Select Committee on Work and Pensions Fourth Report


The Work and Pensions Committee has agreed to the following Report:



The number of working age people claiming incapacity benefits is now greater than the combined total of lone parents and unemployed people on benefits. In recognition of this, the policy focus of the welfare to work strategy is beginning to pay more attention to disabled people. The Department for Work and Pensions launched its Green Paper Pathways to Work in November 2002, shortly after the Committee announced this inquiry. The Green Paper outlined a series of pilot initiatives focussing on providing a better framework of support in the early stages of a claim; a wider range of help to address key health and non-health related obstacles; more support for people who move from incapacity benefits to JSA; and improving financial incentives. This Report sets out the interim findings of our inquiry into the effectiveness of Government policy in increasing the employment rate of disabled people.

Many disabled people are a considerable distance from the labour market and require intense and prolonged support before they are 'job ready'. The Committee has strong concerns that the funding allocation for New Deal for Disabled People is not in proportion to the number of people targetted and does not reflect the level of support required by participants. We are also concerned that Jobcentre Plus will not be able to cope with the extension of the work-focussed interview regime without extra resources.

The Report raises concerns that disabled people are disadvantaged by the binary split between 'incapacity' and 'able to work'; and that the divide between benefits and work is too large and inflexible to enable many disabled people to move into work. The Report concludes that while this problem exists, work incentives will only have a limited effect.

There is some evidence of ignorance about employers' responsibilities under the Disability Discrimination Act is widespread. Awareness-raising of both current and forthcoming legislation, including the lifting of the small employer exemption and the planned Disability Bill, is paramount.

With 2.7 million disabled people claiming incapacity benefits - many of whom say they want to work - and a caseload which continues to rise, it is right that more attention being paid to helping disabled people into work. There is now a wide range of employment initiatives and work incentives aimed at supporting disabled people into work. The Report concludes that although more time is needed for current initiatives to have an effect, the planned pilots and the existing employment initiatives will help to increase the employment rate of disabled people.


1. The number of working age people claiming incapacity benefits now dwarfs the number of unemployed claimants. In contrast to the level of claimants on Jobseeker's Allowance the numbers on Incapacity Benefit and other sickness and disability-related benefits is steadily rising. There are now 2.7 million people of working-age claiming incapacity benefits - greater than the combined total of lone parents and unemployed people on benefits. In recognition of this, the policy focus of the welfare to work strategy is beginning to pay more attention to disabled people.

The Inquiry

2. We launched our inquiry into the effectiveness of Government policy in increasing employment rates of people with disabilities on 7 November 2002, with particular reference to the following issues:

  • What is, or should be, the role of Jobcentre Plus? Are they doing enough actively to engage people with disabilities in finding suitable work? Are initiatives such as WorkStep successful?

  • The New Deal for Disabled People: have the lessons been learned from earlier pilots? How might it be made more effective?

  • The role of the private sector in delivering employment services for people with disabilities and health problems.

  • Are the needs of particular groups of people with disabilities and health problems adequately catered for? Should employment projects be more inclusive and adapt to individual need rather than be aimed at people with specific disabilities?

  • The tax credit and benefits system: is it too complex for the circumstances faced by people with disabilities? Should it be reformed to reduce financial disincentives to find work?

  • How does discrimination hinder the employment of people with disabilities?

  • What effect does the Disability Discrimination Act have?

  • What experience do other countries have in tackling the growth in the numbers claiming incapacity-related benefits?

1. Soon after the Committee announced the inquiry, on 18 November 2002, the Department for Work and Pensions (DWP) launched its Green Paper Pathways to Work: Helping people into employment. The consultation period on the Department's proposals ended on 10 February 2003. The Green Paper outlined a series of pilot initiatives which are planned to begin at the end of 2003. To enable this inquiry to feed into the consultation, the Committee has agreed to produce an interim report and may decide to return to the subject at a later stage. Since the end of the consultation period coincided with the Committee's inquiry it was agreed not to take oral evidence from the Department since the scope of the questioning might be limited.

2. The Committee has received fifty-two memoranda from a wide variety of individuals and organisations, and a number of useful background papers. We have taken oral evidence from three sets of witnesses.[1] We are most grateful to all who have submitted evidence, both oral and written, to the inquiry.

3. We also considered it important to see for ourselves how some of the Government's existing employment initiatives for disabled people were actually working. The Committee therefore visited South Wales, an area with some of the highest claimant rates of incapacity benefits in the UK. The visit included talks with Jobcentre Plus officials, New Deal for Disabled People, Access to Work and WorkStep contractors and clients. We wish to thank all those who helped to arrange the visit.


4. Nearly one in five people of working age in private households have a current long-term disability: 7.1 million people (3.7 million men and 3.4 million women). In autumn 2001, the overall ILO unemployment rate for disabled people was 8.3 per cent compared with 4.8 per cent for non-disabled people. Approximately half of the disabled population in the UK are economically inactive (44 per cent of men and 52 per cent of women), compared with only 15 per cent of the non-disabled population (9 per cent of men and 21 per cent of women).[2]

5. The employment rate at Spring 2002 for disabled people is 48 per cent, compared with an overall employment rate of 74.6 per cent. Since 1998, employment rates for disabled men and women have increased and the gap between the overall employment rate and that for disabled people has decreased. In the year to Spring 2002, the employment rate for disabled people increased by 0.6 percentage points and the gap between the overall employment rate and the disabled persons rate narrowed by 0.8 percentage points to a 26.6 percentage point difference.[3]

6. In the last twenty years, the number of people claiming incapacity-related benefits has trebled. The Department uses the figure of 2.7 million incapacity benefits claimants. This includes those on Incapacity Benefit, Income Support and Severe Disablement Allowance (which is being phased out). It also includes those who receive National Insurance credits only. The largest group is those on Incapacity Benefit. In November 2002, the number of Incapacity Benefit (IB) claimants stood at 2.38 million - 1.8 per cent higher than at the same point a year earlier, and 1.5 per cent lower than when IB was introduced in 1995. Of these, 1.08 million - 45 per cent of the total IB caseload - had been on benefit for five years or more, 5 per cent more than a year earlier.[4] The number of IB claimants now considerably dwarfs the number of unemployed claimants, where, in contrast, numbers are falling. In November 2002, there were 872,000 Jobseekers Allowance (JSA) claimants, a fall of 1.09 per cent compared to 2001, whilst the overall number who had been claiming JSA for a year or more fell 11.3 per cent over the year, to stand at 162,000.[5] Overall expenditure on incapacity benefits is currently over £16 billion a year compared with £4 billion for the unemployed.[6]

Table 1: Caseload numbers for Incapacity Benefit, Incapacity Benefit credits and Severe Disablement Allowance[7]


Total Caseload

Incapacity Benefit


Benefit Credits

Severe Disablement Allowance

















Caseload figures rounded to the nearest 5,000


Caseload figures for 1999-2000, 2000-01, 2001-02, taken from the respective Client Group Analysis (February quarter).

The following chart has been taken from the Department's Green Paper:[8]

7. Geographically, the biggest concentrations of Incapacity Benefit claimants are in former industrial areas such as South Wales, Clydeside, Merseyside and the North East of England, where up to a quarter of the working age male population is on incapacity-related benefits.[9]

8. Under its 'employment opportunities for all' strategy, the Government has set the DWP a Public Services Agreement target: "Over the three years to 2004 to increase the employment rates of disadvantaged areas and groups, taking account of the economic cycle - people with disabilities, lone parents, ethnic minorities and the over 50s, the 30 local authority districts with the poorest initial labour market position - and reduce the difference between their employment rates and the overall rate."

9. To date, the DWP has taken a number of steps to meet this target and are consulting on the next stage of their strategy, as outlined in the Pathways to Work Green Paper. Action taken so far includes the introduction of Jobcentre Plus, with compulsory work-focussed interviews for new and recent IB claimants; the national roll-out of the New Deal for Disabled People (NDDP); the introduction of WorkStep, replacing the former Supported Employment Programme; and a range of tax credit and benefit reforms aimed at easing the transition to work and reducing financial disincentives - these include new 'Permitted Work' rules and the Disabled Person's Tax Credit (soon to be replaced by the Working Tax Credit).

10. In addition, the employment provisions of the Disability Discrimination Act (DDA) have been in force since December 1996 and are due to be extended further in 2004. The current provisions protect disabled employees and job applicants from unjustifiable discrimination and require employers to make necessary reasonable adjustments to premises or working arrangements to help people with disabilities. The extensions to the DDA will end the small employer exemption and the exemption of specific occupations (eg the police and prison officers).

11. The Green Paper sets out a new strategy which will be piloted in six areas at the end of 2003 focussing on four issues:

  • Providing a better framework of support in the early stages of a claim. This will incorporate a range of changes including: shifting the timing of the first work-focussed interview away from the initial point of claim; co-ordinating the interview and the Personal Capability Assessment; increasing the frequency of work-focussed interviews; claimants and advisers will draw up a mandatory action plans together; and a new team of specialist advisers will be created to work with people with disabilities.

  • Providing direct access to a wider range of help to address key health and non-health related obstacles. A 'Choices Package' offering new referral arrangements and a simplified range of programmes offering specialist and mainstream support will be piloted. In addition, a new rehabilitation programme will be piloted to help participants regain confidence to return to work.

  • Improved financial incentives which enable claimants to see that they are better off in work. A Return to Work credit will be piloted to help those moving off an incapacity benefit back to work. The credit will be paid through Jobcentre Plus at £40 per week for 52 weeks where personal income in work will be less than £15,000 a year. The Adviser Discretion Fund will also be widened to support claimants in their return to work activity.

  • More support for people with health problems who move from incapacity-related benefits to JSA. Those transferring from incapacity benefits to JSA will automatically see a specialist adviser and will draw up a Jobseeker's Agreement that reflects residue health issues. Tailored support through the relevant New Deal will be available without the normal waiting period.

1. Launching the Green Paper, the Secretary of State said, "No longer must we treat people on Incapacity Benefit as if their working life has come to an end. People on Incapacity Benefit who want to work are faced with a system where too much seems stacked against them...Our Green Paper is designed to end a terrible waste of talent and experience. Most people who come on to Incapacity Benefit have the potential to get back to work if they are given correct and timely help...This is not about forcing sick or disabled people into work. It is about encouraging people to look at their options and helping those who want to work to achieve their goal of getting a job."

2. The positive focus on tackling the barriers faced by disabled people who want to work is very welcome. We welcome the Green Paper and the positive tone in which it is written as a constructive development. There are some elements of the pilots that we do not believe need piloting and should be introduced across the service as soon as possible. We reiterate a number of recommendations made in the Committee's Employment Strategy report[10] that the Government should simplify conditions of qualification for schemes, devolve more discretion to front-line staff and to recipients of funding, make greater use of intermediate labour markets, tackle regional and local employment more effectively and improve assistance for those contemplating self-employment or starting a small business.

3. The bulk of this report takes the structure of the current New Deal as given. However, we want to raise a prior question: whether the design of the New Deal itself is the cause of a misallocation of funds and an inflexible delivery system for clients. We highlight below the fact that less than £50 million has been spent on the New Deal for Disabled People since 1997, compared to £139 million for lone parents, nearly £500 million for those over 25 and over £1.3 billion for those under 25. Yet, there are now far more people on incapacity­related benefits than there are lone parents or unemployed people claiming benefits - without even taking into account those people who are economically inactive and poor, but not eligible for any benefit. That pattern of resources would be unlikely to have arisen if spending had developed in relation to the numbers involved - in other words, if local offices had been able to decide who to help from amongst their local population, according to need. That pattern of resources may therefore be the symptom of funding being allocated by central government, and of it being parcelled up between rigidly defined programmes. In turn, the inflexible nature of the programmes means that clients are fitted into those programmes, rather than receiving packages of help designed around their individual needs. We heard in Merthyr Tydfil of the frustrating experience of advisers having to send away IB claimants who had finally decided to seek work, but did not qualify because they lived in the wrong ward. We invite the Government to consider whether the driving cause of these problems is the balkanised structure of the New Deal and, if so, whether the different new deals, pilots and programmes should be rationalised into a Single New Deal, with different eligibility criteria for benefits but a single gateway for job help. This flexibility would draw on the experience of Action Teams for Jobs, and be aimed at all economically inactive people, whether claiming or not.

1   See list of witnesses page 38. Back

2   Labour Market Trends, August 2002: Labour Market experiences of people with disabilities Back

3   Department for Work and Pensions (2002) Autumn Performance Report - Progress against Public Service Agreement Targets CM 5660 Back

4   Department for Work and Pensions (2002) Incapacity Benefit and Severe Disablement Allowance, Quarterly Summary Statistics November 2002  Back

5   Department for Work and Pensions (2002) Jobseeker's Allowance, Quarterly Summary of Statistics, November 2002 Back

6   Department for Work and Pensions (2002), Pathways to work: Helping people into employment CM 5660, November 2002 Back

7   Ev 248 [DWP memorandum Annex B] Back

8   Department for Work and Pensions (2002), Pathways to work: Helping people into employment CM 5660, November 2002 Back

9   Appendix 38 Back

10   Work and Pensions Committee, Third Report of Session 2001-02, The Government's Employment Strategy, HC 815 Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2003
Prepared 11 April 2003