Most incapacity benefit claimants face weak work
incentives. If someone on universal credit (UC) who
receives the health element – the UK's main incapacity benefit
– moves into work paying more than the equivalent of 16 hours a
week at the National Living Wage, DWP can reassess their
capability to work. This could result in them
losing their entitlement to the health element of UC (£4,994 a
year) - as well as getting some of their “standard” UC tapered
away. This means a typical out-of-work UC health claimant who
begins a part-time job at the National Living Wage and loses
their UC health entitlement would actually be worse off
following moving into work.
The government should weigh the costs to claimants and government
of any planned measures against their expected effectiveness at
bringing people into work.
Eduin Latimer, Research Economist at the Institute for
Fiscal Studies said:
“It is easy for a government to say that they will get more
people on incapacity benefits into work, but harder to actually
do it. Most incapacity benefit claimants are a long way from the
labour market and face weak work incentives. Employment support
programmes could help, but of course they don't come for free.
Either restricting eligibility for health-related benefits or
lowering the value of health-related benefits might get more
people into work, but both imply reducing support for a
vulnerable group. There are unlikely to be easy solutions to the
rising share of the population out of work due to ill health.”
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