Summary

1. Disability and social security: time for a new realismDeclan GaffneyPresentation for Compass conference 25 June 2011, updated September 2011

2. Summary • It is well known that receipt of incapacity benefits rose dramatically during the 1980’s and early 1990’s as mainly older workers were diverted off unemployment benefit • It is also widely believed that there was little change to the IB caseload over the last fifteen years despite low unemployment, and this has encouraged the view that there is something about IB as that leads to ‘welfare dependency’, leading to calls for radical reductions in caseload numbers. • In fact, controlling for population change, receipt of IB-only (without a disability benefit) fell by 25% between 2002 and 2010. Rates of receipt fell most dramatically in areas which had previously had the highest rates. Labour’s third-term reforms contributed very little to these changes. • Over the same period there was a rise of 5% in receipt of IB combined with a disability benefit, controlling for population change.There was also a large rise in receipt of disability benefit without IB. • There is little evidence to support the ‘dependency’ theory of IB receipt or policies based on this theory.The priority should be with improving employment chances for those with longer-term and more severe conditions, who form an increasing share of the caseload. ‘Putting people through their paces’ (D. Cameron, July 2011) has little to offer.

3. Thirty years of welfare and disability Standard story on sickness and disability benefit runs like this • 1980’s and early 1990’s saw huge rise in claimant numbers as government encouraged unemployed workers to exit the labour market for economic inactivity • Despite rise in employment under Labour, incapacity benefit caseload remained very high and Labour was slow to introduce reforms • In 2010 Labour paid a heavy electoral price for failure to reform IB early enough • There is therefore a political consensus on tough policies to reduce IB caseloads

4. Thirty years of welfare and disability • How plausible is the story? • It leans heavily on one overriding explanatory factor: ‘welfare dependency’ as a driver of economic inactivity. • It ignores demographic change • By focussing on IB in isolation, it fails to consider the effects of other policies which would be expected to impact on IB receipt, such as tax credits and the minimum wage • It says nothing about disability prevalence, severity or trends

5. Thirty years of welfare and disability • So we need a more rounded picture putting sickness and disability benefits into a broader context • First we look at welfare and employment under Conservative governments • Then we look at what happened under Labour

6. Source: Grubb, Singh, Tergeist (2009)

7. Welfare and employment under the Conservatives • The impact of weak labour demand and deindustrialisation between 1980 and 1995 fell particularly on three groups: young people, lone parents and older male workers. • Both lone parents and older workers were incentivised by welfare policy to exit the labour market for so-called ‘inactive’ benefits (income support, incapacity benefits). • Lone parent employment fell from 63% in 1979 to 44% by the time the Conservatives left office (Blundell 2011). • Economic activity for older men (age 55-59) fell from 92% to 75% between 1980 and 1995 (ILO activity dataset).

8. Welfare and employment under the Conservatives • By the 1990’s there was a consensus that a significant share of the IB caseload was accounted for by people who had no serious impairments, although this was rarely quantified. • On the left, this was initially widely interpreted as ‘hidden unemployment’, concentrated in former industrial and mining areas- a ‘labour demand’ interpretation (Beatty et al. 2009). • on the right (and later on the left) as ‘welfare dependency’ (a labour supply interpretation). • In the event, it was what the two interpretations had in common- their focus on labour markets- that was to have the most influence on later welfare reform.

9. Welfare and employment under the Conservatives • But over the same period (1980-1995) there had also been an increase in the population prevalence of disability. • This trend was misinterpreted: it was widely assumed, without evidence, that it was driven by less severe conditions and impairments, reinforcing the hidden unemployment/welfare dependency narratives around IB. • Recent analysis indicates that the trend was driven by increased prevalence at all levels of severity (Berthoud 2011). • So while policy and labour market conditions played major roles in increasing IB receipt, that is not the whole story.

10. What happened under Labour? • Labour came to power determined to reverse the rise in economic inactivity under the Conservatives. At the same time, labour market conditions were vastly improved post-1995, with unemployment falling to its lowest level for a generation. • But over time a striking contrast emerged between the two main ‘inactive’ groups: lone parents and IB recipients. • Lone parent employment rose rapidly, from 44% to 57%, leading to a sharp fall in benefit receipt. • Incapacity benefit numbers increased slightly in the late 90’s and fell very little in the new century

11. Source: DWP 5% sample and WPLS

12. Source: DWP 5% sample and WPLS

13. What happened under Labour? • By 2005, Labour ministers were convinced that the IB caseload represented both a political liability and a failure of welfare policy to impose enough responsibilities on claimants • However Labour’s third term IB reforms were not primarily about compulsion, and the broad principles adopted commanded wide support among disabled people and organisations • However the new Work Capability Assessment eroded confidence in the new system, with a high rate of successful appeals against negative decisions (40%) • Impact of reforms impossible to quantify at this stage because they coincided with the onset of recession

14. What happened under Labour? • The apparent stability of the IB caseload under Labour was illusory. Beneath the headline figures, there were significant shifts in the composition of the caseload and in rates of receipt • Rates of receipt for older men fell rapidly • The concentration of IB claims in former industrial areas, while still important, reduced considerably (McVicar 2009) • There were contrasting trends for IB-only and IB combined with disability benefits (DLA)

16. What happened under Labour? • Among those not in receipt of DLA caseloads fell rapidly from 2002, as labour market theory would predict. Numbers reduced by 20% between 2002 and 2010, and by 25% controlling for population change. For men, who had tended to have higher rates of receipt, numbers fell by 31% controlling for population change, and by 17% for women. • These falls were partly offset by increasing numbers of women receiving IB/ESA combined with DLA. This may be due to more women meeting IB/ESA contribution or income conditions, combined with a higher increase in DLA for women. • DLA recipients now account for over half of all IB claims, compared to a third in 1995. • Long-term IB claims are increasingly dominated by DLA recipients (65% of all claims running for five years or more). • The rise in DLA receipt since 2002 is accounted for by (a) high and middle care 29% (b) high mobility (36%) (c) low care 18% and (d) low mobility 17%.

17. Source: DWP 5% sample and WPLS

18. Conclusion: time for a new realism • Labour market explanations of sickness and disability benefit caseloads aren’t wrong so much as incomplete. • As proxied by DLA receipt, severe impairment now accounts for over half of IB claims, and as DLA receipt is a crude proxy this if anything understates the position. • Thus the current drive to reduce claimant numbers is likely to impact heavily on people with more severe impairments, and the problems with WCA suggest this is already taking place. • Another implication is that the expectations about reductions in caseload numbers adopted by both current and previous governments (‘a million off IB’) are exaggerated

19. Conclusion: time for a new realism • It seems clear that the IB caseload responded to the improved labour market conditions and work incentives under Labour, contrary to what is still widely asserted. • This, together with the rise in DLA, raises the question of whether there is really much more to be gained from the strategies of improving gains to work pursued under Labour. Most of the effects of this approach may already have been banked. • However the exhaustion of these strategies does not make the case for greater compulsion, given that the average level of severity in the IB caseload has risen.

20. Conclusion: time for a new realism • A new realism about the objectives, the potential and the limits of welfare reform in this area is needed. • Rather than being driven by undisciplined expectations about reductions in caseloads or moral sloganeering, reform should focus on the tough policy questions raised by the prevalence of impairment at the more severe end of the spectrum. • Should the system be aiming to increase employment for people with more severe impairments? If so, what sort of timeframe should we be thinking of (five years? twenty years?), what sort of employment (e.g. do ‘mini-jobs’ have a role?), what policy levers (employment law? discrimination law? in-work support and advice?) and what would be the criteria for success (employment rates? lifetime earnings? wellbeing measures? health outcomes?).

21. Conclusion: time for a new realism • It also needs to be recognised that the employment penalties associated with disability at all levels of severity are stronger now than they were thirty years ago (Berthoud 2011). • If this is no longer attributable to government policies and badly designed benefit systems, as argued here, then policy will need to take account of broader labour market factors- earnings inequality, returns to skills and flexibility are obvious examples. • Reducing disability employment penalties, rather than arbitrary cuts to caseload numbers, sounds like a policy objective that could command support among disabled people- and it would need that support. • An implication is that policies which sap people’s confidence in the system and the help it claims to offer threaten the objectives of welfare reform itself.

22. References Beatty et al. 2009 Beatty C. Fothergill S. Platts-Fowler D. DLA claimants: a new assessment DWP Research report no. 585 Berthoud 2011 Berthoud, R. ‘Trends in the employment of disabled people in Britain’ Institute for Social and Economic Research, University of Essex McVicar 2009 McVicar D. ‘Local level incapacity benefit rolls in Britain: correlates and convergences’ Queen’s University School of Management (working paper December 2009)