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Taxpayers face footing staggering £28bn benefits increase | Personal Finance | Finance

Taxpayers face footing a staggering benefits bill in five years’ time with a £28billion rise in working age health related benefits, a leading think tank has said.

The Institute for Fiscal Studies (IFS) published findings on Friday (April 19) after Prime Minister Rishi Sunak revealed major proposals on welfare.

It said the number of working age people claiming at least one health-related benefit could be on course to pass five million by 2028. The figure has shot up by one million since 2019 and now accounts for 4.2 million working-age people (10.2 percent). In the year before the Covid pandemic, the figure was 3.2 million (7.9 percent).

If the pace slows but stays above the pre-pandemic norm, then the number of claimants is estimated at 5.4 million (12.4 percent). But if rates return to their pre-pandemic levels, the IFS said the figure would be around 4.4 million recipients.

Spending on disability and incapacity benefits for working-age people has soared by £12.8bn to £48.3bn between 2019-20 and 2023-24, according to the IFS. This is forecast to rise to £63.7bn by 2028-29, which analysts said is a £28.1bn increase in the space of 10 years.

Sam Ray-Chaudhuri, IFS research economist and report author, said a year or so ago it seemed plausible that the rapid rise in numbers claiming health-related benefits was a transitory pandemic-related phenomenon. He added: “That explanation now appears unlikely, and today’s new forecasts reflect this fact.

“The rising cost of these benefits, and what might be done in response, will be a pressing concern for the next government and make the already tough fiscal situation harder still. Unfortunately, designing the right policy response is made much more difficult by the lack of clarity on what is fuelling the rise.”

The abrdn Financial Fairness Trust, which funded the IFS report, said while there are likely to be various reasons for the increase, much is still unknown in this area. Its chief executive, Mubin Haq, said: “A range of factors is likely to be contributing to this rise, such as the pandemic, NHS waiting times and conditionality in the benefits system, but much remains unknown as to what is driving this growth.

“Cutting or reducing access to benefits would lead to severe hardship for millions with additional needs and fail to address the underlying conditions we now face.”

Mr Sunak told today of the “moral mission” to reform welfare as he announced major changes to the system. The Prime Minister repeatedly stressed that the system as it stands lets people down by not being focused enough on the work they might be able to do.

He insisted the changes – including benefits being stopped if someone does not comply with conditions set by a work coach and a pledge to “tighten” the work capability assessment (WCA) – are not solely about cutting costs.

A proposal to reform personal independence payments (PIP) was described by the Resolution Foundation as the big news in Mr Sunak’s speech on Friday, rather than the previously-trailed “fluff around sick notes”.

Mr Sunak said there will be a consultation on proposed changes to a “more objective and rigorous approach” in the benefits system.

He also suggested greater medical evidence could be required to substantiate a PIP claim and some people with mental health conditions may be offered talking therapies or respite care rather than cash transfers.

Mr Sunak described the Government’s approach as saying “people with less severe mental health conditions should be expected to engage with the world of work”.

Other proposed changes include having so-called specialist work and health professionals charged with responsibility for issuing fit notes instead of GPs – in a bid to end the “sick note culture”.

Evidence on this new approach is being sought from healthcare professionals, employers and people with lived experience.

Other proposals include people working less than half a full-time week having to try and find extra work in return for claiming benefits, a speeding up of the process moving people from older so-called legacy benefits onto Universal Credit, and ending benefits for anyone who has been claiming them for 12 months but is deemed not to have complied with conditions such as accepting available work.

Mr Sunak confirmed a previously announced commitment around the Work Capability Assessment (WCA) to see people with less severe conditions expected to look for work.

The Government said it remains committed to scrapping the WCA entirely and replacing it with a “new personalised, tailored approach”.

It has previously stated that the WCA changes would apply to new claims only, with the reform coming in from 2025 onwards.

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