Incapacity Benefit

Incapacity Benefit is a UK welfare benefit that was introduced in 1995. It used to be available to adults who were younger than the State Pension age, who had made National Insurance contributions, and who were having difficulty finding work because of an illness or a disability.

Incapacity Benefit was phased out by a New Labour government following the passage of the Welfare Reform Act in 2007, which replaced it with Employment and Support Allowance for new claims. In 2011, the Conservative-Liberal Democrat Coalition began to reassess long-term recipients still on Incapacity Benefit and move them onto Employment and Support Allowance.

There are now fewer than 100,000 people on Incapacity Benefit. It is no longer available to new claimants.

History of Incapacity Benefit

1911 and 1945

In Britain, sickness benefits were introduced by David Lloyd George, Winston Churchill and other reformers as part of the radical changes to social security brought about by the National Insurance Act 1911. These Edwardian-era reforms were incorporated into the Welfare State after the Second World War - although until the early 1970s, the post-war National Insurance scheme treated everyone who became eligible for benefits after losing their job in largely the same way, regardless of whether or not they were disabled.^[1]

Long-term illness and disability were also addressed to some extent through National Assistance and, from 1966, Supplementary Benefit.

1971

Edward Heath's government brought in a raft of new social security payments including Invalidity Benefit, which was introduced in 1971 to go some way towards replacing the wages of people who had been 'invalided out' of their occupation after developing a long-term illness or a disability. It was worth more than basic Unemployment Benefit paid to people without disabilities.

Tania Burchardt, from the London School of Economics, has described the 1970s and 1980s as decades notable for an "improvement of the coverage of earnings-replacement benefits".^[1]

1995

In 1995, the Conservative Secretary of State for Social Security, Peter Lilley, abolished Invalidity Benefit and replaced it with Incapacity Benefit after the Prime Minister of the day, John Major, had complained about the burgeoning caseload, saying: "Frankly, it beggars belief that so many more people have suddenly become invalids, especially at a time when the health of the population has improved".^[2]

A new feature of Incapacity Benefit was that officials could ask for claimants' disabilities to be confirmed using a bespoke testing procedure – the All Work Test – carried out by doctors working for the government. Another feature was that claimants would be assessed on their ability to do any job, not just their old trade. And unlike its predecessor, Incapacity Benefit was taxable.^[3] Nevertheless, the caseload continued to rise.

After 2000, some recipients underwent a Personal Capability Assessment to establish whether their condition had improved: if it had, benefit payments could be withdrawn; otherwise, a Capability Report was drawn up by the examining doctor and used by Job Centre staff to plan ways to boost recipients' employability, in the hope of returning them to work.^[4] This new test was also used to assess some fresh claims for Incapacity Benefit.

In 2004, the caseload peaked at just under 2,500,000 then began to fall slowly.

2008

In late 2008, New Labour replaced Incapacity Benefit with Employment and Support Allowance (ESA) for new claims and yet another eligibility test was introduced: the Work Capability Assessment. At the same time, capacity was boosted by bringing in nurses to carry out the bulk of the medical assessments using a new semi-structured interview technique, with the findings recorded in digital format. This meant that from 2008, most new claims were scrutinised by a healthcare professional; those whose claims reached the threshold for eligibility were granted ESA - either shortly after the initial assessment, following an internal review of the initial decision, or after an external appeal.

After the introduction of ESA, the number of remaining Incapacity Benefit recipients dwindled: by early 2011, the Incapacity Benefit caseload had shrunk by more than 500,000.^[5]

2011 to 2014

The Coalition government formed in May 2010 decided to implement the plan to reassess most remaining Incapacity Benefit recipients.^[6] This programme ran from early 2011 to 2014 using a new and stricter version of the Work Capability Assessment: recipients confirmed as having 'limited capability for work' – often colloquially, but not technically accurately, referred to as being 'unfit for work' – were transferred onto ESA; any found fully capable of work would, in theory, have had their Incapacity Benefit payments stopped and then been invited to consider applying for Jobseekers Allowance (JSA). In practice, many Incapacity Benefit recipients declared 'fit for work' in this reassessment programme formally appealed against the initial decision and continued to receive Incapacity Benefit until their appeals were heard, at which stage more than 50% of 'fit for work' decisions were overturned and the claimant was moved onto ESA, not JSA.^[7] However, people with an impairment that hampered their ability to cope with the appeal process itself, e.g. a cognitive impairment, often struggled to find their way over the legal and bureaucratic hurdles that faced them when their long-term income-replacement benefit was suddenly stopped.^[8] Some people taken off Incapacity Benefit after their reassessment claimed ESA successfully at a later date when their illness worsened.

Fewer than 90,000 people were still receiving Incapacity Benefit by the middle of 2015, although the number of people on Employment and Support Allowance had grown from zero to more than 2.3 million over the preceding seven years.

Criticisms

The number of claimants was "out of control"

The number of claimants of sickness benefits increased rapidly from the mid-1980s. Anti-cuts campaigners have suggested that this was, in fact, the result of a deliberate policy to encourage jobless people to apply for Invalidity Benefit on the part of Margaret Thatcher's government, which had campaigned with the slogan "Labour Isn't Working" but was later embarrassed by the steepening rise in unemployment.^[9] Conversely, the Spectator journalist James Bartholomew has argued that the real cause was the increase in financial attractiveness of sickness benefits compared to unemployment benefits that took place in the 1970s under Edward Heath and Harold Wilson.^[10]

The early rising trend was investigated in a series of studies commissioned by the government in 1991 and published in 1993.^[2] Several possible causes were identified:

• A higher level of background unemployment; a decline in manual work; less accommodating workplaces
• An increased readiness by GPs to issue sick-notes; longer hospital waiting times; changing patterns of illness
• The relative generosity of different benefit payments
• Changes to Unemployment Benefit, with more conditions being attached to it
• More women working and paying National Insurance contributions, and so qualifying for benefits
• More claims being made by disabled people who had not previously claimed, despite being entitled to
• Administrative changes to the benefits system in general, which tended to deter people from changing their status

The House of Commons research paper that summarised the studies' findings in the 1990s concluded that the number of new claims and their general pattern had not changed significantly; what had changed was the rate at which recipients were coming off the benefit to move back into work (after their illness had begun to improve, for instance, or by finding a job despite their disability) - it had fallen.

The bulk of the rise in the caseload occurred during the late 1980s, the 1990s and the first years of the 21st century. In 2004, the caseload began to fall slowly.^[11]

Eligibility testing procedures were lax

Ministers complained about a "sick-note culture" that allowed people to drift onto Incapacity Benefit.^[12] A medical certificate from a GP is the first step onto sickness benefits; although a government-run eligibility test was brought in alongside Incapacity Benefit in 1995, critics said that officials still accepted too many claims using information supplied by the claimants themselves and their GPs without asking for an All Work Test to be performed, partly because the pool of medical assessors was relatively small and partly because doctors' time was costly - which was why large numbers of nurses were brought in to perform the new test introduced in 2008.^[13]

Claimants were "trapped" on benefits

Welfare reformers said that once claimants had been granted Incapacity Benefit they became "trapped" in the system.^[14] In fact, there was nothing in the regulations that inherently trapped people on Incapacity Benefit: recipients were free to relinquish their payments and seek work if they felt able to, although the meagre gains from moving into a poorly paid and insecure job were thought to act as a deterrent to doing so - a phenomenon that Working Tax Credits and Universal Credit were designed to mitigate.^[15]

The cost was unaffordable

In 2011, out-of-work sickness benefits had an annual cost of £13 billion: the Chancellor, George Osborne, called this "a very large budget".^[16] The total annual budget of the Department for Work and Pensions in 2011 was £180 billion, with the largest slice by far - almost half - being spent on the State Pension, followed by Housing Benefit at slightly under £30 billion. Tax Credits, administered by the Treasury, cost roughly the same as Housing Benefit.

If out-of-work sickness benefits costs were combined with those of the other disability benefits - the bulk of which go to the elderly - the total would be around £33 billion.^[17]

People who could work were putting in claims

DWP data on the outcomes of new claims - not reassessments of existing Incapacity Benefit recipients - drawn from the first two years of ESA's availability showed the following:

• Only 7% of new claimants were found at assessment to be both severely disabled and unfit for work
• Another 17% were also found to be unfit for work after their assessment, but were less disabled and so were judged likely to work in the future, once they had received tailored support
• 39% were found to be able to work there and then, and so were not entitled to ESA

The remaining 37% ceased claiming for unspecified reasons in the course of the 13-week application and assessment process; some might have abandoned a weak claim as the assessment approached, others might have recovered from their illness, injury or recent surgery or found a new job - the proportions are unknown.^[18]

When the unassessed 37% are removed from the equation, the results are:

• 38% were assessed as being unfit for work at the time of their assessment
• 62% were assessed as being fit for work (before any appeal)

Over time, these percentages shifted very much in favour of claimants as the testing process became more accurate: in 2015, 75% of new claimants of ESA who got as far as an assessment were ultimately found eligible for the benefit.

Some recipients were no longer incapacitated

Commentators and policy-makers suspected that a large chunk of people on Incapacity Benefit had got better but had kept this quiet and were still receiving payments.^[19] Another, more charitable, view was that recent disability legislation and changes in the workplace might have removed some of the barriers to disabled people returning to work.

In two pilot studies of the Work Capability Assessment as a tool for judging the fitness for work of long-term Incapacity Benefit recipients – when 1,347 disabled people living in Aberdeen and Burnley, who had been on their benefit for at least two years, were assessed in late 2010 – provisional results suggested that:

• 30% of existing Incapacity Benefit recipients were actually able to work, according to the new test's more stringent criteria
• 39% were unfit for work but, with extra help, were likely to return to the world of work at some point in the future
• 31% were both unfit for work and unlikely to benefit from rehabilitation or training.^[20][21]

The reliability of this provisional data has been challenged, since many of those categorised as 'fit for work' subsequently won their appeals against the initial decision, suggesting that the results of the pilot studies overstated the percentage of claimants who were capable of finding a job.^[22]

With the passage of time, experience showed that the vast majority of Incapacity Benefit recipients also met the more stringent criteria for ESA as well, and the combined total of people on these benefits hardly changed between 2008 and 2015 (see the main articles Employment and Support Allowance and Work Capability Assessment). Furthermore, the generic rehabilitation programme for those on ESA who were considered to be able to work in the future – the Work Programme – proved largely ineffective in returning them to work.

References

State benefits in the United Kingdom
Current	Income assistance Working age Working Tax Credit Jobseeker's Allowance (JSA) Income Support Carer's Allowance Employment and Support Allowance Flexible Support Fund (FSF) Old age State Pension Pension Credit Disability relief Disability Living Allowance Personal Independence Payment Attendance Allowance Child support Child Benefit Child Maintenance Child Tax Credit Combination Universal Credit Other Bereavement Benefit Housing Benefit
Ambiguous	Education Maintenance Allowance (abolished in England only)
Former	Council Tax Benefit Incapacity Benefit National Assistance Severe Disablement Allowance Supplementary Benefit Invalidity Benefit Sickness Benefit