- Welfare pays £2,500 more a year than after-tax income of worker on national living wage (NLW) despite new Welfare Bill
- Jobless single parent claiming for anxiety and child with ADHD will get nearly £37,000 a year – £14,000 more than NLW worker
- Sickness benefit to hit £100 billion as OBR warns of “vulnerable position” for UK finances
- UK would save up to £9 billion a year targeting mental health benefits to fund NHS therapy and employment support
Benefits for economically inactive claimants will still be worth thousands of pounds more than wages despite the Government’s benefit clampdown, new analysis reveals.
As the Government’s Welfare Bill progressed last night after a £5 billion cut to Personal Independence Payment (PIP) was abandoned, new figures published by the Centre for Social Justice (CSJ) highlight the chronic gap between welfare and work.
The CSJ finds that, in 2026/27, an economically inactive claimant on Universal Credit (UC) with the average housing benefit and Personal Independence Payment (PIP) for ill health would receive an income of around £25,000 – rising to £27,500 for those awarded PIP’s highest rate.
For new claimants, this falls to £22,550 once the Welfare Bill’s £47 per week cut to UC Health is taken into account.
By comparison, a full-time worker on the National Living Wage (NLW) 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.
By 2026 the DWP expects sickness benefit claims to hit 3.4 million, while the reduction to UC Health is forecast to affect just 840,000 new claimants by 2029/30.
Once further benefits are added up, the gap between work and welfare remains even wider.
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 NLW.
The analysis comes as a bombshell report by the OBR report said the UK public finances were in a “vulnerable position and facing mounting risks”, with health and disability benefits set to hit £100 billion by 2030 and pension and debt costs spiralling out of control.
Around two in three people claiming Universal Credit Health also receive PIP, and roughly the same proportion are in receipt of housing support in UC. While it is possible to claim PIP while in work, fewer than one in six claimants are employed.
PIP was designed to help those with long-term conditions and disabled people with daily living and mobility costs. Since the pandemic the number of monthly PIP awards has more than doubled, from 13,000 to 34,000 a month – with roughly 1,000 people now signing on every day.
This rise has largely been driven by a sharp increase in claimants citing anxiety and depression as their main condition, up more than threefold since 2019. Similarly, the majority (seven in ten) of assessments awarding Universal Credit Health involve mental health and behavioural conditions.
Meanwhile, the number of children in receipt of Disability Living Allowance (DLA) has doubled over the last decade, with the growing caseload driven by awards for behavioural disorders, learning difficulties or ADHD.
The CSJ argues that considering combined benefit entitlements in the round produces a more accurate picture of the trade-offs between work and welfare. The think tank is calling for reforms that would redirect funding from long-term cash payments for less severe mental health conditions towards in-kind support.
The CSJ’s recommendations in its latest report, Change the Prescription, include:
- Withdraw PIP and UC Health eligibility from those with milder anxiety, depression or ADHD (equating to the 69 per cent of claimants with these conditions who do not receive enhanced PIP, translating into roughly 1.09 million claimants across PIP and UC).
- For those retaining eligibility, reset payments to £103.10 per week, a reduction of roughly £80 per week – aligning the benefit with the standard rates of PIP.
- Use the saving of £7.4 billion annually by 2029/30 to fund a £1 billion reinvestment 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 would save approximately £8.8 billion.
- Establish a £300 million National Work and Health Service, building on the pilots of the WorkWell scheme in 15 local authority areas, taking responsibility for Fit Notes away from overburdened GPs. Assuming just ten per cent of affected claimants move into full-time work would see the Chancellor net a further £500 million.
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. 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.”
Joe Shalam, Policy Director at the CSJ, 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. The Timms Review must be brought forward to Autumn, there is no time to lose.”
