The figures are a stark illustration of why ministers believe the significant reforms to disability and sickness benefits that they have just proposed are necessary.
The Institute for Fiscal studies said this represents a 38 per cent growth in the number of claimants in just four years.
And Office for National Statistics (ONS) figures show 2.8 million people were out of work and classed as long-term sick – one of the highest rates of any G7 country.
Forecasts expect this to increase further – with estimates ranging from £63 billion in 2028/29 (OBR) to the Government’s own claim that it will hit over £70bn by 2030.
But why is the UK in this position? And is there anything that the experience of other countries can tell us?
How Covid set the UK apart
OECD data, measuring employment rates of 15 to 64-year-olds between 2006 and 2023 shows only four nations hit a target of 80 per cent: Iceland, The Netherlands, Switzerland and New Zealand.
But what sets the UK apart is that levels of economic inactivity have significantly spiked since the Covid-19 pandemic.
In the Department for Work and Pensions policy Green Paper outlining the benefits plans, published this week, it stated: “We are the only major economy whose employment rate hasn’t recovered from the pandemic. We are also seeing a growing problem where young people are leaving school and not entering further education, an apprenticeship, or work.”
According to the Office for Budget Responsibility (OBR), data shows a rise in inactivity across the G7 countries in the years leading up to the pandemic.
“Since the pandemic, the 15 to 64-year-old inactivity rate has increased in the UK by 0.5 percentage points and by 0.3 percentage points in the US – but fallen in the other five G7 economies,” the OBR analysis says
An Institute for Fiscal Studies report in September, concluded the “rapid growth in health-related benefits seems to be largely a UK phenomenon”.
They included Australia, Austria, Canada, Germany, Ireland, the Netherlands, Sweden and the US.
Despite this, spending on health-related benefits is actually similar in the UK to that of other comparable countries.
According to Eurostat, among EU countries disability benefits expenditure was on average 1.8 per cent in 2022.
What is the cause?
The increase in working-age spending in the UK has been mostly driven by more people making claims for disability or health related benefits.
Some suggest the cause is a combination of the impact of the Covid-19 pandemic and the cost of living crisis and how these events interacted with the condition of the UK’s economy and our public services.
The OBR reported in 2023 that ill health had “consistently been a bigger factor behind inactivity in the UK than in most other advanced economies”.
“For example, the design of UK’s disability benefit system may make them more responsive to a cost of living shock than in other countries.”
The Government’s Green Paper suggested ministers believe there is a link between the generosity of disability and health related welfare claims and the rise in new claimants.
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“Benefit changes over the last decade or so have had the effect of making the health element of universal credit (UC) relatively more attractive,” the Department for Work and Pensions document said.
Will the measures announced this week make a difference?
Latimer said the proposals, announced by Kendall on Tuesday, would reduce the increase in claims.
“There is much less certainty about how this will affect economic inactivity and employment. The Government clearly hopes that the announced measures will support health-related benefit claimants into employment, but many health-related benefit claimants have been out of work for some time so getting them back into work will be challenging.”
“There’s also a risk that costs will shift to the NHS and other services. A sustainable approach requires addressing the underlying causes of poor health and shifting support towards prevention, reducing the numbers of people moving onto health-related benefits in the first place.
“A more proactive approach is needed, keeping people healthy and in work for longer, rather than intervening only once they have left the labour market.”
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