Focus on health to cut ballooning welfare bill, new report argues

The next government should focus on addressing underlying health conditions rather than embarking on a benefits “clampdown” if it wants to cut the welfare bill, a new report argues.

According to research from the Resolution Foundation, the Treasury will have to spend an extra £20bn on working-age health-related benefits by 2028-29, taking the total bill to £63bn.

This likely increase comes after a fairly substantial rise in spending on health-related spending over the past decade. Total annual spending on health-related benefits has increased from £28bn in 2013-14 to £43bn last year.

The expanding welfare bill reflects an increasingly sickly population. Record numbers of working-age people are out of the workforce due to long-term health conditions.

The number of working-age people reporting that they have a disability has increased from 5.9m in 2012-13 to 8.9m in 2022-23.

The increase in spending on health-related benefits has caused alarm across the political spectrum, with both major parties pledging to cut the benefit bill.

The Conservatives have promised to save an extra £12bn through welfare reform, helping to fund their 2p cut to National Insurance.

The government highlighted reform of personal independence payments (PIP) as a way to cut spending, particularly by making it more difficult for people with mental health issues to claim benefits.

“While people suffering with mental health conditions face significant challenges, it is not clear that they always face the same additional living costs as people with physical disabilities,” the manifesto said.

Although a smaller part of Labour’s manifesto, getting people back into work is an important part of the opposition’s plan to generate economic growth.

Liz Kendall, shadow work and pensions secretary, has previously said there will be “no option of a life on benefits” under Labour. The party has promised to lift the employment rate to 80 per cent, equivalent to getting an extra 2m people into the workforce.

The Resolution Foundation pointed out that any government wanting to get people back into work and save money on welfare spending needed to address the underlying health issues.

The report warned that “rushed attempts” to restrict eligibility would likely cut off support to people with acute needs without addressing their underlying health condition.

“This isn’t down to people gaming the system, or support somehow being easier to claim. Nor is it the case that a so-called ‘benefits clampdown’ would produce easy, pain-free savings,” Lindsay Judge, research director at the Resolution Foundation, said.

“The growing health-related benefit spend reflects the fact that Britain is becoming older, sicker and experiencing more disability,” Judge added.