Disability benefit reform can help narrow the gap

27 January 2016

This afternoon the House of Lords is debating one of the more controversial measures announced in the Summer Budget and contained in the Welfare Reform and Work Bill: the reduction in the rate of benefit received by some people on sickness benefits. Ahead of this there has been an active campaign encouraging peers to reject the measure.

On Saturday, 30 disability charities and three peers signed an open letter to Work and Pensions Secretary, Rt Hon Iain Duncan Smith, arguing that “the Government’s proposed cut to Employment and Support Allowance (ESA) will undermine its commitment to halve the disability employment gap”. To support this statement they cite a survey of disabled people which found that 45 per cent of respondents agreed that it would “probably mean I return to work later” as the change would delay their recovery.

This morning, the Royal College of Psychiatrists are reported to have said:

“We know that what works for people with mental health conditions is a system of long term support into work, rather than threats and sanctions which are unjust and ineffective and can lead to people’s mental health conditions deteriorating, pushing them even further from work.”

Firstly, it is important to separate the issue of sanctions from the rate reduction. Undoubtedly, poorly applied conditionality could lead to adverse outcomes for people with health conditions. That is not, however, to say that conditionality should not be applied. Indeed, when announcing the Labour Government’s intention to replace Incapacity Benefit (IB) with ESA, then Secretary of State John Hutton argued that it would help ensure “an active welfare state that balances rights with responsibilities”.

This, however, has nothing to do with the Government’s plans to reduce the weekly payment received by people in the Work Related Activity Group (WRAG) of ESA and it is misleading to conflate the two issues.

This rate reduction was recommended by Reform in a publication ahead of the Summer Budget. Currently people in the WRAG receive a basic rate of around £102 a week, compared to the basic rate for jobseekers which is around £73. This sizeable difference has inadvertently created a financial advantage to being on the sickness benefit. For some people, particularly those with severe conditions, the benefit level will make no difference, but for others it may. The last Labour Government also recognised this, and talked about the “perverse incentives” built into IB as a result of paying more the longer the claim. In a detailed report on Sickness, Disability and Work, the Organisation for Economic Co-operation and Development cite the “differences in [the] generosity” of sickness benefits compared to unemployment benefits as one of several factors contributing to the rise in claims across the countries they looked at.

There is a broad consensus that more needs to be done to tackle the 30 percentage point gap between the employment rate of disabled people and non-disabled people. Combining the reduction in benefit level with significant additional support for people with health conditions could well help in that task. On the latter the Government can certainly do more, but to simply overlook the role that structural reform can play in moving people back to work is an error.

Charlotte Pickles, Senior Research Director, Reform

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