DWP told to take 'urgent action' to reform health-related benefits

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The DWP is being told to take 'urgent action' to reform the benefits system as costs soar. Detailed demands have been made to make multiple changes to the system.

Too many people's lives are being wasted, a new report said. And huge amounts of money are being spent - with everyone losing out.

The House of Lords Economic Affairs Committee has demanded an overhaul of the health-related benefits system. Following an inquiry into how welfare and long-term sickness interact, they've found that current setups are providing incentives for people out of work to apply for these benefits, and once they receive them, there's little motivation or assistance to secure employment.

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The committee made it clear that their findings didn't align with the idea that worsening health or stretched NHS services were behind the spike in benefit claims. They're now pushing the UK Government for a strategy to iron out the system's flaws, cautioning: "If the Government does not do so, this growing area of welfare spending will remain a challenge for the forthcoming Spending Review."

Lord Bridges of Headley, heading up the committee, remarked on the urgency, stating: "The health benefits system is financially unsustainable, wastes human potential and - in the words of the Employment Minister (Alison McGovern MP) - 'does not work for anybody'. Given the pressure on the nation's finances, tackling this must be a top priority for the Government.

"Urgent action is needed to reform both the unemployment and health-related benefits system, and how they interact. There should be more support to help those who are able to find and accept work - and to ensure that those who cannot work for a period are not abandoned to a life on benefits.

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"Without a clear plan of action, growing welfare spending will remain a significant challenge for the forthcoming Spending Review."

Key findings were revealed in a letter to the Secretary of State for Work and Pensions, Liz Kendall, published on Monday, which included other conclusions from the Committee, reports the Daily Record. The full letter can be read here, but here is a summary of the findings:

  • Around 3.7 million people of working age receive health-related benefits, some 1.2m more than in February 2020 - more money is now being spent on incapacity and disability benefits (almost £65 billion) than defence, and that figure is set to rise, the committee said.

  • If 400,000 people who are out of work due to ill health were able to find work, this could save around £10 billion through higher tax revenue and lower benefit spending, the committee found.

  • GPs are unable to offer a sick individual the degree of support they may need - the fit note should be overhauled, they said. GPs should be encouraged or enabled to refer an individual to an occupational health professional, while individuals who are signed off work for more than a month should undergo additional or ongoing assessments.

  • The lower level of conditionality attached to health-related benefits creates an incentive to apply for these benefits, the committee said. The Work Capability Assessment (WCA) is not rigorous enough and susceptible to error. The Government is right to plan to reform the WCA. The assessment should be face-to-face and seek to establish what work an individual can do rather than looking to corroborate what they cannot do.

  • Once in receipt of these benefits there is a disincentive for claimants to apply for and accept work, the committee said. The Government needs to review the conditions for those in receipt of health-related benefits so that, if people return to work, they are not at risk of immediately losing those benefits. Or, if the job proves unsuitable, they are not immediately faced with having to reapply for these benefits.

  • The committee said it had received no convincing evidence to support the claim that the UK Government’s targeting NHS waiting lists will have a material impact on the number of sickness-related benefit claims. This is not to deny that improving the health of the population will increase employment. But the DWP and the NHS must share and analyse health and benefits data in order to establish whether and how targeted intervention to cut NHS waiting lists could have a material impact in reducing labour market inactivity, they said.

  • The committee said there should be a system in which those who receive health-related benefits are proactively helped to overcome obstacles rather than remain on benefits and out of work indefinitely. The committee urged the Government to consider providing enhanced support, prioritising those claimants where the returns and rewards for getting back into the labour force are high - for example, young people. The committee recommended that, just as unemployed people have a work coach, so should those on incapacity benefit for the first two years of their period on benefits. Each caseworker’s aim would be to help the claimant overcome obstacles, both in terms of health and employment, and get back to work, they said.

The committee expressed its approval of the UK Government's intention to "take a whole new approach with fresh thinking" towards welfare. They stated that reform is necessary to both curb the increasing fiscal burden and address the escalating social cost of hundreds of thousands of people reliant on benefits.

The committee said: "We see no reason to delay action. A wealth of analysis already exists on the issues we have raised and which offers credible solutions to the problems we have highlighted. We urge the Government to accelerate its plans to reform health-related benefits.

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"If the Government does not set out how it intends to address these weaknesses, this growing area of welfare spending will remain a challenge for the forthcoming Spending Review."

The committee said it gathered evidence from the UK Government, the Bank of England, the Office for Budget Responsibility (OBR), and several policy experts - the evidence can be accessed online here.