“You have two choices: you can weave baskets or work on a switchboard.” That was the choice offered to me - a partially sighted teenager whose sight was rapidly deteriorating twenty years ago by the careers adviser at my secondary school. Decades later, after carving out a successful business career, I reflect on how different my life could have been if I had taken that advice.
Yet today, Britain’s welfare system does exactly that. Rather than acting as a springboard for aspiration, our current welfare structures have become an anchor, limiting the potential of millions by focusing relentlessly on incapacity rather than capability. In short, our system focuses not on what people with disabilities, whether mental or physical, can do but rather what they cannot do.
The wider issue however is that, put simply, Britain cannot afford a welfare system for those with minor mental or physical disabilities. If unchecked, between three and four million people would claim Universal Credit health top ups by 2030 - and stuck without jobs forever. The Office for Budget Responsibility (OBR) estimates that, by the end of the decade, the annual bill for these benefits would be £100bn. But worse for the millions of people claiming these benefits - that has risen so dramatically post COVID - it is the lost life chances that matter most and is why action is needed now. More importantly, it should be the priority of any Government to provide the most help to those with the severest disabilities. But by having to spend the welfare budget on so many millions of people, many of whom have relatively minor conditions, it leaves too little for those who need it the most.
The Government has, encouragingly, taken some positive first steps. But the proposed savings of around £5bn, while sounding large, are tiny compared to the overall budget. Even after the Chancellor added a freeze on the health element of Universal Credit in her Spring Statement, the numbers paint a worrying picture. According to the OBR, the caseload for Personal Independence Payments (PIP) is still forecast to grow by 24% (more than 750,000) by 2030. Financially, the story is similar: the impact assessment found that even with the £4.5 billion of savings, spending on these benefits is still forecast to grow substantially in nominal terms, by over £14 billion, or 28%.
The OBR assessment underscores that, financially, the changes implemented so far are relatively modest. The savings made, although welcome, barely scratch the surface of the deep structural issues within our welfare system. If we genuinely aim to safeguard the future sustainability of Britain’s public finances, tougher and more courageous decisions must be forthcoming.
One glaring area highlighted in a recent IFS report, and by many who have contributed to the conversation around benefits, is the substantial proportion of working-age individuals classified as economically inactive due to conditions such as mild depression or anxiety. The IFS found that 1.3 million people claim disability benefits primarily for mental health or behavioural conditions, 44% of all claimants since the pandemic. Alongside this, a recent DWP survey suggests 86% of incapacity and disability benefit claimants report having a mental health condition. These conditions, while deserving of empathy, should not automatically consign a person to a life outside the workforce, or push them further away from society. Numerous studies have in fact demonstrated the positive effects employment can have on mental health, bringing purpose, structure, and community engagement that welfare dependency simply cannot match. So helping more people into work could actually have a beneficial impact in improving their mental health.
What is needed therefore is a much more fundamental assessment of how we differentiate between those who genuinely require ongoing support due to severe and chronic disabilities, and those who, with the right support and encouragement, could flourish within the workplace. That is going to require different kinds of assessment, especially in mental health, as well as changes to the amount claimants receive. It is simply unfair - and economically unsustainable for the country - for so many those in disability and incapacity benefits to receive more than they could if employed on a job earning the national living wage. Presently, our failure to effectively distinguish between these groups results in resources being diluted, depriving the most severely disabled individuals of the substantial support they desperately need.
Left leaning critics of the welfare reforms accuse the government of harshness. However, I believe this to be a symptom of the perverse incentivisation of the system itself. There is nothing compassionate about trapping individuals in a cycle of dependency. True compassion lies in enabling people to achieve independence, dignity, and self-reliance through meaningful employment. It is neither fair nor sustainable to continue with policies that perversely incentivise inactivity.
The Government’s reforms represent an important first step towards a comprehensive recalibration of our welfare system. This must include more targeted interventions that genuinely empower individuals to pursue gainful employment. Vocational training, workplace support schemes, and mental health services tailored specifically to reintegrate people into productive roles are essential and economically prudent investments. The recent discovery phase of the Mayfield report found that out of comparatively sized OECD countries, Britain is the only one that has had economic inactivity grow since the end of the pandemic. It is clear that our system is in need of radical action.
The OBR’s impact assessment also makes clear that incremental adjustments will not resolve the challenges facing our welfare state. Half-measures will merely prolong existing problems, leaving future governments with even greater financial and social burdens to tackle and the most vulnerable in our society even worse off than they already are. We must act decisively now, guided by a clear-eyed view of what our economy, and our society, can sustainably afford.
It is neither socially constructive nor fiscally responsible to allow millions of economically capable individuals to remain detached from the labour force. Nor is it morally acceptable to deny adequate support to those who truly need it due to misallocated resources.
First published on CapX : https://capx.co/our-broken-welfare-system-is-ruining-lives
Britain has always thrived on aspiration, hard work, and the principle of rewarding effort and determination. It is time our welfare system reflected these values once again. By focusing on capability rather than incapacity, encouraging employment over dependency, and strategically allocating resources to those in genuine need, we will forge a stronger, fairer, and more prosperous Britain for all.