The Office for Budget Responsibility (OBR) has published a report arguing that awards of ‘incapacity benefits’ are now at their highest since the financial crisis and will reach an all-time high in 2029. It suggests that the only measure that has ever significantly reduced awards was the reassessment of claimants using a harsher test.
This week’s ‘Welfare Trends Report’ was originally going to be published under a Conservative government in July, but the election led to it being put on hold. However, given the focus of both the Tories and Labour on getting disabled claimants into work, it will no doubt be equally welcomed by the current administration.
The OBR report looks at incapacity benefits right back from the invalidity benefit of the 80s and 90s through to the current system of employment and support allowance (ESA) and universal credit (UC).
It claims that incapacity benefit awards were declining from the early 2000s to the mid-2010s. This period also saw the introduction of ESA in 2008 and universal credit in 2016.
The change from incapacity benefit (IB) to ESA led to a fall in the caseload from 6.7% of the population in 2008 to 4.9% in 2018, largely due to IB claimants being reassessed for ESA and being found capable of work under the new, harsher regime. Between 2011 and 2015, 1.3 million IB claimants were reassessed for ESA and 250,000 of these were found fit for work.
The fall would have been even higher if the pension age for women had not been raised, leading to more women having to claim incapacity benefits instead of state pension.
Under UC the proportion of claimants rose by 2.1% to 7.0% between 2017 and 2024, entirely reversing the previous fall. And the OBR predicts that the rise in numbers will continue over the coming years, with a record high of 7.9% being reached in 2029 if current trends continue.
The OBR suggests that the main cause of the increase in awards is not a rise in the number of people making claims. Instead it is what happens as claimants move through the system. The proportion of claimants who drop out before getting an award has fallen and the proportion of claimants who are successful has risen.
The number of initial claims for incapacity benefits between 2010 and 2023 accounts for just 20% of the increase in awards.
However, 30% of the rise is due to fewer claimants dropping out of the process before a decision is made.
And very nearly 50% is due to a higher approval rate: more claims are being accepted as valid now than in the past.
In part, this could be because of the type and severity of the conditions for which people are now claiming, the OBR suggests.
But, whatever the reason for the increased approval rate, the message from the OBR is clear: reassessments using a harsher test are the only measure that has reduced caseloads in the past.
As readers will know, in the Autumn of 2023 the Conservatives announced plans for a revised WCA to be brought in for new claims from April 2025. This would make changes to the substantial risk regulations, the mobilising activity and the getting about activity.
The changes were to be aimed only at new claimants and were estimated to be worth £1.3 billion a year in savings for the DWP. Existing claimants would be protected by the “Chance To Work Guarantee", which the Conservatives claimed would abolish the WCA for the vast majority of existing claimants with limited capability for work-related activity (support group).
Labour has yet to say whether it will take the changes to the WCA forward and, if it does so, whether this will also include the “Chance To Work Guarantee". This report from the OBR will certainly provide ammunition for those who wish to impose the worst of those Tory plans.
You can download the ‘Welfare Trends Report’ from this link.
