Welfare pays more than a job for 1m on combined benefits, think tank warns
- Scale of welfare crisis uncovered following revelation benefits pay £2,500 more than wages of a full time job after tax
- Sickness benefit to hit £100 billion as economists warn UK “heading for IMF bailout”
- Chancellor would save over £7 billion a year reforming mental health benefits to fund NHS therapy and employment support
The number of those receiving more in benefits than a full time job is higher than previously thought, new research reveals.
One million people are now out of work and claiming overlapping sickness and housing benefits alongside Personal Independence Payment (PIP), according to analysis by the Centre for Social Justice (CSJ), following a surge in claims for mental health conditions.
The think tank warns that the rising tide of welfare dependency is being felt most acutely among young people, with almost one million under 25s now out of work or training.
Recent CSJ research revealed that by 2026 there will be more than a £2,500 gap between earnings and combined benefit income. A full time worker on the National Living Wage (NLW) is expected to earn £22,500 after paying income tax and national insurance.
By comparison, an economically inactive claimant on Universal Credit (UC) for ill health with the average housing benefit and Personal Independence Payment (PIP) would receive an income of around £25,000, rising to £27,500 for those awarded PIP’s highest rate.
New analysis published today finds that, as of May 2025, there were one million people claiming a combination of UC health, housing and PIP, following a dramatic increase in awards for anxiety and depression since the pandemic.
Seven in ten new UC Health assessments now involve mental health conditions, and PIP claims for anxiety and depression are up threefold since 2019.
In a new report, Wasted Youth, the CSJ warns that the UK is “writing off” a generation of young people, trapped in welfare rather than work. UK payroll data shows that the number of under 25s in work has collapsed, down by 119,000 in the past year alone. Since 2020 the number of non EU under 25 migrants on payroll has rocketed by 315 per cent.
The OBR has said health and disability benefits will hit £100 billion by 2030, while youth worklessness bodes ill for long term growth. Young male NEETs are ten times likelier to remain economically inactive 20 years later, leaving them poorer, sicker and more likely to die young.
The CSJ says ministers must act urgently this Autumn to close the gap between work and welfare and to “end the disaster of wasted lives”, while protecting those who are unable to work due to a disability.
Its recommendations include:
- Reform mental health benefits: Withdraw UC Health and PIP from those with milder anxiety, depression or ADHD, equivalent to around 1.1 million people, and reset remaining awards to £103 per week. This would save £7.4bn by 2029/30, of which at least £1bn should be reinvested in radically expanded NHS Talking Therapies, social prescribing and employment support.
- Support young people into work: Introduce a Future Workforce Credit, an effective tax cut for employers hiring NEETs, funded by removing the UC health element for under 22s. This would get 120,000 young people into jobs while netting £765m in tax and welfare savings.
- Build a new Work and Health Service: Funded by £300m in savings, this would expand WorkWell pilots and shift responsibility for fit notes away from GPs.
- Reinstate domestic job advertising rules: Require employers to advertise roles to UK workers before recruiting under the visa system.
Joe Shalam, Policy Director at the CSJ, said:
The Prime Minister is right, one million jobless young people is a moral and economic disaster, but with principled reforms he can change lives, save money, and get Britain working again.
Ministers should redirect benefit payments for less severe mental health conditions into proper support to stop thousands more ending up trapped on welfare. The future of our economy depends on it.
Previously, Rt Hon Sir Iain Duncan Smith MP, former Work and Pensions Secretary, said:
Before lockdown, we had the lowest numbers of workless households since records began. Since then, the scale of the disincentive to work has grown dramatically. We cannot allow another wasted generation to be trapped in dependence rather than independence and achievement.
NOTES TO EDITORS
Methodology:
- The CSJ produced a range of illustrative example claimants and workers using the most recent publicly available data, including: the average UC housing element for out-of-work claimants in England (DWP Stat-Xplore); the UC standard allowance and elements (UK),including the welfare bill’s new measures of an above inflation increase to the standard allowance, the freezing of the health element for pre-April 2026 cases, uprating and halving of awards for post-April 2026 claims (DWP Universal Credit Bill: Universal Credit Rebalancing); the average and higher rate PIP awards (DWP Stat-Xplore; GOV.UK); the UC child element (Universal Credit regulations 2013); the average Child DLA award (DWP Stat-Xplore); and the UC carer element (Universal Credit regulations 2013); and upratings to 2026/27 from the IPPR Tax-Benefit Model. The CSJ used HMRC’s tax calculator to provide examples of different earnings after tax.
- As at May 2025, we estimate there were 980,000 out of work claimants in receipt of UC health and housing elements and PIP. To reach this estimate, in the absence of publicly available combinations data, we start with 2.1 million households claiming UC health (DWP Stat-Xplore, 2025) reduce that down to the 1.4 million who are also in receipt of UC housing (DWP, Stat-Xplore, 2025), and then apply an assumption of a 7 in 10 overlap (DWP survey data, 2024) between those claiming PIP and UC health – which reduces the total to an estimated 980,000 claiming UC health, housing and PIP.
