Britain’s welfare bill has ballooned, with 23 per cent of the working-age population now in receipt of some form of benefits, figures analysed by The Independent reveal.
Labour has branded the spiralling costs of a life on sickness benefits “unsustainable” and has vowed to clamp down by slashing the budget by £5bn.
Analysis of government figures by The Independent shows more than one in five people between the ages of 16 and 64 now claims some form of working-age benefits, including schemes such as the Personal Independence Payment (PIP), Universal Credit (UC), Housing Benefit, Jobseeker’s Allowance, and Carer’s Allowance.
More than one million people with disabilities are set to lose out as ministers tighten the rules for those who can apply amid claims the current system “leaves too many people in a permanent state of dependence on benefits without the opportunity of work”.
The figures lay bare the dilemma the chancellor, Rachel Reeves, faces in trying to balance the nation’s books, while also ensuring the most vulnerable in society are not deprived of crucial assistance when she delivers her spring statement on Wednesday.
Today, this publication sheds light on the sheer scale of the task faced by the government in reforming Britain’s welfare state and whether it really is worse off than other countries.
How did it all start?
The modern welfare system has its origins in the 1911 National Insurance Act introduced by Liberal chancellor David Lloyd George to provide insurance cover for people out of work. But the welfare state as known today was formalised in the 1945 to 1951 Labour governments.
Under the 2010 to 2015 Tory-Lib Dem coalition government, work and pensions secretary Iain Duncan Smith tried to bring down soaring costs in the wake of the financial crisis by introducing Universal Credit, capping overall welfare claims to £25,000 a year and limiting Child Benefit to two children. At the same time, there was an attempt to make work pay by increasing the minimum wage to a national living wage.
The cuts and introduction of the cap have been criticised for their societal impact, with a study by the London School of Economics (LSE) last year finding that the austerity programme resulted in 190,000 excess deaths during the 2010s.
In 2018, there was a marked shift in the number of people claiming disability payments, which went up with inflation that year while other benefits were frozen. Coupled with mental health conditions such as anxiety and depression being included in disability assessments, along with the impact of Covid and lockdown, there has since been a rapid rise in total payments.
According to a respected think tank, the Institute for Fiscal Studies (IFS), “in 2021, each month 15,000 or so working-age people started a PIP claim. That monthly figure had remained little changed for years. It then steadily increased, such that by July 2022 it had doubled to 30,000.”
The increase was underlined with the rise in personal independence payments for people with disabilities. In the financial year ending April 2024, the total expenditure on PIPs increased to £21.6bn, up from £17.7bn in the financial year ending April 2023 and £15bn the year before.
Where are we now?
Chancellor of the Duchy of Lancaster, Pat McFadden, a key figure behind the scenes of Sir Keir Starmer’s administration, has claimed that the UK is an “outlier” as the only G7 country with fewer people in work than before the Covid pandemic.
While it is true the percentage of working-age people in jobs is down 1 per cent from 2019, a more relevant metric might be the rise in health-related benefit claims. This is up substantially since Covid – and higher than comparable countries, according to the IFS.
But this picture is not unique to the UK, with Denmark, France, and Norway all seeing more claimants since the pandemic. Meanwhile, the number of claims has fallen in Germany, Ireland, Australia and the United States.
The Independent’s own analysis of health benefit claims found that disability entitlement in the UK, paid via the Disability Living Allowance (DLA) and PIP, rose by around 30 per cent – to nearly 5 million people – between 2019 and 2024.
Meanwhile, the number of claimants of the Universal Credit Health element and the legacy Employment and Support Allowance (ESA) has shot up by 55 per cent since the end of 2019, to 3.9 million people; some of which will overlap with PIP/DLA.
In Denmark, entitlement for its equivalent, the disability pension, is up by 22 per cent in the same period, while in France, sickness benefits for working-age people (Prestation de Compensation du Handicap) increased by 8.3 per cent between 2019 and 2022.
In comparison, disability benefit payments in the US have fallen by around 13 per cent since Covid, and by 9 per cent in Canada.
The IFS also found that many European countries saw an increase in the disability rate relative to the working population, between 2019 and 2023.
Meanwhile, the disability rate in the UK went up by 4.8 per cent to 23.8 per cent of the working-age population in that same period, according to the Labour Force Survey. Not all of these people will claim disability benefits.
What does this mean for how much nations spend?
The latest European Commission figures to 2023, show that the highest welfare spenders proportionally to their Gross Domestic Product (GDP) – the main way to measure economic activity in a country – were Finland, Austria and Italy.
They spent 25.7 per cent, 21.4 per cent and 21.1 respectively on social protection, which encompasses sickness and disability benefits, pensions, and more.
By comparison, the UK spent 10.9 per cent of its GDP on welfare in 2023, and 10.8 per cent in 2024, according to the Department for Work and Pensions (DWP).
But that figure also includes pensions. When looking specifically at health and disability benefits, the UK spends around 3.2 per cent of GDP, our analysis found.
This puts the UK just above the EU average (2.8 per cent of GDP) for spending on health and disability benefits; but over a dozen countries spend more as a proportion of GDP.
The most generous spenders in Europe are Norway, Denmark and the Netherlands, while the lowest spenders are Ireland, Romania, Portugal and Croatia, according to European Commission data.
When including all spending on welfare (social protection), Finland, France and Austria spend the most in proportion to GDP.
How much does the UK spend on benefits compared to other areas?
The UK’s expenditure on welfare amounts to £303.3bn in the 2024/5 year; making up 23.8 per cent of the government’s total annual budget.
Much of this is spent on pensions and other benefits for the elderly, such as an Attendance Allowance for those who need help with personal care, and housing benefits.
Nearly a tenth – £117.6bn – pays for working-age benefits alone, around 4.2 per cent of GDP.
That is more than double the defence budget for 2024/5, at £56.4bn; and more than the amount spent on education, £116bn.
The amount spent on health and disability benefits is slightly lower, at £90.4bn; but still makes up 7.1 per cent of the budget, which is around 3.2 per cent of GDP.
Who is claiming benefits in the UK and what are they claiming?
Some 9.9 million working-age people, 22.8 per cent of the working-age population, are receiving some form of benefits, according to the latest DWP figures, in addition to 13 million above state pension age (67 and over).
That amounts to 14.5 per cent of the population as a whole.
Universal Credit (UC), which includes financial support for housing, children and childcare for those out of work or on a low income, is the most-claimed benefit in the country, with around 7.5 million people receiving some amount of UC in January 2025.
Some 5.4 million people claim a health-related benefit, with 3.6 million receiving PIP, 1.3 million on DLA, and 2.5 million entitled to a form of UC Health. People can be eligible for both PIP and UC Health at the same time, depending on their specific conditions.
Young people aged 16-24 make up around one in 10 claimants (939,365), according to the figures. But as the government looks to increase the age of those eligible to claim the Universal Credit health top-up to 22, around 106,000 people aged 18-21 currently claiming it will lose out.
An estimated 9.3 million people in the UK are economically inactive – not in employment and not seeking work – amounting to around 1 in 5 (21.5 per cent) of the working-age population.
That figure has risen by 1 per cent since before Covid, from 20.5 per cent in December 2019.
While this is a backslide compared to other G7 countries, the Office for National Statistics warns there may be issues with the data, as the Labour Force Survey has faced low response rates since the pandemic.
A higher proportion of women (25 per cent) are economically inactive than men (17.9 per cent), according to the Labour Force Survey; though not all of those out of work will be claiming benefits.
There are also more working-age women claiming benefits (5.2 million) than men (3.8 million), according to DWP figures from August 2024.
Significantly more women (4.3 million) are claiming a combination of PIP and Universal Credit No Work Requirement (NWR) benefits, compared to 3.5 million men; meaning that their condition does not require them to seek employment in order to remain eligible.
What is driving the rise in benefits claims?
Mental health is a major driver of sickness benefits in the UK.
Nearly 4 in 10 of all PIP entitlements (38 per cent) are linked to psychiatric disorders, according to DWP data from August; the leading cause of sickness benefit entitlement in the UK by a long way.
These most commonly include anxiety and depressive disorders, mood disorders, and learning disabilities.
This is followed by musculoskeletal conditions – such as arthritis, fibromyalgia, or amputated limbs – neurological and respiratory diseases.
Mental health disorders also make up 55 per cent of the post-pandemic rise in disability benefits, according to separate research from the IFS.
But the UK is not an outlier in this phenomenon, our analysis has found.
In Germany, a similar number (39.7 per cent) of all disability pensions are linked to mental disorders. This is also in line with Canada (34.1 per cent).
But in the US, mental health claims make up a relatively low proportion of those qualifying for social security disability insurance (SSDI), at just 22 per cent.
Motability – what is it and much is it costing?
One element of welfare that has remained untouched in the shake-up is Motability.
Overseen by charity the Motability Foundation, the scheme allows claimants to put their mobility payments towards leasing a car, electric vehicle, scooter, or powered wheelchair.
Eligible applicants could also get up to £750 towards a new vehicle until January 2025.
Those on the higher rate of the mobility component of DLA, PIP, Child or Adult Disability Payment can apply.
Motability also pays for the insurance, tax, MOT and necessary adaptations, which makes the scheme more financially attractive than claiming the mobility payments in cash.
Some 815,000 people are using the scheme, according to Motability’s latest report, with customer numbers increasing by nearly 15 per cent in the year to September 2024.
The scale of the scheme is expansive, with 1 in 5 new cars purchased in the UK brought through Motability.
It is controversial as claimants can choose to put more of their own cash towards higher-range cars, such as BMWs, as the benefit is not means-tested.
The cost to the taxpayer is sizeable, at £2.8bn in 2024 alone.
Those receiving benefits for conditions such as Attention-Deficit/Hyperactivity Disorder (ADHD) and anxiety may be eligible; but claimants must already have been assessed for the enhanced mobility scheme by the DWP.
Why is reform needed?
Labour has said reform is needed because the bill for those on disability and long-term sickness benefits is set to hit £70bn by 2030, with the number of claimants rising from the current 2.8 million to 4 million.
Unions, charities and left-wing Labour MPs have branded the changes “immoral”, saying they will target the most vulnerable and push more people into poverty.
Sir Keir vowed that the most severely disabled will always be protected, but said Labour was “not prepared to stand back and do nothing while millions of people – especially young people – who have potential to work and live independent lives, instead become trapped out of work and abandoned by the system”.
Whether the changes will help more people back to work remains to be seen.
