New budget “black hole” as Government undercounts number of sick Brits, analysis reveals

• New research shows official forecasts routinely underestimate the number of people on incapacity benefits by the hundreds of thousands 
• Analysis reveals surge of extra one million sickness claimants to add over £7 billion to welfare budget
• Spiralling economic inactivity creates £2.1 billion “black hole” in DWP’s budget
• Chancellor urged to adopt “Dutch-style” employment schemes to get Brits back to work and slash the benefit bill

The Government is underestimating the number of Brits on incapacity benefits by over a quarter of a million people, a new analysis suggests.

The £2.1 billion “black hole” in the Department for Work and Pensions budget was identified by the Centre for Social Justice after analysing the accuracy of official forecasts produced over a ten-year period.

The think tank found the Office for Budgetary Responsibility and government to routinely underestimate the number of incapacity benefit claimants at the end of the five year “scorecard period” by the hundreds of thousands.

Applying the average underestimate of 255,000 to the currently forecast caseload reveals that the number of incapacity benefit claimants could well exceed four million by the end of the parliament – reaching 4.1 million by 2028-29.

This would mean over one million more claimants signed off sick compared to today, with the total cost to the Exchequer reaching £33.5 billion by 2028-29, a real terms increase of £7.4 billion compared to 2023-24, and thousands more people consigned to a life on benefits.

The CSJ is calling on the Chancellor to take radical action this Budget to get economically inactive Brits back to work.

This includes:

• Devolving employment support funding to local authorities, mirroring the approach taken in the Netherlands where economic inactivity fell by almost three times the rate of the UK since 2010, and building on the Working Well model pioneered in Greater Manchester by Mayor Andy Burnham.
• Implementing the “Into Work Guarantee” – first recommended by the CSJ in 2023 before being adopted by Labour Shadow Ministers – which would enable benefit claimants with disabilities to try work and return to their benefits if the job doesn’t work out within a set period.
• Accelerating the migration of claimants on legacy sickness benefits to Universal Credit, where they can receive extra support back into work.

The total number of economically inactive working age adults hit nine million last year, with long-term sickness up by over 600,000 since the pandemic according to the Office for National Statistics.

The findings come as the Government is expected to proceed with reforms to the work capability assessment announced by Liz Kendall’s predecessor as Work and Pensions Secretary, which are forecast to save £1.3bn by 2028-29.

However, today’s revelation shows the Government will need to adopt even more radical reforms if it is to get economically inactive Brits back to work and put the welfare budget back onto an even keel.

Andy Cook, Chief Executive of the Centre for Social Justice, said:

“These are deeply worrying findings. As if the challenge of economic inactivity wasn’t tough enough already, our analysis suggests there are thousands more claimants slipping through the cracks.

“Liz Kendall is making the right noises on devolved employment support and an Into Work Guarantee. Now we need to see action.”

ENDS

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NOTES TO EDITORS

1.  Methodology: to provide a more accurate estimate of the total number of incapacity benefit claimants at the end of the scorecard period (2028-29), the CSJ analysed every available caseload forecast published by the DWP between Autumn 2012 to Spring 2024 to understand the average difference between the expected incapacity caseload and that revealed in the most recently published outturn data. The analysis found there to be an average of 255,000 additional claimants on incapacity benefits at the end of the scorecard period, compared to the forecast figure. Applying the average underestimate to the most recent forecast suggests there would be 4.1m claimants by 2028-29, compared to the 3.85m currently expected.

2.  Methodology: To produce a costing of the average underestimate, the CSJ multiplied 255,000 by the cost of the average incapacity benefit claimant in 2028-29 (in 2024-25 prices, £8,161). This suggests there is a budgetary “blackhole” of £2.1 billion in 2028-19, with the overall incapacity caseload cost rising from £31.4 billion to £33.4 billion in the same year. This compares to £26 billion in 2023-24.

About The Centre for Social Justice

Established in 2004, the Centre for Social Justice is an independent think-tank that studies the root causes of Britain’s social problems and addresses them by recommending practical, workable policy interventions. The CSJ’s vision is to give people in the UK who are experiencing the worst multiple disadvantages and injustice every possible opportunity to reach their full potential.

The majority of the CSJ’s work is organised around five ‘pathways to poverty’, first identified in our ground-breaking 2007 report Breakthrough Britain. These are: educational failure; family breakdown; economic dependency and worklessness; addiction to drugs and alcohol; and severe personal debt.

Since its inception, the CSJ has changed the landscape of our political discourse by putting social justice at the heart of British politics. This has led to a transformation in government thinking and policy. For instance, in March 2013, the CSJ report It Happens Here shone a light on the horrific reality of human trafficking and modern slavery in the UK. As a direct result of this report, the Government passed the Modern Slavery Act 2015, one of the first pieces of legislation in the world to address slavery and trafficking in the 21st century.

Our research is informed by experts including prominent academics, practitioners and policy-makers. We also draw upon our CSJ Alliance, a unique group of charities, social enterprises and other grass-roots organisations that have a proven track-record of reversing social breakdown across the UK.
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The social challenges facing Britain remain serious. In 2024 and beyond, we will continue to advance the cause of social justice so that more people can continue to fulfil their potential.