Impact of disability benefit reforms.

What do you think?

Tougher eligibility and lower value disability benefits reducing demand by “baby boomers”?

Low education linked to high disability benefit claims and less chance of working again?

Mental health and behavioural conditions increasing or just being better recognised?

If you are like me and just a bit of a geek about disability benefits, this paper is just up your street.

It talks about how disability benefits were growing as a proportion of the national income from the 1950s to nearly quadruple in the 1990s.  Reform in the mid 90s and the following decade has produced major reductions so that the forecast of expenditure in 20017/18 will be back to 1960s levels.  But the number of people receiving benefits hasn’t reduced anything like so dramatically.

Over this long period, we need to recognise that other factors are influencing the level of demand such as:

  • The recession and gradual economic recovery.
  • Transition from manufacturing to more service-based economy.
  • An ageing population (increasing propensity for disability).
  • More women in the workforce.
  • The relative value of benefits reducing in relation to average income and the sanctions regime dissuading many from continuing claims.

While there have been reductions in the claim rates of older men and women, those rates relate to the larger numbers within the “baby-boomer” population meaning that the overall numbers of disability benefit claimants has reduced little (about 2.3m in 2013)  .  Essentially, the reforms anticipated the baby-boomer demand and managed to slightly reduce claimant numbers with new eligibility tests and some displacement to other benefits while cutting the relative value of the benefits to reduce cost/render less attractive to higher earners.

Factors for employment support providers.

  • More mental health and behavioural conditions.  “Among both men and women there is systematic growth in the proportion of claimants in any age group with mental and behavioural disorders as their principal health condition.”  And this higher rate is marked amongst young people.  However, I think we have to be careful not to jump to the conclusion that this shows a real increase in these conditions: many were doubtless “hidden” and/or undiagnosed while the WCA was also notoriously poor in acknowledging such conditions.  But these increases also mean that providers of employment support, the health sector, employers and others need better strategies and delivery to make work a viable prospect –especially amongst the young.  Hopefully, more Government focus on mental health will be a start.
  • Improve skills.  People with lower education are about four times more likely to claim disability benefits than those with higher education:  they probably had lower skills, lower pay, riskier jobs and lifestyles.  It seems that they are more likely to gain health conditions whereupon disability benefits have higher relative value in contrast to those with high skills and better paid jobs.  They probably have fewer transferrable skills meaning that adapting and returning to different work is more difficult so they are likely to claim for longer periods.  Employment support providers need to find ways of upgrading/updating skills to make sustainable jobs a possibility.
  • Earlier interventions.  On the policy front, the correlation between older age, low skills, more health conditions and disability benefits is important:   benefits need to be well-targeted on those with most needs (which may not result from the number of conditions but the severity of consequences from even a single condition).  With the ageing population and later eligibility for retirement pensions, the potential disability benefit costs look high – the cost-effectiveness of earlier interventions to improve health and skills in work need calculating.

Snapshot of disability benefit reforms.

  • 1970s. Invalidity Benefit at a rate of about 25% of average earnings and the “Suitable Work” test.
  • 1995.  Reformed to Incapacity Benefit with the “All Work” test requiring claimants to be considered in relation to any work, regardless of their previous occupation/skills etc and medical assessment by individuals’ GPs replaced by external agencies.  Claimant numbers fell when continuation of disability benefits after retirement age stopped – but overall expenditure probably differed little as these individuals would have received their State pensions instead.  The Pathways to Work scheme had some success in providing support and financial incentives to encourage recent claimants to get back to work.
  • 2008.  Reformed to Employment and Support Allowance but at a rate of about 15% of average earnings (primarily as earning levels had increased but the benefits had not).  A stricter medical Work Capability Assessment divides claimants in to the Work-Related Activity and Support Groups – subject to much criticism (especially around mental health conditions) and some consequent change.    The mandatory Pathways provision continued and voluntary participation in the Work Choice programme offered.  IB claimants were progressively transferred to ESA from 2010, starting with the most recent claimants so that those changing in late 2014 were those furthest from work.

“Disability benefits”, of course, don’t give the whole picture: it has been estimated that some 25% of people claiming Job Seekers Allowance after “failing” the WCA are disabled people according to the Equality Act 2010 definition.  Many will have been deemed capable of work (despite substantial impairments) if supported in work through the Access to Work scheme (which itself has been much criticised as under-performing).  Hence, one should not ignore all these JSA claimants when looking at disability benefits – many will have as much difficulty in getting jobs as those on ESA.

“It seems clear that in the absence of the various reforms discussed here, the number receiving disability benefits in the United Kingdom—and the amount spent publicly on them— would have ended up being substantially higher. But the changes in receipt of disability benefits are far from uniform across divisions of age, sex, education, and health.”

Penny Melville-Brown

Disability Dynamics ltd

Helping disabled people to work since 2000

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