The Prime Minister is under mounting pressure to tackle the spiralling benefits bill (Image: Tayfun Salci/Anadolu via Getty Images / Tayfun Salci/Anadolu via Getty Images))
Britons on benefits can earn ￡2,500 more than a worker on the national living wage, according to a hard-hitting analysis from a leading think tank. Experts have warned that people are “trapped” in Britain’s benefits system as costs spiral and the Government u-turns on reform.
The Centre for Social Justice (CSJ) has calculated that in 2026-27 an “economically inactive claimant on Universal Credit” who gets the “average housing benefit and Personal Independence Payment” (PIP) for ill-health would receive an income of around ￡25,000. It says this could rise to ￡27,500 for those who receive the highest PIP rate.
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In contrast, a full-time worker on the National Living Wage is expected to earn ￡22,500 after paying income tax and National Insurance – leaving a “￡2,500 gap between work and welfare for existing claimants”.
It acknowledges the system will be less generous to new claimants once cuts to UC health support are taken into account. They are expected to receive ￡22,550.
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The findings come in the wake of the Labour Government hitting the brakes on plans to limit eligibility for PIP.
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Sir Iain Duncan Smith, a former work and pensions secretary and founder of the think tank, warned of the consequences of ducking reform.
He said: “Before lockdown, we had the lowest numbers of workless households since records began. However, figures from the Centre for Social Justice show how damaging Covid was and that, since then, the scale of the disincentive to work has grown dramatically.
“That’s why the Bill’s failure to look at real reform of the system is more costly than just the billions lost to the Chancellor, the real loss is that of the wasted lives trapped in a system of dependence rather than one of independence and achievement.”
The analysis warns that sickness benefits claims are expected to hit 3.4million next year.
It states that an “out-of-work single parent, claiming PIP for anxiety and benefits for a child with additional needs such as ADHD” would receive ￡36,900 – “over ￡14,000 more than the after-tax wages of a full-time worker” on the national living wage.
The think tank argues PIP was “designed to help those with long-term conditions and disabled people with daily living and mobility cost”. But it says that since the pandemic the “number of monthly PIP awards has more than doubled, from 13,000 to 34,000” – with around 1,000 people signing on every day.
The spiralling cost of benefits is considered a key challenge for the national finances. Health and disability benefits are expected to cost ￡100billion by 2030.
The Centre for Social Justice says that although “it is possible to claim PIP while in work, fewer than one in six claimants are employed”.
Joe Shalam, the think tank’s policy director, acknowledged the efforts made by the Work and Pensions Secretary to reform the system but pressed her to go much further.
He said: “Liz Kendall deserves credit for tackling the perverse incentives that have crept into the welfare system since Covid. People who cannot work due to sickness or disability must always be protected, but as our research shows, too many people are trapped in a cycle of dependency and wasted potential.
“By tightening eligibility for mental health benefits and investing in therapy and employment support, ministers can save public money and transform lives.”
He warned there is “no time to lose”.
The think tank is calling for the withdrawal of eligibility for PIP and UC health support “from those with milder anxiety, depression or ADHD”.
It wants a ￡1billion investment in “frontline mental health services including NHS talking therapies, local support groups, work coaches and community interventions”.
Narrowing eligibility for PIP and UC Health to the most severe cases of anxiety, depression or ADHD, it claims, would save approximately ￡8.8billion.
It also wants a ￡300million “national work and health service” which would take responsibility for fit notes “away from overburdened GPs”.
If 10% of affected claimants moved into full-time work, the think tank says, this would save the Chancellor ￡500million.
Shadow Work and Pensions Secretary Helen Whately: 'Work should always pay' (Image: Getty)
Shadow Work and Pensions Secretary Helen Whately, said “work should always pay”.
She said: “Starmer has so far proved incapable of reforming the system, so we have thrown down the gauntlet and shown him how to do it – no more sickness benefits for foreigners, make it harder to claim for low level mental health and wellbeing reasons like anxiety, and bring back face to face assessments. But he still doesn’t listen.
“The Government’s failure to fix this is putting support for those who actually need it at risk. It’s obvious who’s side they are on - and it isn’t working people.”
The Government has gutted the most controversial elements of its welfare reform plans, u-turning on some cuts to UC while protecting people who claim PIP today from tougher eligibility rules.
However, there is still strong concern among leading charities about cuts to the health element of UC. Fifty-three groups including Scope, the Joseph Rowntree Foundation and RNID have warned the changes will “plunge many more disabled people into poverty”. It says more than “700,000 people who are disabled or have a long-term health condition are set to lose an average of ￡3,000 a year”.
Reform UK Deputy Leader Richard Tice MP said: “This is yet another example of Labour’s policies disincentivising work. It’s no surprise that so many people would rather rely on taxpayer-funded benefits than get up early and work hard—Labour has made that the easier, more attractive option.
“In many cases, people can earn more from benefits than from full-time employment. This is a system which is fundamentally broken. Our country cannot sustain itself with so few people contributing.
“Reform will restore the value of work, cut wasteful spending and daft regulations, then lower taxes, and ensure that hard work always pays.”
Elliot Keck of the TaxPayers’ Alliance, said: “It should come as a wake up call to ministers the fact that for many Brits, there is a greater incentive to live a life on benefits than to work. This is a disaster for the economy and for taxpayers and is also unhealthy for the individual and their family, given how important it is that children see the benefits and value of hard work.
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“The Government needs to ensure its reform of the benefits system is radical enough so that work genuinely pays.”
A Government spokesperson said: “We inherited a broken social security system that is failing people on all accounts. We are changing the system so it genuinely supports those who can work into employment and ensuring the safety net will always be there for the most vulnerable – and puts the spiralling welfare bill on a more sustainable footing.
“Through our ￡2.2billion employment support funding over the next four years, we are also building on the success of programmes like Connect to Work, which help disabled people and those with health conditions into work.”
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