Reform welfare series

August 2016

Reform published a series of three reports on reforming the sickness and disability-related out-of work benefits system. Improving employment opportunities for disabled people has been a priority for successive governments, but reform to date has been inadequate and progress woeful, as the minimal shift in caseload numbers illustrates – in 2014-15 there were just over 2.5 million working age claimants of incapacity-related benefits, a decade earlier there were almost 2.8 million.

The Reform series provides a blueprint for delivering the radical change needed to transform the outcomes of those parked on out-of-work benefits. This series looks at how to do this in three parts: first, it lays out the case for change; second, it explores structural changes to the existing benefit system; and finally, it looks at how government can best design welfare-to-work services and support and incentivise employers to recruit and retain disabled employees.

Each area of reform is vital if the Government is to make progress towards its ambition to halve the disability employment gap; addressing just one issue will not be sufficient. Achieving the radically different employment outcomes desired by the Government demands a radically different approach. This series of reports provides just that.

Employment and Support Allowance: the case for change

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The first paper in the series, Employment and Support Allowance: the case for change, laid out the case for changing Employment and Support Allowance.

Unconditional support for those who are deemed, due to incapacity, unable to work or carry out any work-related activity is a key principle of the welfare state. For many of those claiming sickness and disability benefits, however, the evidence suggests the system is doing more harm than good.

Given the well-evidenced benefits of work, including for many sick and disabled people, and that labour market detachment increases over time, the high number of people claiming out-of-work incapacity-related benefits long term is bad for individuals, society and the economy. A job brings many important financial and non-financial benefits. Employment not only provides a source of income, but can improve social inclusion, build self-esteem and improve an individual’s physical and mental health.

The Government has made a commitment to halve the disability employment gap. Crucial to this will be redesigning the out-of-work incapacity-related benefit system to assist more claimants back into sustainable employment.

Working welfare: a radically new approach to sickness and disability benefits

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The second report in the series, Working welfare: a radically new approach to sickness and disability benefits, outlines the structural reforms that would maximise Universal Credit’s impact for people with health conditions. The package of reforms cover the benefit rate, gateway and conditionality. They are not about cost-saving, but building a more coherent, effective and personalised benefit system.

It argues that the Government should set a single rate for out-of-work benefit. The savings from this rate reduction should be reinvested into Personal Independence Payment – which contributes to the additional costs incurred by someone with a long-term condition – and into support services.

Moving to a single out-of-work allowance is also a key precursor to a more personalised system focused on what a claimant can do. The Government should implement a single online application for the benefit, including a ‘Proximity to the Labour Market Diagnostic’ to determine a claimant’s distance from work and a health questionnaire.

Stepping up, breaking barriers: transforming employment outcomes for disabled people.

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The final report in the series, Stepping up, breaking barriers: transforming employment outcomes for disabled people, addresses the employment support services that should sit alongside a reformed benefits system. It also explores the role of employers in ensuring that people with a disability or health condition are given every opportunity to move into, and stay in, work.

Outsourced welfare-to-work programmes have proven to be an effective model. They allow diversity of provision through supply chains of specialist providers, can flex to accommodate different referral volumes and can ensure financial risk is shifted from the taxpayer to the provider. The design of the programme is, however, key to maximising the benefit of outsourced provision. The payment structure must incentivise the outcomes government seeks, whilst remaining commercially viable for providers.

Innovation is key: the black box should be retained, but a more radical approach is needed. A ‘skunkworks’ model, akin to that used in the private sector, should be implemented. This would enable government and the sector as a whole to try new things and develop an evidence-base of what works. Taken together, these proposals would drive better performance, which means better outcomes for the people that really matter.

Ensuring that suitable jobs are available for when claimants complete the programme and that employers are willing to recruit disabled workers is essential. Despite a strong business case, many employers remain unsure about the risks and costs associated with recruiting disabled workers. Government policy should aim to lower these barriers through supported stepping stone jobs, apprenticeships and changes to Access to Work.

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