From education to employment

Prime Minister right to focus on people not being well enough to work – but has offered a problem statement not a plan

With the UK the only G7 economy yet to return to pre-pandemic employment levels, the Prime Minister is right to make reducing long-term sickness a top economic priority. But his latest announcement is a problem statement not a plan, the Resolution Foundation said today (Friday).

The Foundation notes that proposals to reform sicknotes could offer improvements, especially if tied to more support to keep people attached to their current employer when they have a serious illness or acquire a disability. However, sickness absence rates, while currently up on pre-pandemic levels at 2.6 per cent, remain well below the rates seen in the 1990s (such as 3.1 per cent in 1995).

Furthermore, while the rhetoric in the Prime Minister’s speech focused on mental ill-health, which is a growing issue for long-term sickness and those out of work entirely, it is actually a declining reason for short-term sickness absence from work (down from 11 to 8 per cent between 2019 and 2022).

The far bigger announcement today is the consultation on the future of Personal Independence Payments (PiP). Reform of PiP is inevitable, with DWP spending on working-age disability benefits up 86 per cent in 2022-23 compared to 2010-11 (in real terms), and with a further 60 per cent rise forecast by 2028-29.

But while the speech set out the problem rising ill-health is creating for the Treasury, it did not offer a plan for addressing it, nor address any of the many difficulties involved in doing so. For example, while the Prime Minister made the case for reform on the basis of rising numbers of people with mental ill-health claiming benefits, any major reforms will also impact those with physical disabilities too. That’s because those whose primary health condition is physical currently account for the majority – 62 per cent – of PiP claimants in England and Wales.

The lack of a plan in part reflects how challenging disability reform is, says the Foundation. After all, major – and highly controversial – reforms were also carried out in the 2010s, but they ultimately failed to make major savings. The Labour Party too has not set out any material proposals in this area.

Finally, the Foundation says that disability reforms aren’t just about the public finances, they are important for family finances too. People with disabilities are among the poorest in society, with one-in-three adults in the poorest tenth of the population having a disability.

Louise Murphy, Senior Economist at the Resolution Foundation, said:

“Rising economic inactivity, and especially rising inactivity due to long-term sickness, is one of the biggest economic challenges Britain faces in the 2020s. Not only is it reducing employment and growth, and increasing public spending, it is harming the living standards of those who are too ill to work.

“But the Prime Minister today has set out a problem statement rather than a plan, particularly when it comes to proposals to overhaul our main disability benefit.

“This may reflect the very challenging nature of disability benefit reforms. But whoever wins the next election will need to go beyond rhetoric and consultations if they’re to stem the rising benefit bills and help more people into work.”

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