The tragedy of the welfare trap

So that’s it then. The prospect of reforming Britain’s dysfunctional, aspiration-sapping welfare system has been killed for at least the duration of this parliament. The Labour government’s welfare bill, having already been gutted last week to stave off a backbench rebellion, had to be gutted again at the 11th hour last night to allow it to pass. The eventual bill bore so little resemblance to the original proposals that many MPs had no idea what they were even being asked to vote on.

The climbdown over the Universal Credit and Personal Independence Payment Bill is a humiliation for Keir Starmer. The prime minister was inches away from suffering his first Commons defeat, despite having the largest majority of any government in decades. It is perhaps even more devastating for chancellor Rachel Reeves, who was visibly tearful in parliament today, after a major plank of her fiscal strategy was wiped out overnight. What was initially touted as ‘the biggest shake-up to the welfare system in a generation’, projected to save £5 billion annually, will now save literally no money. This means Britain’s incapacity-benefits bill will continue to balloon to £70 billion per year by 2030.

Now, the original proposals for welfare reform, drawn up by work and pensions secretary Liz Kendall, were clearly rushed and ill-thought through. They were designed explicitly to meet Reeves’s fiscal rules, not for the benefit of the needy. Had the bill passed unaltered, there would not only be tighter rules on who can claim incapacity benefits, but successful claimants would also have been entitled to less cash. This would mean punishing claimants, even if the government accepts they need assistance. This, quite understandably, struck many as cruel.

The dysfunction at the heart of the British welfare state is not that individual claimants are drawing out excessive sums of cash in incapacity benefits. Sadly, disabled people in Britain do not generally lead charmed lives. Being disabled, or living with a disabled person, is one of the strongest predictors of poverty in the UK. No, the problem is that the scope for who is classified as disabled is widening well beyond what is rational. Far from being compassionate, this is putting ever growing numbers of perfectly healthy, potentially productive people out to pasture.

According to the Institute for Fiscal Studies, a staggering one in 10 of the working-age population now claims some sort of disability benefit – either the health element of Universal Credit or a Personal Independence Payment (PIP). Bleaker still, claims are rising fastest among the young, surging by 69 per cent among 25- to 34-year-olds in the past five years.

Of course, there has not been some mass disabling event like a war on British soil, or any genuine rise in sickness rates in recent years. Not even the Covid pandemic can be blamed for this, as other countries that endured similar levels of infections from the virus have not experienced anything like the UK’s rise in incapacity claims.

Much of the increase in claims relates not to physical disabilities but to mental health. Indeed, 44 per cent of newer claimants cite poor mental health as their primary condition. According to the Tax Payers’ Alliance (TPA), an astonishing 110,000 adults in England are now claiming PIPs for anxiety and depression, up from 24,000 in 2019.

A major cause of this surge is the system itself. As the Financial Times explains: ‘The waxing and waning of health-related benefit caseloads is almost always driven primarily by changes to incentives and stringency in different parts of the benefit system, rather than by changes in people’s health.’ Around 80 per cent of claims are approved today, compared with 40 per cent in 2010. Claims can now be made online and assessed over the phone, rather than in person. Some whistleblowers at the Department for Work and Pensions have alleged there is a cash incentive for approving claims quickly.

The fact that incapacity benefits are more generous than unemployment benefits, and indeed more lucrative than many poor-paying jobs, is also an incentive to claim. It is no coincidence that Britain’s many deindustrialised, deprived towns and cities are hotspots for disability claims. Signing people off work has become a means of masking mass unemployment – of concealing the true scale of Britain’s economic sickness.

Legal and social changes have played a major role, too. The 2014 Care Act placed mental health on a legal parity with physical health, opening up the benefits system to a whole range of new ailments. The TPA’s research has found people (albeit in small numbers) receiving benefits for obsessive compulsive disorder, alcoholism and even ‘factitious disorders’ – that is, mental-health conditions where the patient is known to be intentionally faking symptoms, such as Munchausen syndrome.

This is not to suggest that anything like the majority are faking illnesses or are on the take. Instead, this is a product of decades of a therapeutic culture, where we are all invited to see ourselves as vulnerable, our challenges as disorders and our emotions as pathological. Feeling sad is now depression, social awkwardness is now anxiety, to lack concentration is to suffer from ADHD. This mental-health framework has now collided with all the other perverse incentives that govern the welfare system.

The message sent by those ‘rebel’ Labour MPs this past week is that none of this really matters. That we need not worry about consigning a generation to inactivity and unemployment. In fact, as they see it, opposing reforms to welfare is righteous, progressive and an expression of ‘Labour values’. It is beyond perverse.

No one will shed a tear for Starmer’s shredded authority or for Reeves’s broken fiscal rules. But we surely need to recognise the human cost of what is unfolding across the country. The welfare trap is a terrible tragedy.