The following OECD assessment and recommendations summarise Chapter 6 of the Economic Survey of the United Kingdom 2005 published on 12 October 2005.
How successful has the new approach to disability benefit been?
While the unemployment rate is very low, the working age inactivity rate has remained stubbornly above 21% since the early 1990s recession. As many as 7% of 25 54 year old men are inactive, compared with 1% three decades ago when the unemployment rate was as now. This is partly a symptom of the general lack of skills, as inactivity has risen most for the least skilled. Yet, many end up claiming disability related benefits, where the number of recipients, particularly prime age men, has grown faster than in most other countries, with most of this growth occurring in the 1980s and early 1990s. They have recently started to decline. It is encouraging that many of the 2.6 million receiving incapacity benefits do not consider themselves as disabled, and many say they would like to work. At the same time, many people with disabilities are in work, not claiming benefits. This suggests that there is significant scope for helping people on incapacity benefits to return to work.
Inactivity because of illness or disability
As a percentage of population in each age group, 2003 (1)
1. 2001 data for age group 25-49. The OECD average is an unweighted average of available data covering 23 countries for age group 25-49 and 25 countries for the other age groups.
Source: OECD estimates using European Labour Force Survey data for European countries, and ILO data for non-European countries, Ageing and Employment Policies Thematic Review.
The government has taken a number of policy initiatives to address these problems. Under the Pathways to Work scheme, being piloted in 10% of the country at the beginning of 2005, most new incapacity benefit claimants are required to attend six, monthly, work focused interviews soon after their move to incapacity benefit. This provides the potential for developing customised support to overcome the range of barriers which different individuals face in returning to work. New claimants are offered specialist employment advice, new programmes to help manage their conditions, access to a range of tailored support, plus £40 per week as a return to work credit. The pilots have been successful, showing a large increase in participation in reintegration programmes and a marked increase in exits from incapacity benefit Building on this, the government intends to require all except the most severely disabled to participate in activities that support a return to work and to restructure the incapacity benefit into a basic rate plus a supplement conditional on this activity. This represents a welcome change from the current situation whereby incapacity benefit is paid at a higher rate if received for more than a year, rewarding those remaining on benefit.
“Pathways to work” increases the off-flow from incapacity benefit (1)
Six-month off-flow rate, per cent
1. The off-flow rates presented are produced from the Working Age Statistical Database (WASD). WASD does not include a proportion of short-term incapacity benefit claims, therefore the off-flows presented will be lower than actual rates; however trends over time will be consistent.
Source: Department of Work and Pensions, September 2005.
The Pathways to Work programme will be extended to a larger part of the country from October 2005 to cover approximately a third of recipients by October 2006. The programme should continue to be rolled out nationally. The compulsory interviews have also recently been extended to some existing claimants with more manageable conditions in addition to new claimants. When there is sufficient capacity, it should be extended to a wider range of existing claimants.
An issue for concern is the almost automatic transfer to incapacity benefit when statutory sick pay ends or when an individual becomes sick or disabled while claiming another benefit. General practitioners are the initial gatekeepers, with a more rigorous personal capability assessment taking place later on. Experience from other OECD countries indicates that leaving the decision to an “anonymous” team rather than general practitioners results in more rational decisions. It could therefore be considered to involve specialised occupational health teams earlier in the process of eligibility assessment and so make the transfer to incapacity benefit less automatic.
The growing number of incapacity benefit recipients suffering from mental and behavioural disorders, which are now the largest group by medical condition, raises the question as to whether the recent rapid expansion of health care has been appropriately prioritised. Today, patients still have to wait for six to nine months to access psychotherapy while conditions often become more entrenched. With adequate treatment and rehabilitation many of those with mental health conditions may be able to get back to work, and providing some meaningful activity may further help such conditions. Shifting health care resources towards mental health would help both labour market performance and human happiness.
Medical conditions of persons receiving disability benefits
Number of recipients, million
1. Based on 1% administrative dataset with annual data.
2. Based on 5% administrative dataset with November quarters.
Source: Department of Work and Pensions.
Return to the Economic Survey of the United Kingdom 2005
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For further information please contact the United Kingdom Desk at the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by David Turner and Jens Lundsgaard under the supervision of Peter Hoeller.