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The UK cannot afford the amount of public money being spent on health-related benefits, the employment minister has said, vowing to reform a system that leaves people “on the scrapheap”.
Alison McGovern signalled the government is willing to tear up the current assessment process, which determines financial help for sick and disabled people. She said it was “focusing on what they can’t do on a worst day, not on what they would like to do — or what support or help they think that they would need or want.”
In a sign that Labour plans a radical reframing of the welfare system, McGovern said the work capability assessment (WCA) “doesn’t work for anybody at the moment. It forces people to say how sick they are”.
“I think that is a serious problem,” she added. “Firstly because the country can’t afford the level of resources, but we also can’t afford the waste of people’s time and talent that represents. It’s devastating.”
McGovern was speaking to the FT at a job fair in Blackpool ahead of the publication of a government green paper this month that will aim to get more people into work while finding savings within a health-related benefits system that is projected to cost up to £100bn a year by the end of the decade if left unchecked.
McGovern said there were an estimated 200,000 people across the country on incapacity benefits saying they would like to work immediately.
“The whole point of the green paper is to reshape the system so we increase the possibility, the chance, the likelihood of people moving into work,” McGovern added. “We’ve got a lot of people who’ve been left on the scrapheap for quite a considerable amount of time.”
Getting rid of the WCA entirely would be controversial, however, because it could mean many people with serious long-term health conditions having their benefits cut.
People who are currently assessed as being too sick to work, or prepare for work, receive incapacity benefits worth some £5,000 a year — roughly doubling their income compared with someone on the basic rate of jobless support — and are not required to look for a job.
However, they also receive virtually no help to find a job if they want one, and many people are afraid they will lose vital income if they try a job that does not work out.
These skewed financial incentives are widely seen as part of the reason why spending on health-related benefits has soared in recent years, with the annual cost to the exchequer already hitting £65bn.
Ministers have made it clear they want to move away from this binary, high stakes system — which McGovern described as “too high and too hard a boundary to get through”.
“It’s really important that our public finances are sustainable, and given some of the numbers . . . we’ve got a challenge in this area that we have to meet,” said McGovern. The current system is “setting us in a bad direction in terms of the fiscal position” and also represents a “heartbreaking” loss of opportunity for the people involved.
Officials privately think the WCA process is dysfunctional — it is conducted largely online and once claims are approved, very few of the more severe cases are reassessed.
One option would be to end the division between means-tested incapacity benefits — accessed through the WCA — and disability benefits, or “personal independence payments”, which are meant to cover the extra costs of living with a health condition. There would then be a single assessment with more graduated, potentially time-limited, support.
But while ministers at the Department for Work and Pensions want to use at least some of the resulting savings to fund employment support programmes, the Treasury’s priority is to cut costs and create much-needed fiscal headroom in the March 26 Spring Statement.
The shrinking of chancellor Rachel Reeves’ room to manoeuvre since the October Budget has raised the pressure on ministers to find savings, with officials looking increasingly to the country’s huge welfare budget.
The Office for Budget Responsibility is usually sceptical of the savings that can be generated by welfare reform, however, because of past failures, and is unlikely to “score” policy measures unless they produce sure-fire, up front savings.
The imperative is to cut spending by at least the £3bn over five years that the previous Conservative government was aiming for, as this is still factored into the OBR’s fiscal forecasts.
DWP is likely to argue that the eventual savings could be much greater, given enough resources to help the one-third of incapacity benefit claimants who would like to work.
Conservative plans would have narrowed the eligibility for incapacity benefits, excluding some people with mobility problems and less severe mental health conditions, but leaving the broad shape of the system intact.
The Labour government’s plans may instead cut the level of benefits some people receive and nudge people to engage with employment support schemes, rather than excluding big groups from support entirely.
McGovern spoke to the FT just after the release of data suggesting almost a million young people were classed as not in employment, education or training at the end of 2024.
“We’ve got to make sure that young people get that first opportunity, because if you’re out of work when you’re a young person, it is devastatingly bad for your career,” she said.
