The shape of these problems is well known. Unlike in comparable countries, the economic activity rate – the proportion of the working-age population neither in work nor seeking work – has not recovered its pre-Covid level. This has slowed growth in GDP and accompanying tax revenue. Moreover, a large proportion of the inactive claim benefits of one kind or another, increasing the burden on the taxpayer. A particular concern is the rise in the proportion of the inactive who are claiming health-related benefits. One in every 10 working-age people now claims at least one health or disability benefit- and many claim several. In the past, the bulk of such claimants would be amongst the over-50s, mainly with physical problems accentuated by the ageing process. However a disturbing feature of recent developments is the large number of young people economically inactive as a result of a mental health condition. This has increased by over 25% in the last year alone, and now stands at around 270,000.
The need to do something about this has been apparent for some time. The last government made some attempts to chip away at benefits, but their efforts were resisted by the Opposition. Now Labour is in government and is having to face up to reforming the benefit system itself. The financial pressure to do has been mounting as a result of excessive government borrowing and the ever-growing national debt. In the last few weeks it has also become apparent that we need to spend a lot more on defence, which means other government spending must be cut back sharply if we are not to add to record levels of tax and borrowing.
Liz Kendall’s Green Paper has one eye on the fiscal realities, but politics also demands that it attempts to assuage the concerns of Labour’s backbenchers and the poverty lobby.
Accordingly, the problem is framed as one where hundreds of thousands of inactive workers with health problems or disabilities really want to work, and could do so with the right support, but are held back by a system which ‘consigns’ them to a life on benefits. There is something in this view, but it sees the inactive as passive victims of ill-health and arbitrary bureaucratic classification about fitness to work.
As the Green Paper accepts, though, the increasing proportion of the inactive claiming disability benefits reflects not so much an increase in underlying morbidity, but rather rational behaviour by claimants who see that they can obtain significantly higher financial support than if they were simply on out-of-work benefits such as Job Seekers Allowance or Universal Credit. Their claims have been facilitated by a collapse in the proportion of Work Capability Assessments (WCA) and tests for eligibility for Personal Independence Payments (PIP) which are conducted in person. Poverty advisory groups and online influencers provide coaching on how to give the answers – online or in telephone conversations – which will unlock eligibility for higher benefits.
The measures currently proposed are intended to cut £5 billion from the benefits bill by 2030. This figure, however, looks shaky when looked at in detail, and some changes may not survive the inevitable lobbying and legal challenges which face any reformers at the DWP. Already plans to freeze the nominal value of PIP have been abandoned in the face of back bench opposition.
One probably sensible move is the phasing-out of the WCA, as this involved a binary fitness/unfitness to work which in effect meant those unfit to work were no longer expected to do anything to improve their potential employability. In any case a large proportion of WCA claimants were also being assessed separately for PIP, which will now become the sole access point for disability benefits. The test will be toughened, and will more frequently be conducted in person. This will lead to some people who would previously have qualified no longer doing so, and thus being obliged to undertake some preparation for work. To mollify critics, the basic level of Universal Credit payment will be increased.
There is also to be a restriction on young people under 22 receiving another sort of payment, Limited Capability for Work-Related Activity (LCWRA), with an emphasis on the previously-announced ‘Youth Guarantee’ of education, training or work placement which is said to offer a better opportunity than being on benefits indefinitely. The DWP also hopes to clamp down on rapidly-rising expenditure under PIP on provision for ADHD sufferers such as headphones, smart watches and ‘support workers’. They may be overly optimistic about their ability to control this.
The putative savings from these and other minor measures seem contingent on benefit claimants being more carefully monitored and ‘supported’ by the DWP. This, however, will almost certainly cost more and there must be doubts about how successful such support will be in getting people back to work and reducing benefit expenditure. Many people’s disabilities are so extreme that paid work will never be a real possibility. There will also be many who could in principle get back into the workforce, but much depends on challenging drug and alcohol abuse, obesity, and other behaviours which make employment difficult – particular in areas where a high proportion of residents exist in a culture of benefit dependency.
The Green Paper is also vague on the other side of the labour market relationship, employers – often in short supply in places where there are high concentrations of worklessness.
Taking on people with poor attachment to the workforce and little prior experience is a risk, particularly in light of the new package of employment rights which the government is currently pushing through. Liz Kendall has talked enthusiastically of a new ‘right to try’, where people who try a job which then doesn’t work for them can go back onto the disability benefits they had before without a reassessment. But if new recruits have a fall-back position of going back onto benefits with no questions asked, employers will understandably be reluctant, particularly if they have to incur significant costs in, for example, providing personalised equipment or special training. There is mention in the Green Paper of some possible funding support for employers, but this is not specified. If provided, it would further eat into the supposed savings from Ms Kendall’s proposals.
Apart from the announced proposals, there are several issues which are out for consultation. One interesting suggestion is moving back towards contribution-based benefits. This was of course the principle behind Beveridge, and it was this that the late Frank Field wished to revive when he was briefly asked to ‘think the unthinkable’ under Tony Blair.
The Green Paper is not completely valueless, but it is a long way from articulating a new general settlement on welfare. In her introduction, Liz Kendall dismisses her predecessors’ attempts at reform as ‘sticking plaster politics’ but it’s not obvious that her proposals are that much better. Major surgery they ain’t.
