Change the Prescription Update

Few issues are as explosive in British politics as welfare reform. But just as the smell of cordite following the blazing row over winter fuel payments is wafting away, an even bigger battle on benefits looms on the horizon.

This conversation is long overdue. Since 2020, the number of households where no one has ever worked has doubled. The working-age welfare bill – driven by a surge in long-term sickness and disability claims – is set to hit £131 billion by 2030. This is not a trend matched by other countries, the IFS point out, while the two-thirds increase in health benefit spending since 2019 has not obviously improved outcomes for anybody.

Indeed, as the CSJ’s Social Justice Commission heard from grassroots charities last year, the system increasingly “rewards” ill health. Yes, Universal Credit transformed and simplified the benefit system, helping thousands into work pre-pandemic. By 2019 we had the lowest rate of workless households since records began. But with post-Covid assessment practices, once all the wider benefits are added up and the exemption from the benefit cap applied (as is the case for those deemed unfit to work), welfare can now provide a standard of living comparable to the average post-tax wage. This isn’t fair for claimants or taxpayers.

Liz Kendall has shown political courage in grasping the nettle of welfare, but the Government’s approach (as with winter fuel payments) risks accusations of being “Treasury-brained” – that is, focused on short-term savings that can be scored by the OBR. After a plan to simply freeze PIP was dropped, ministers opted to raise the threshold for eligibility. The result? Over 1.3 million people face losing cash support, including thousands of people with complex physical conditions. According to DWP assessments, three in four PIP claimants with arthritis, two in three with cardiovascular disease, and even a third with cancer could lose out.

One minister has already resigned over the plans. But it is all too easy to say we need to control welfare costs and help more people to become independent and move into work without saying how. Here, we build on the CSJ’s landmark Change the Prescription report, to offer a new plan to all political parties.

I am struck by the words of the former Health Secretary and Chancellor, Jeremy Hunt, who reflected recently in The Economist:

“So why is Britain such an outlier on welfare spending? I am afraid I may be indirectly responsible. In 2014, as health secretary, I passed the Care Act… requiring the secretary of state to try to treat mental and physical health equally.

“[M]ental-illness claims account for more than half of the post-pandemic increase in disability benefits… But is it the right way to give people the help they need?

“Doctors say that social contact is one of the most important ways to tackle mental illness. Signing people off work does the opposite… We therefore need a total overhaul of the way the benefits system treats people with mental illness.”

The honesty is welcome and alights on a deeper truth. While mental health has become central to benefit claims, our system has not remotely adapted to reflect the difference between effective treatment and welfare dependency.

This presents a significant opportunity for any politician bold enough to take a different approach. As we set out here, limiting eligibility for incapacity and disability benefits to only the most severe cases of mental illness would not only bring costs under control but would allow ministers to radically scale up investment in treatment, whether through better access to therapy or funding for the local community groups and charities who change lives.

The same applies to the million or so young people not in education, employment, or training (NEETs). This is a mental health disaster. The considerable savings to be made by better targeting mental health benefits could also be spent on tax relief for businesses hiring British NEETs. This would yield massive mental health and financial gains, and help to move Britain away from an economic model reliant on migrant labour and instead focused on unlocking the talent in our communities.

On welfare, the wrong path is clear: as we saw with winter fuel, a salami-slicing exercise will simply lose the public case for reform. The right path begins with acknowledging that equating mental and physical health, though well-meaning, has led to unintended consequences.

Changing course will take moral courage. But with the number of people with anxiety and depression being written off rising by the day, there is no time to wait.