Crunching data on our benefits claimants

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TOM CALVER | GO FIGURE

How many UK benefits claimants have never worked?

Labour hopes its welfare reforms will persuade thousands to rejoin the workforce but there are problems with that logic

Tom Calver

, Data Editor

Sunday March 16 2025, 12.01am, The Sunday Times

Whatever arrives in Labour’s welfare reform package this week, any tightening of the benefits system will no doubt prove popular. According to a rolling YouGov tracker, 53 per cent of the British public think qualifications for benefits are not strict enough, versus just 25 per cent who say they are too tough. Even Labour voters are now more in favour of tougher benefit rules than looser ones, something unimaginable five years ago.

Writing in The Sunday Times today, the work and pensions secretary, Liz Kendall, says people who spend their lives on benefits are condemned to an existence in which “living standards aren’t improved”. But just how many lifelong claimants are there in Britain?

Lest we forget, an extra 840,000 people have become economically inactive since the pandemic, including 650,000 through long-term sickness, which is costing the taxpayer an additional £20 billion in health-related working-age benefits. And, according to the ONS, of the 2.8 million people who are inactive through poor health, a fifth — 580,000 — have never worked at all.

• Liz Kendall: ‘A life on benefits is bad for your dignity and health’

What do we know about them? These cases stand out for the high prevalence of mental health problems. Half of these inactive never-workers list conditions like autism (114,000), mental illnesses including phobias (85,000) and depression or anxiety (77,000) as the main thing keeping them out of work — a far higher share than among people who have worked before.

The age breakdown is revealing. For obvious reasons, the number of people who have never had a job is highest among the young. But in the past eight years the number in their twenties who have never worked, and blame it on sickness, has almost doubled.

Sceptical? In financial terms there are incentives to claim sickness benefits over basic unemployment payments. As I’ve written before, unemployment benefits in Britain are remarkably low by international standards: the average worker, upon losing their job, earns just a third of their previous salary, or about £12,000 in Britain (and that includes housing support). Add incapacity benefits and that figure rises to £17,000. Ministers want to close the gap between disability and out-of-work benefits to persuade more people into work. But how likely is it to be effective?

Let us return again to the chart on inactivity due to ill-health. While 580,000 people who are too sick to join the workforce have never worked, a far larger group — 1.4 million people, up from 1.1 million five years ago — have not worked for at least five years. A further 410,000 last worked between two and five years ago. In other words, nearly 90 per cent of this economically inactive group have not worked for at least two years. The same is true of incapacity claimants: although their number has soared since the pandemic, most have not worked for more than five years.

This makes no sense! If they weren’t all working, what were all of those new disability claimants doing beforehand?

Actually, of those people who first started being inactive due to ill health since 2021, only 14 per cent were actually working immediately beforehand: instead, 25 per cent were claiming unemployment benefits, while the majority were inactive for different reasons, like looking after the family (20 per cent), being temporarily sick (9 per cent) or being a student (7 per cent).

We talk a lot about getting those on disability benefits back into work, but the reality is that most have not worked for some time. And the longer you leave it, the harder it gets to rejoin the workforce. If you’re unemployed and you left your job in the past six months, by my calculations you have about a 32 per cent chance of moving into employment within the next three months. By the time you have been unemployed more than five years, it falls to a depressing 2.4 per cent.

For those classed as economically inactive through sickness, the rates of re-entry are even worse. Those who were working less than six months ago have just an 8.2 per cent chance of rejoining the workforce in the next quarter. Leave it a few years and it falls below 1 per cent.

In other words, data shows our welfare system is particularly shoddy at returning people to work once they have been out of it for some time.

When it comes to getting people back into work, some methods are better than others. A University of California study from the 2000s compared two welfare programmes that ran in the state. One, which focused on job-searching, writing CVs and making benefits conditional on spending time looking for work, slightly boosted employment in the short term but fell down later because skills didn’t progress. The other, which focused on development — education, vocational training in specific jobs and language programmes — was much better at boosting employment in the long run.

Ministers should take note. There are 200,000 twentysomethings who have never worked because they are deemed too sick: only with the right investment in their long-term skills, rather than using them to plug short-term gaps in the workforce, will they be able to reach their potential.

Fairly quick look at economic inactivity and moves to tackle it

 

• Liam Halligan

Britain’s worklessness crisis is rapidly spiralling out of control

The UK’s benefits system is pushing millions out of our shrinking labour force

476

Liam Halligan

08 December 2024 8:00am GMT

Britain’s unemployment rate rose to 4.3pc during the three months to September, up from 4pc the previous quarter. But joblessness remains low by historic standards.

Back in the 1980s, the number out of work hit 3m – a shocking 11pc of the workforce. The impact was huge, as the jobless crisis rocked politics, threatening to bring down the government.

Yet Britain is now in the midst of a human tragedy every bit as stark, and perhaps just as economically damaging, as that ghastly 1980s unemployment spike.

Up to 3,000 people per day are being signed off work and approved for sickness benefits, indicative of a welfare system that is spiralling out of control. And once the long-term jobless are categorised as sick they’re no longer counted in the unemployment figures.

Data from the Department for Work and Pensions (DWP) shows around a quarter of working-age adults in the UK currently don’t have a job, some 11m people. Of those aged 16 to 64, almost 1.5m are unemployed – the 4.3pc headline unemployment rate.

The number who are officially unemployed is dwarfed by those who are economically inactive, currently more than 9m. This presents a huge challenge to both the Treasury and the DWP – both of which are determined, where appropriate, to get people with long-term health conditions and disabilities back into the workforce.

Around 3.2m people currently claim disability and incapacity benefits across the UK, sharply up from 2.2m back in 2019, just before the government responded to the Covid pandemic with stringent lockdown measures. DWP estimates suggest this figure will reach a staggering 3.9m by the end of this parliament.

So around one in 12 working-age Britons are expected to be claiming sickness benefits by the end of the decade, fuelled by a surge in mental health conditions.

The Office for Budget Responsibility (OBR) has highlighted the “rapid increase” in sickness benefit claims since lockdown. Expenditure on incapacity and disability benefits is set to hit £87.2bn this year – roughly what the state spends on education and some £20.8bn higher than was forecast just three years ago.

The Institute for Fiscal Studies has meanwhile warned of an “extraordinary” rise in spending on incapacity benefits, with the bill heading for well over £100bn by 2030.

Liz Kendall, Work and Pensions Secretary, is putting forward plans for overhauling the welfare system in the spring. Tory analysis suggests the sickness benefits bill is set to rise by another £1.3bn before Kendall launches that welfare review, as both mental health problems and obesity fuel a worklessness crisis that leaves countless employers unable to find sufficient staff.

The Conservatives, though, oversaw a huge rise in welfare spending over the last decade, not least since the pandemic.

Former Tory leader Iain Duncan Smith contained unemployment by rationalising a range of welfare payments into universal credit, which withdraws benefits gradually as claimants increase working hours.

Such “tapering” allows a return to work without fear of losing everything. The same kind of mechanism is needed for sickness benefits because claimants can currently lose their entire benefits package even if they simply train for a new job, let alone earn money.

These issues were brilliantly explained in a film for Channel Four’s Dispatches broadcast last week, by former Spectator editor Fraser Nelson. The film showed that, while 7pc of the UK working-age people are on sickness benefits, in Glasgow and Grimsby, for instance, it’s almost a third.

Nelson explained that while the surge in post-lockdown sickness benefit payments has cost around £10bn in extra government spending, the true bill for the surge in sickness benefit claimants from 2.2m to 3.2m since before the pandemic is much higher.

He presented research by the Centre for Economic and Business Research suggesting that the UK’s GDP would be 3.1pc (£84bn) larger by the end of this parliament had the “missing million” remained in the workforce, bringing in £30bn in extra tax revenue. And, of course, with claimant numbers rising to 3.9m by 2029 on official estimates, the actual cost is set to be even more.

There are, of course, many people receiving disability benefits who do work, and others on sickness benefits who are genuinely unable to hold down a job. No one is disputing that for one moment.

But there is a growing realisation that the current situation is entirely unsustainable. “Many people are working with a health condition and I think many more could, with the right help and support,” Ms Kendall told Dispatches, risking the wrath of Labour Left-wingers.

The reality is that no less than 69pc of sickness benefit claimants now cite “mental and behavioural disorders” in their sickness benefit applications.

Mel Stride, who oversaw the DWP for the last two years of Tory rule, tells Nelson how easy it is to access a sickness benefit package that can pay more than a full-time job on the national minimum wage, with claimants then largely abandoned in terms of the non-financial help they need to get their lives back on track.

“When they go to the doctor for their six-minute appointment, 94pc of the time they are given a note saying you are not capable of any work, ever,” says Stride. “And then they drift into the incapacity benefit cohort – and are basically left alone.”

Welfare reform is a tough, intractable problem – but one that needs addressing for all kinds of economic, societal and human reasons. Amidst an overwhelming sense that our political and media class is failing, some are still willing to draw fire on themselves by grappling with difficult and serious issues the vast majority choose to ignore. I tip my hat to them.

And from earlier in the year - tackling the benefits trap:

 

Long-term sick should be forced to seek work, says Labour adviser

Alan Milburn called for fundamental reform of a ‘crazy’ benefits system, with getting people back to work the ‘only route’ to faster growth

Chris Smyth

, Whitehall Editor

Tuesday July 23 2024, 9.20pm, The Times

Economics

Alan Milburn said he had identified “a group of people who are willing to work but are not being helped to do so”

MICHAEL BOWLES/SHUTTERSTOCK

The long-term sick must be required to look for jobs to deal with unsustainable welfare costs and reduce the country’s “toxic” reliance on immigration, a government health adviser has urged.

Alan Milburn, a former health secretary, found that seven out of ten of the economically inactive want to work but few have any help or requirement to do so, and said there should be fundamental reform of a “crazy” system.

In a report he presented alongside Liz Kendall, the work and pension secretary, he said that dealing with record numbers outside the workforce was the “only route to higher levels of economic growth”.

• Watch: Keir Starmer faces questions after Labour MP rebellion

Kendall acknowledged that dealing with long-term sickness was “central” to Sir Keir Starmer’s plan for growth and she promised fundamental overhaul of job centres and back-to-work support to deal with “spiralling” economic inactivity.

While praising Milburn’s “brilliant report”, she stopped short of backing his plan to impose conditions on sickness benefits, saying the priority was better health and employment services. “There have always been conditions to look for work and consequences if you don’t, that won’t change. But I want to see a much greater focus on that upfront help and support,” she said. “I think we’ve had too much of a focus on [clampdowns] rather than the help and support people really need to get into work.”

There are a record 2.8 million people off work because of long-term sickness, part of 9.4 million people neither in employment nor looking for a job, more than one in five of all those of working age.

With the cost of sickness benefits due to reach £64 billion a year by the end of the parliament, up by £30 billion on pre-Covid levels, Kendall said: “Spiralling economic inactivity is bad for individuals, many of whom want to work, it’s bad for employers who are desperate to recruit, and it is bad for our public finances.”

• Alan Milburn’s verdict: How to solve Britain’s “most toxic issue”

But Kendall also dismissed claims by her predecessor, Mel Stride, that labelling everyday worries as mental health problems was pushing up the benefits bill. “Divisive rhetoric about strivers versus scroungers, or claiming people just feel ‘too bluesy’ to work may have grabbed headlines, but it did absolutely nothing to actually get Britain working again,” she said.

Arguing that the “vast majority” of claimants needed help, she said that inactivity was “driven by the fact that we are an older, sicker nation”. Kendall added that “the pandemic had a real impact on the mental health of young people”, promising treatment and support earlier. Kendall concluded that her department had become too focused on overseeing benefits payments, saying: “We need fundamental reform so a department for welfare becomes a genuine Department for Work.”

Liz Kendall envisages leading a “Department for Work”

KARL BLACK/ALAMY

She was speaking in Barnsley, where Milburn has been carrying out a review of how a former “epicentre” of unemployment had seen jobseekers replaced by the long-term sick. He said he was surprised that polling for his review found seven in ten of those classed as unable to work said they would like a job.

Yet although eight out of ten of them were claiming benefits, “only one in ten actually have any contact with employment services that could help them to work. This is what you call a catastrophic systems failure,” Milburn said.

Saying that nationwide these findings could mean an extra 4.5 million potential workers, he said: “The officially unemployed are outnumbered now six to one by people who are economically inactive, who have no engagement with job centres. This is crazy.”

He said the Conservatives had been “relying on toughening benefit rules to deal with what is largely a health-related problem”, calling for “a better balance between sticks and carrots”.

However, he acknowledged a “perversity” in the benefits system that has created incentives to be signed off sick. “If you are officially seeking work, you get help to do so, you have regular contacts and a lot of hassle, but you get lower benefits than if you’re classified as unable to work where you get no hassle and no contacts,” he said.

While stressing that some people would never be able to work, Milburn said that he had identified “a group of people who are willing to work but are not being helped to do so”.

“We’ve got to have a two-way street,” he said. “The state will provide more help, greater personalisation, better integration for example of health and employment support services. But if you’re on state benefits, and economically inactive, you have a duty to engage with those better services.”

Milburn is also advising Wes Streeting, the health and social care secretary, right, arriving for a cabinet meeting with Jonathan Reynolds, the business secretary

CARL COURT/GETTY IMAGES

Urging Rachel Reeves, the chancellor, to find upfront cash for a “a genuine case of investing to save”, Milburn, who is advising Wes Streeting, the health secretary, also said the NHS should be required to help employment services.

Such a drive to get people back to work would also deal with the “toxic issue” of immigration and prevent a “tide of populism” seen in Europe from sweeping Britain, Milburn argues. “This is a wake-up call for the new Labour government,” he writes in The Times today, urging ministers and bosses “to wean themselves off the easy solution of importing more workers from overseas”.

Getting people back to work instead is “the biggest opportunity both to grow the British economy and deal with the most toxic issue in British politics,” he says.

In sickness and unemployment

 

Benefits beat seeking a job, minister admits

Alison McGovern says the system makes it hard for the long-term sick to find work, with the bill set to rise to £100bn by 2030

Chris Smyth

, Whitehall Editor

Tuesday December 03 2024, 9.40pm, The Times

Alison McGovern said the Tories made the situation worse when they cut jobseekers’ benefits and increased long-term sick pay

REX

Benefits claimants have increasingly found that they can get more money being signed off sick than looking for a job and there is “clearly a problem” with incentives in the system, the employment minister has acknowledged.

Alison McGovern said that the current system “doesn’t work for anybody” because it made it hard for the long-term sick to find work while pushing up costs for taxpayers.

McGovern said that it was “bleak” that rising numbers of young people were being signed off sick with problems such as mental health conditions. She said that the welfare system needed to change so that disabled people were helped to find work rather than being left “on the scrap heap”.

It was “obvious”, she noted, that the current system was not financially sustainable, with the cost of sickness benefits rising to £65 billion this year and projected to hit £100 billion by the end of the decade. McGovern said that the government was doing “a lot of thinking” about how to reform the welfare system, as she acknowledged that ministers had “further choices to make” as they aim to set out plans next year.

There are currently 3.3 million people claiming incapacity benefits because they are deemed too ill to work, up a million since Covid, with the figure projected to hit 4.1 million by the end of the parliament. Last week ministers set out a back-to-work plan aiming to improve help for people seeking jobs, while acknowledging that they needed to look at the welfare system.

• Young people face losing benefits if they don’t take up training

Experts have said that one reason why the numbers are rising is that those on incapacity benefits can get about £5,000 a year more than jobseekers, and with fewer conditions. Acknowledging the problem for the first time, McGovern told the Lords Economic Affairs Committee that there was “clearly a problem with the situation we’re in now with social security benefits and the changes over the past decade or so that have meant more likelihood” of people ending up sick in the long-term.

“There’s the headline rate issue and there’s also some process issues,” she said.

“The current system doesn’t work, it doesn’t work for anybody … Universal credit was supposed to be designed as a system that would strongly incentivise work and it’s turned out not to do that.”

Shaun Butcher, deputy director of disability analysis at the Department for Work and Pensions (DWP), said that it was unclear how much the gap in payment levels had worsened the problem but stressed that “those incentives are quite powerful” for people claiming benefits.

Blaming repeated Conservative crackdowns on jobseekers’ benefits for increasing the pay and conditions gap with the long-term sick, McGovern said that they had ended up “making the situation worse”.

“It’s definitely the case that the difference between being in the old JSA [Jobseeker’s Allowance] unemployed bit of the system, and the ill health, limited capacity for work-related activity group — the gap has widened,” she said.

“Various decisions that were taken throughout the period of the last decade or so have meant we’ve had this bifurcation effect between the two groups of people — out-of-work unwell, and the technically unemployed, actively seeking work — that have not helped the situation.”

She said that “a system with very hard and high walls between the two categories” did not work, adding: “We need to lower those barriers and to try to create a system that doesn’t place people in a binary category that it is unlikely that they will escape from.”

A green paper on welfare reform is due next year and McGovern promised that it would have “more to say” about how the system should change.

Reforms would aim to ensure that the long-term sick would not be scared of talking to jobcentres, as she argued that workers should have “much more access to occupational health support” at work to stop them going off sick.

She added: “I’d also like our work coaches from jobcentres to be able to be available in GPs’ offices and other places.” Saying it was “frustrating” for doctors to see patients whose real problems were about work, McGovern argued: “I would like them to be able to have a much closer relationship with us in DWP so we can try and help with the person’s broad sweep of problems.”