IFS: Cuts to non-health-related benefits shift claimants onto disability benefits

Disability benefits are intended to support people living with disabilities with the additional living costs they face as a result of their condition. They form just one part of the working-age benefit system, and people can claim disability benefits at the same time as other benefits such as universal credit.

Studying four cuts to benefits in the 2010s, including cuts to housing benefit and reductions in the benefit cap, we find consistent evidence that cuts to other (non-health-related) benefits cause rises in disability benefit receipt. This could be because benefit cuts worsen health or because they increase incentives to claim disability benefits.

These are some of the key findings of new IFS research, funded by the Joseph Rowntree Foundation and the Health Foundation. The exact magnitudes of how much disability benefit receipt changes when other benefits are cut differ from reform to reform, but in each case the number of people claiming disability benefits increased. We find that:

• Cuts to housing benefit for private renters in 2011 directly reduced incomes of affected families by 3.3%(£667 per year) and increased the number of affected people receiving disability benefits by 3.5% (from 221,000 to 229,000 recipients). Fiscally, the spillover effects onto disability benefits reduced the savings from the reform by 4%.
• The increase in the female state pension age from 60 in 2010 to 65 in 2018 reduced household incomes of affected women by 20% (£8,100 per year) and increased their disability benefit claims by 7%.
• The lowering of the benefit cap in 2016 and the introduction of work requirements for more single parents between 2008 and 2012 also increased disability benefits claims.
• We use these results to produce a rough estimate of the total effect of all cuts to (non-disability) working-age benefits and tax changes between 2010 and 2019 on disability benefit claims. This back-of-the-envelope calculation suggests that in total these tax and benefit reforms could have increased disability benefit spending by £900 million, equivalent to 13% of the actual £7 billion (real-terms) growth in total disability benefit spending over the 2010s. Since there have not been significant net benefit cuts since 2019, this factor is unlikely to explain much of the dramatic post-pandemic rise in disability benefit spending.
• Our results suggest that cuts to real incomes increase disability benefit claims. They therefore suggest the sharp increase in the cost of living in 2022, which cut incomes in real terms, is likely part of the explanation for the post-pandemic increase in disability benefit claims.

Eduin Latimer, Senior Research Economist at IFS and an author of the report, said:

‘Across four different reforms, we find an unintended consequence of benefit cuts – that they lead to more people claiming disability benefits. More evidence is needed to understand what is driving this effect. One result of these spillover effects is that the fiscal savings from cutting non-health-related benefits are slightly smaller than previously thought. These effects will likely also have a long-term legacy, as people often stay on disability benefits for many years. The big-picture lesson for policymakers is that changes to one part of the benefit system can shift pressures elsewhere, rather than remove them entirely.'

David Finch, Assistant Director at the Health Foundation, said:

‘This new research highlights that cuts to one part of the welfare system can push people to claim health-related benefits, potentially driven by the cuts worsening health. This creates a long-term risk that they spend longer out of the workforce and with lower income. Future welfare reform must learn the lessons of the past, putting people's immediate and future health at the centre of decision making.'

Iain Porter, Senior Policy Adviser at the Joseph Rowntree Foundation, said: 

‘Social security should be a public service that is there for any of us when we need it, whether it is the loss of a job, becoming unwell or breaking up with your partner. Supporting people well during hard times is an investment in their future, their health and the wider economy. These findings suggest the recent rise in health-related benefit claims is likely to be partly explained by the sharp drop in real incomes caused by the cost of living crisis.

‘If people have seen their health decline because they don't have enough to live on then blunt cuts are an entirely false economy. We need politicians of all parties to make sensible long-term investments in the support systems that should keep us safe, healthy and independent when we need them.'

ENDS

Notes to Editor

Do disability benefit claims rise when other benefits are cut? is an IFS report by Jonathan Cribb, Heidi Karjalainen, Eduin Latimer, Sam Ray-Chaudhuri and Tom Waters.