Select Committee on Work and Pensions Fourth Report

HIDDEN UNEMPLOYMENT

4. Between 1979 and 2002 the numbers of people on incapacity benefits more then trebled to 2.7 million. That is greater than the combined total of lone parents and unemployed people on benefit. Nearly half of those on incapacity benefits have been receiving benefit for over five years, compared with less than 5 per cent of the unemployed and 35 per cent of lone parents. Once a claimant has been on incapacity benefits for a year, the average duration of their claim is eight years.

Stock and flow

5. In spite of a favourable economic climate with low unemployment rates and high productivity the caseload of Incapacity Benefit and other related benefits is still steadily increasing. Part of the problem is due to a low outflow rate rather than a high inflow rate.

Figure 2: Inflows to Severe Disablement Allowance, Invalidity Benefit and Incapacity

 Benefit - 1990 to 2002[11]

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6. The Pathways to Work Green Paper attributes the rise in the incapacity benefits caseload to three factors.

• Economic trends: The economic and industrial changes which led to older and unskilled workers losing contact with the labour market.

• Benefit administration: Those on unemployment benefits received increasing levels of contact and support to re-enter the labour market whereas incapacity benefits recipients received much less.

• Demographic changes: An ageing population with increasing numbers of people in their 50s and 60s who are more likely to have health problems.

10. The geographical claimant rate of incapacity benefits varies widely with concentrations in former industrial areas. Table 2 shows the proportion of the working age population claiming Incapacity Benefit by Government Office region.

Table 2: Incapacity benefit claimants by Government Office Region
Area	All IB claimants as percentage of working population
North East	10.6
North West	9.6
Yorks and Humber	7.1
East Midlands	6.1
West Midlands	6.8
South West	5.2
Eastern	4.3
London	5.6
South East	3.8
England	6.3
Scotland	9.2
Wales	11.2
All	6.8

Source:

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

11. Research conducted by Christina Beatty and Stephen Fothergill at the Centre for Regional Economic and Social Research identifies the top 20 districts of male incapacity benefit claimants, reproduced in table 3 below. Geographical concentrations are located in areas such as Clydeside, South Wales, Merseyside and the North East of England. The proportions of working age men claiming incapacity benefits in these areas falls between 15-27 per cent of the working age population. The proportion of women claiming incapacity benefits in these areas is lower but the geographical spread is much the same. According to Beatty and Fothergill's figures this compares with nearly all of the south and east, outside of London, where the proportion of men and women claiming incapacity benefits is below 5 per cent.

Table 3:[12] Male sickness claimants August 2001 - top 20 districts
		% of 16-64 year old men
1.	Merthyr Tydfil	26.9
2.	Easington	26.2
3.	Glasgow	20.7
4.	Blaenau Gwent	19.8
5.	Liverpool	18.9
6.	Neath Port Talbot	18.9
7.	Rhondda Cynon Taff	18.2
8.	Caephilly	18.0
9.	Knowsley	17.8
10.	Inverclyde	17.4
11.	Wear Valley	17.1
12.	Torfaen	16.2
13.	Barnsley	16.1
14.	Manchester	16.1
15.	Gateshead	15.9
16.	Carmarthenshire	15.8
17.	North Lanarkshire	15.4
18.	South Tyneside	15.3
19.	Anglesey	15.2
20.	St Helens	15.2
Source: Beatty, Fothergill, Gore and Green (2002)

12. The areas identified by Beatty and Fothergill as having the highest proportion of incapacity benefits claimants are also some of those which experienced economic decline in the 1980s and 1990s. As Beatty and Fothergill point out, around half of the top 20 areas are former coalmining regions or are areas which relied upon the steel and shipbuilding industries.

13. Evidence from organisations working with unemployed people in areas which have high rates of inactivity also acknowledged the link between employment levels and high rates of incapacity benefits. The Wise Group and the Work Foundation state, "It is surely no surprise that the areas hardest hit by industrial decline...are also the ones most likely to see high levels of inactivity."[13]

14. Similar views were found when the Committee visited Merthyr Tydfil and Bridgend in South Wales. Officials from the Jobcentre in Merthyr Tydfil were of the view that the depressed economy had significantly impacted on the claimant rate of incapacity benefits. However, they were hopeful that with the recent boosts to the local economy in the form of new industries arriving, the number of disabled people moving into work would increase. One of the problems which they were facing was that of disabled people's perceptions of work - particularly for those who had been long-term claimants. Due to the changing face of industry, there was a mismatch of the types of jobs people wanted and those that were available.

15. Evidence suggests that the state of the local labour market has a strong effect on the likelihood of disabled people working. If the local economy is buoyant, more disabled people will move into work. That said, much is dependent upon the help and support available to disabled people and the relationships between employers and employment services. The Committee agrees with the view expressed by Professor Fothergill that not enough emphasis is placed upon regional employment policies. A wider view of the causes of local and regional unemployment is required if the local and regional concentrations of incapacity benefits claimants are to be effectively tackled.

Incapacity for work

16. Eligibility for long-term sickness and disability benefits relies on a definition of incapacity which requires satisfying the Personal Capability Assessment (PCA). Approved doctors working on behalf of the DWP assess the extent to which a person's health condition impairs their ability to do a range of work-related activity which are categorised by physical, sensory and mental functions. The intention of the PCA is to draw a line between those who should not be expected to seek work in return for benefit and those who can be expected to do so. The former group are able to claim Incapacity Benefit and the latter can claim JSA or move into work. As the Green Paper points out, the PCA level does not necessarily mean that those passing it are unable to work, rather that it is unreasonable to require them to.

17. The Government frequently cites a figure of more than one million people on incapacity benefits who would like to work. However, although a significant proportion of those claiming an incapacity benefit say they would like to work many, particularly those who have been on benefit for a long time, are not 'job ready' and may require significant help to move into paid work. Such support is resource intensive. More than a third (35 per cent) of incapacity benefit claimants have mental or behavioural disorders.[14] People with mental health difficulties also have the lowest employment rate of all disabled people (18.4 per cent compared with 47.9 per cent[15]). This suggests that more significant barriers may be faced by those with mental health difficulties, compared with other groups of disabled people, and that more intensive and innovative support is required to help them move into, and stay in, work.

18. Oral and written evidence received was consistent in saying that many disabled people on incapacity benefits were able to work if they received the right support. Many organisations were also very quick to point out that this does not necessarily mean that people are claiming incapacity benefits fraudulently. The TUC pointed to the Department's own research[16] which suggests a fraud level of less than 0.5 per cent. The suggestion or implication that people 'opt' to claim disability benefits rather than unemployment benefits also appears to be unfounded. As Disability Alliance pointed out, very few claimants actually know which benefits they are receiving. Furthermore, the strict incapacity tests mean that IB is not open to anyone who chooses to claim it, while a protracted period of worklessness can be a major contributor to ill health. Therefore it is, in our view, highly unlikely that claimants make an active choice between Incapacity Benefit and Jobseeker's Allowance. We believe that a substantial number of the 2.7 million incapacity benefits claimants do represent 'hidden unemployment', however, we do not believe this means that these people have wrongly or fraudulently claimed.

The labelling and medicalisation of disability

19. One of the key problems appears to be the definition of incapacity itself. Labelling someone as 'incapable' of work sends out a very strong message to the claimant and to potential employers. With so many Incapacity Benefit claimants themselves saying they would like to work, the incapacity label is misleading and unhelpful. The Green Paper suggestion of changing the name of Incapacity Benefit gained support from witnesses giving oral evidence to the Committee.[17] The Committee supports the move to change the name of Incapacity Benefit to something with more positive connotations. This will help to dispel the myth that many disabled people are unable to work.

20. A further problem identified during the course of this inquiry is the medicalisation of the incapacity benefits system. There remains a reliance on the medical profession, who may not be best placed to decide whether or not someone is capable of working. The Shaw Trust suggested that there is a danger that incapacity is still being measured against previous employment. They also warned that capacity/incapacity may be assessed without a proper understanding of the support available to enable a person to work. They suggested a move away from a purely medical process by using more occupational nurses and fewer doctors.[18]

21. The Employers' Forum on Disability summed up the problem with the medicalisation of the incapacity benefits system and the issues caused: "Both employers and people with disabilities experience the health service as a barrier. The medical profession does not generally understand disability to be an equal opportunities or discrimination issue and is unfamiliar with the DDA. Doctors tend to overestimate the risk to the company associated with hiring someone with a disability or health condition, and underestimate the potential of the employer to make the necessary adjustments. Millions of people in work have no access to occupational health specialist physicians; instead, general practitioners are consulted at recruitment and in retention cases. GPs tend to have a very limited understanding of the realities of work and the nature of possible adjustments and have little time in which to consider work related adjustments."

22. The Committee agrees with suggestions that reliance on a medical model of assessing incapacity is acting as an additional barrier to disabled people who want to move into work. We recommend that occupational nurses and Disability Employment Advisers should have more input into the Personal Capability Assessment. We also recommend that the Government investigate the 'non­NHS' models of voluntary groups and private providers, who have developed medical models aimed at job retention and, where that is impossible, a rapid return to work. We further recommend that this should be built into the pilots proposed in the Green Paper, so that half of the pilots should have their medical services delivered other than through the NHS. We hope that this would ensure that consistent standards are operating across the UK.

23. The Committee agrees with the Department that the three factors contributing to the rise in incapacity benefit claimants are economic and industrial changes, benefit administration and demographic changes. Measures currently undertaken to help disabled people move into work need explicitly to address these three factors.

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11   Ev 247 [DWP memorandum Annex C] Back

12   Ev 277 [Appendix 38] Back

13   Ev 82, para 17 Back

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

15   Labour Force Survey Trends, August 2002: Labour market experiences of people with disabilities  Back

16   Ev 112, para 7.5 Back

17   For example, Ms Hindle of UnumProvident suggested 'Capacity Benefit'. Back

18   Ev 66, paras 18-19 Back

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Prepared 11 April 2003