Disability and incapacity benefits for working-age people: some recent developments

Britain is an international outlier in the post-pandemic increase in working-age claimants of long-term sickness benefits

A few years ago, the psychiatrist and science blogger Scott Alexander recounted an interesting anecdote from his university days on his Slate Star Codex blog. One of Alexander’s professors was an expert in herpetology, a branch of zoology focused on the study of amphibians and reptiles. That professor specialised on an environmental problem called “endocrine disruption”, which is when chemicals interfere with the hormone systems of living organisms, often in ways that adversely affect reproductive capacity. Research into that problem was then still in its infancy, but according to Alexander, awareness of it was growing.

Until Alex Jones, the radio show host and conspiracy theorist, launched his now famous tirade about “chemicals turning the friggin’ frogs gay”.

That, according to Alexander, was a major setback for research into endocrine disruption. Anything Alex Jones touches automatically becomes low-status, which means that people who want to be seen as intelligent, educated and sensible will be too embarrassed to go near it. From then on, it became impossible to talk about the subject without someone replying “Oh, so what you’re saying is: chemicals are turning the frogs gay? HAHAHAHAHA!”

In Britain, a similar social mechanism may be impeding reform of the long-term sickness benefits system, an issue which the Starmer government is currently struggling with.

Reform of major welfare programmes has always been a tricky subject for those of us who keep an eye on the caseload numbers and the cost of such programmes. Your opponents will always suspect that what truly motivates you is a mean-spirited, misanthropic hatred of poor people, which you are just trying to hide behind spreadsheet language. But this is not new, and welfare reforms have nonetheless often succeeded in spite of it.

A much bigger obstacle to reform is that, at least in Britain, complaining about overuse of the benefit system has become a low-status opinion. It is seen as “a bit Gammon”, almost on a par with complaining about immigrants or “the wokerati”. It is seen as the sort of thing someone who reads trashy tabloid papers would say. This is why people who want to be seen as intelligent, educated and sensible are reluctant to talk about it. If you want to signal a high social status, you have to say things like “Actually, we lose far more in corporate tax avoidance than in benefit fraud”, or “It’s not the disabled who are to blame for our economic woes – it’s corporate greed and the avarice of the billionaire class!”

The other day, LBC Radio host James O’Brien slagged off one of his listeners, a driving instructor who complained about welfare recipients who, in his words, “sit on their bums all day”. To the delight of his fan club, O’Brien retorted:

“You’re in a car all day, so, […] you are actually sitting on your bum all day.”

That is, of course, a hilarious takedown, which truly put that driving instructor in his place. But it is not, in and of itself, proof that there cannot be a problem with the system.

Let’s have a look at some recent trends.

There are two major types of long-term sickness benefits in the UK: incapacity benefits and disability benefits. The former are income-replacement benefits which compensate people for their reduced ability to work. The latter compensate people for the additional costs that people with disabilities face; they may, for example, need mobility aid.

Prior to the pandemic, 7.5% of the working-age population in England and Wales, or 2.8m people in absolute terms, used to get either incapacity benefits or disability benefits or both, at a cost of 1.3% of GDP. Now, 10% of the working-age population, or 3.9m people, get at least one of those benefits, at a cost of 1.7% of GDP. That latter figure is forecast to rise to 2.1% of GDP by the end of this decade.

None of this is, in itself, catastrophic. Prior to the pandemic, UK spending on incapacity/disability benefits was below the OECD average. It has overtaken the OECD average in the meantime, but not by very much. Even the forecast figure would not make the UK exceptional by OECD standards. But it is a major, sudden increase, and it has some features that are worth pointing out.

Firstly, there is the fact that this increase is not happening elsewhere in the OECD. If it were merely a delayed effect of the pandemic, we would expect to see similar trends in many other places. But that is very much not what we see. The UK is an outlier in trends, if not in levels.

Secondly, the age profile of the new claimants is unusual. Prior to the pandemic, receipt of incapacity/disability benefits was heavily biased towards people closer to retirement age. That age gradient has flattened a lot among new recipients. The number of young applicants has grown at a much faster rate than the number of middle-aged applicants, albeit from a lower base.

Thirdly, and related to that, a major long-term driver of the increase in caseload numbers is the number of claims related to mental health issues, broadly defined. In 2002, 1.1% of the working-age population claimed benefits primarily on mental health grounds. By 2019, that share had risen to 2.2%, and today, it stands at 3.3%. It is among these claimants that young people are heavily overrepresented, with people in their 20s six to seven times more likely to claim than people in their 60s.

I am not trying to imply that mental health issues are not serious, or that these young people are all just faking it. But by their very nature, these are conditions where both the diagnosis and the correct prescription are more ambiguous.

Fourthly, if we break down the claimant figures by geography, we see a strong, negative correlation between local economic performance and the proportion of incapacity/disability benefit recipients. (Although this is not new, and therefore does not tell us much about the more recent increase in caseloads.) A left-wing way of reading these figures would be that relative deprivation and a lack of economic opportunity drive benefit claims, and that the solution is to invest more in left-behind parts of the country rather than punish benefit claimants. But even that reading would suggest that there is an economic dimension to this issue as well as a medical one. An improvement in local economic performance is not going to heal the sick.

None of this vindicates James O’Brien’s caller, or people who think like him. It is not true that anyone can just sign up for benefits by claiming to have a mental health issue. Almost half of all applications for disability benefits are rejected, and this is without counting those who are already filtered out at the pre-screening stage. Nor are they all “sitting on their bums all day”: one in four recipients of disability benefits, and one in eight recipients of incapacity benefits, are in work, if often part-time. And while I have not found data on this, I strongly suspect that a lot of claimants are stuck on some interminable NHS waiting list, which is hardly their fault.

Where does this leave us?

I hate articles which describe a problem, and then just end by saying “It’s all very complicated” rather than offering a solution. But I’m afraid this is one of those articles. I don’t know what the solution is. All I know is that we have an ageing population, which is increasing the cost of the pension system, the healthcare system and the social care system. Against that backdrop, we cannot also be blasé about the cost of working-age benefits. As George Orwell famously said: some things are true even though some of James O’Brien’s callers talk about them in a clumsy way.