The Week

The Week 26 April 2024

Charlotte Pickles
Director

This week the latest benefit expenditure and caseload tables were published by the Department for Work and Pensions. These tell us how much we’ve spent on benefits, as well as how many people received them, and how those figures are expected to change over the next few years. It’s sobering reading for a country whose growth forecast is anaemic and public finances – to use a technical term – are screwed.

Let’s take disability benefits, as that was the subject of the PM’s speech last Friday. There are two main types of disability and sickness benefits – income replacement (i.e. benefits to replace earnings because you are not working) and extra costs (benefits designed to help with the additional costs you have due to your condition).

Disability Living Allowance (DLA) and now Personal Independence Payment (PIP) are the key extra costs benefits. PIP, which the Coalition government introduced to replace DLA (with an aim of cutting working-age spending by 20%,) is paid based on an assessment of ‘daily living’ and ‘mobility’ tasks.

In 1998-99 we spent £9.5 billion, fast forward two decades and that figure stood at nearly £23 billion. By 2028-29, a further decade on, total expenditure is forecast to be £40 billion. That’s all in real terms.

Income replacement benefits have undergone even more change, moving from Incapacity Benefit to Employment and Support Allowance and now Universal Credit. In 1998-99 we spent £13 billion, two decades on we spent £18.3 billion and we’re forecast to spend £31 billion in 2028-29. In 1998-99, 2.75 million people claimed these out-of-work benefits, by 2028-29 4 million are expected to.

Over the past year we’re expected to have spent £54 billion on those incapacity and disability benefits, that’s more than the defence budget, pretty much what we spent on schools, and three times the spending on policing.

These are incredible increases – 10% of the working-age population now receive at least one health-related benefit – and within a context of medical and technological advancements and more inclusive approaches to the workplace, underpinned by legal requirements to make reasonable adjustments.

That is not, of course, to say that people with disabilities to do not face considerable prejudice and discrimination when in comes to the workplace – there is a huge amount still to do on both accessibility and attitudes – but these trends are deeply concerning. The rate at which people leave ESA or the UC equivalent is vanishingly small, 1-2%. That’s a phenomenal loss of potential.

Such high caseloads and therefore costs are also one of the reasons that the system is less generous than we might want it to be. There is a reason we call benefit payments social security – the mark of a compassionate society is how we treat those in need – but when demand is so high, support inevitably has to be more thinly spread.

And, as the IFS has brilliantly shown, this isn’t about an ageing population: “a 20-year-old today is about as likely to claim a health-related benefit as a 39-year-old was in 2019; a 35-year-old today is about as likely to claim as a 46-year-old in 2019; and a 55-year-old today is about as likely to claim as a 60-year-old in 2019.” And ‘mental and behavioural disorders’ account for an increasing proportion of claims – largely depression and anxiety. As many have already pointed out, the spike in claims post-pandemic is particularly worrying.

The PM’s speech last Friday was warmly welcomed by some, and roundly rejected by others, but he was right to call reforming welfare a “moral mission”.

When John Hutton was Secretary of State for Work and Pensions under New Labour he told Parliament that someone who had been on Incapacity Benefit (IB) for two years was “more likely to die or retire than ever get back to work”. He understood that there was nothing compassionate about leaving so many people to languish on benefits. He understood that work matters beyond the pay check it provides. That was why New Labour started the process, implemented by the Coalition, of replacing IB with ESA.

In his speech, the PM said “it would be wrong merely to sit back and accept [the trend], because it’s too hard; or too controversial; or for fear of causing offence”. Difficult decisions will have to be taken, but serious investment will also be needed – in ensuring people have access to mental health support, in making public transport accessible, in providing highly-tailored employment support.

Whatever the colour of the next government, this must be at the top of their to-do list.

And our read of the week…

With local elections next week, and a general election looming, The House has a wonderfully short blog from Professor Philip Cowley on potholes and voting intentions. Apparently, research from San Diego found that for every pothole complaint, the vote share of an incumbent dropped by 0.2 percentage points. Apparently this is an example of “retrospective voting”, i.e. voting based on what has (or has not!) been done rather than political promises of future benefits. As the prof puts it: “anyone can promise something; your record is harder to dodge.”