Government warned health benefits system is ‘financially unsustainable’

Experts have raised concerns that the UK's health benefits system is ‘financially unsustainable.’ They argue that the current way of assessing who qualifies for incapacity benefits is not working effectively.  

The system is seen as wasting human potential and placing unnecessary strain on the nation's finances, according to a House of Lords report. 

How many people receive health-related benefits?  

• 3.7 million people of working age in Britain currently receive health-related benefits. 

• This is 1.2 million more than in February 2020. 

• £65bn of taxpayers’ money is spent on incapacity and disability benefits. 

• Long-term sickness has become a major cause of joblessness since the pandemic, rising from 2 million in 2019. 

Experts say the system isn’t working 

Lord Bridges, chairman of the cross-party Economic Affairs Committee, said that tackling the issue “must be a top priority for the government.” 

In a letter to the work and pensions secretary Liz Kendall following an inquiry into why health benefits spending has increased, Lord Bridges argued that the rise isn't necessarily due to poorer health or longer NHS waiting times, saying there is “no convincing evidence” of this.  

He warned that people have incentives to claim health-related benefits, which then becomes a deterrent for them to seek employment. 

The system, according to Lord Bridges, is financially unsustainable and wastes human potential.  

“The danger is that people have incentives to claim health-related benefits; and, once in receipt of them, have neither the incentive nor support to find and accept a job,” he added. 

What is the government is doing about it? 

In 2024, Liz Kendall announced a plan to get people back to work, focusing on the 2.8 million people who are out of work due to long-term sickness. Kendall's plan aims to help those able to work return to employment. 

In response to the House of Lords report, a government spokesperson explained that reforms are being planned to make the benefits system fairer for taxpayers and to provide better support for those who need it to move into work.  

In the spring, new proposals will be introduced to reform the health and disability benefits system. 

“This will be part of a proper plan to help disabled people who can work secure employment while ensuring support is provided for those who need it,” said the spokesperson. 

The impact of long-term sick leave on personal finances 

Sick leave, particularly absences lasting four weeks or more, is affecting the financial stability of workers, as data from March 2024 showed.  

• 20% of all sick leave in the UK is classified as long-term. 

• Long-term sick leave can drain savings and reduce income from overtime or extra payments. 

• Even with statutory sick pay (SSP), the amount received is usually much lower than regular wages. 

• For freelancers and the self-employed, the situation is even worse, as they don't have the same sick pay protections. 

Support if you’re on long-term sick leave 

If you’re on long-term sick leave, there may be some financial help available. 

Firstly, if you’re eligible for sick pay but haven’t been paid anything from your employer, make sure you ask them to. 

Check if you’re eligible for statutory sick pay. 

If you're self-employed and temporarily unable to work due to illness, check if you have made enough national insurance contributions to qualify for New Style Employment and Support Allowance (ESA). 

If your employer refuses to pay you: 

Contact the HMRC statutory payment dispute team. 

If your statutory sick pay has run out, you might be able to claim certain benefits. 

Check what benefits you’re eligible for. 

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