Britain is on the sick
More Britons are out of work and claiming incapacity benefits than ever before – and it has little to do with Covid or waiting lists. What’s the problem? Simon Wilson reports
WHAT’S HAPPENED?
New official data, published last week, shows that the number of working-age Britons who are “economically inactive” due to sickness – that is, out of work and not looking for a job – stands at an all-time record of 2.6 million. That’s almost half a million more people than at the start of 2020, before the Covid pandemic, and 600,000 more than the figure in the late 2010s. This mass withdrawal from the workforce has helped fuel the UK’s labour shortages. It is also proving an expensive business in other ways. According to the Office for Budget Responsibility (OBR), the rise in long-term sickness has added £15.7bn (0.6% of GDP) to annual government borrowing because of lost tax receipts and higher welfare spending.
IS THIS ABOUT COVID?
No. The contribution of ill-health towards overall economic inactivity is at an all-time high – accounting for 29% of the total earlier this year, compared with 25% before the pandemic (according to the official Labour Force Survey). However, the largest percentage increases in inactivity due to sickness since the start of the pandemic have been among younger people, who were much less affected by Covid. The Office for National Statistics (ONS) says that the rise in work-limiting health problems predates the pandemic. In 2016, the proportion of 16- to 64-year-olds reporting these was 15.4%, which rose to 16.4% in 2019, and 18.1% of the population in 2022.
HOW DO OTHER COUNTRIES COMPARE?
Since the turn of the century, the UK has had impressively low inactivity rates compared with similar countries. But today it is an outlier in that its inactivity rate has failed to bounce back following the pandemic. In the OECD group of richer developed countries, we are in the small minority of countries (about 20%) where that’s the case. In the OECD on average the rate of inactivity has actually fallen since 2020 by an average of 0.4 percentage points. In the UK, like other countries, it surged in 2020. But unlike in most other countries, inactivity has continued to climb, and since 2020 overall it is up by 0.5 points. Some have ascribed the rise since 2021 to poorer mental health post-pandemic, and to those patients suffering from ongoing complications (“long Covid”). But this is an unsatisfactory explanation, since these conditions are not unique to the UK, and don’t explain why this country might be an outlier. Nor, argues The Economist, does the poor condition of the NHS, and long waiting lists, explain it.
“THE RISE IN LONG-TERM SICKNESS HAS ADDED £15.7BN TO ANNUAL GOVERNMENT BORROWING”
WHY NOT?
Waiting lists for elective treatment have soared from 4.6 million in February 2020 to 7.6 million this summer. But more than half of those waiting for care are not of working age. And the treatments most in demand (for example, musculoskeletal issues) don’t match the reported conditions of the long-term sick. Here, mental health is a big contributory factor. According to analysis last year by the ONS, 60% of the long-term sick had a mental health condition as at least one of their health needs (it’s common for long-term illness to have more than one contributory cause). Moreover, according to data from the OBR, only around a quarter of the long-term sick are inactive because they are awaiting treatment. In other words, “problems in the NHS may be behind some of the rise in inactivity, but they are not the predominant cause”.
SO WHAT IS?
There may well be an element of hidden unemployment, says Sarah Neville in the Financial Times, in that claimants are better off claiming sickness benefit than they would be on unemployment benefits. Of the 34 OECD countries surveyed this spring (a fifth of which still had higher rates of inactivity than before the pandemic), the UK had the least-generous benefits for the jobless after two months as a proportion of previous in-work income. Even after a year of unemployment, only four countries are less generous. “Basically it’s quite hard to be out of the labour market in Britain, unless you’re disabled, because you won’t have enough money to live on,” reckons Torsten Bell of the Resolution Foundation.
IS IT EASY TO GET SICKNESS BENEFITS?
It has got much easier in recent years, and there are a number of perverse incentives in the system that have boosted numbers. The number of people claiming incapacity surged in the 1990s, but since the early 2000s it had fallen gradually, as governments (Labour and then Conservative-led) made it harder to claim. Then, in the late 2010s, policy changes resulted in claims surging once more. The key change is that in 2019 the government made it far easier to claim sickness benefit. In the fiscal year 2019-2020, over 80% of claims were successful, compared with just 35% in the decade before. When the pandemic hit, the wider benefit system was swamped, and incapacity claims were waved through. If the approval rate had stayed at 2016-2017 levels, there would have been 670,000 fewer approved claims since.
WHY ARE MORE CLAIMS BEING PASSED?
The old system “did a fair job of nudging those who were temporarily incapacitated back into work as soon as they were better”, argues The Economist. The new one “has sharply raised the relative rewards of claiming to be permanently incapacitated”. If you are deemed incapable of working again, you now get twice as much benefit as those expected to return to work one day. Obviously, that creates a strong incentive for some to overstate their conditions – and it’s a big contrast with the situation as recently as 2017. Before then, the short-term sick were given benefits at a slightly higher rate than the unemployed. The government faces a tough task in readdressing this debate in the run-up to an election. But ignoring the welfare system’s increasingly clear flaws comes with a large and growing cost. The system needs recalibrating. Politicians “must not shirk or dodge” this urgent task.
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