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The benefits that will be frozen in 2025
Incapacity benefits more lucrative than part-time work, says IFS
Britons with long-term sickness risk being up to £1,200 worse off if they come off incapacity benefits and work part-time, a leading think tank has said.
The Institute for Fiscal Studies (IFS) said discouragingly high taxes on working people were making it difficult to entice welfare claimants back into the labour market.
Someone on incapacity benefits deciding to re-enter the workforce for 16 hours per week would be as much as £1,200 worse off a year than if they did not work at all, analysis by the IFS found.
It added that four in five people on incapacity benefits have been out of work for more than two years, equivalent to around 2.6m Britons.
Sir Keir Starmer has said that people on long-term sickness benefits should be made to return to work “where they can” as part of his plans to “get Britain working”.
But Eduin Latimer from the IFS said: “It is easy for a government to say that they will get more people on incapacity benefits into work, but harder to actually do it. Most incapacity benefit claimants are a long way from the labour market and face weak work incentives.
“Clearly the fact that they are facing these high effective tax rates will disincentivise people from moving into work.”
Ministers are scrambling to solve Britain’s bulging long-term sickness problem, as the costs of supporting those out work are projected to surpass £100bn by the end of the decade.
Liz Kendall, the Pensions Secretary, is understood to be considering slashing benefits for those with mild mental health conditions to save £3bn.
However, Mr Latimer said getting people on incapacity benefits back into work would be “challenging” and there were no “easy solutions”.
His analysis found that people returning to work for 16-hours a week face an effective tax rate of more than 100pc when taking into account the loss of their benefits.
Even if they increased their hours to 20 a week, they would still be £360 poorer a year than if they did not work at all and the Government reviewed their situation, the IFS said.
This reflects that universal credit claimants generally lose 55p for every pound of income from working.
Meanwhile, claimants receiving additional support for poor health on top of that risks losing £4,994 if they work more than 15 hours a week.
This means that even a claimant taking on a full-time job on the national living wage making £20,900 a year would face an effective tax rate of 89pc.
Their income would as a result rise by less than £200 a month from working full-time as opposed to not working at all.
Mr Latimer said: “There is a strong incentive to work fewer hours”.
It comes as Rachel Reeves plots a tax raid at her maiden Budget on Oct 30 to plug a £22bn “black hole” in the public finances, which the Chancellor claims was left by her predecessors.
Sir Keir Starmer refused to rule out a tax on jobs on Tuesday, saying that Labour’s manifesto commitment not to increase National Insurance (NI) did not extend to businesses, only applying to their staff.
However, experts warned Ms Reeves that the potential rise alongside an overhaul of workers’ rights risked putting firms off hiring just as the jobs market is slowing.
Neil Carberry, the chief executive of the Recruitment and Employment Confederation, said this would particularly disadvantage those trying to come off benefits and young people.
Mr Carberry said: “Those things fall particularly heavily where an employer is making a 50-50 decision about taking a chance on someone.”
Official data on Tuesday showed that the number of long-term unemployed young people has surged to a near three-year high.
As of August, some 88,000 Britons aged 18 to 24 have been unemployed for at least a year, the Office for National Statistics (ONS) said, the highest level since the end of 2021 when the economy was still recovering from Covid lockdowns.
Paul Nowak, general secretary of the TUC, warned the rise risked “terrible scarring effects on young people’s life chances” and intervention was needed to stop them “from being left on the scrap heap”.
He added: “This is not a problem we can allow to get any worse, and today’s rise in long-term youth unemployment is particularly concerning.”
Mr Carberry, the REC chief executive, added that young people were facing a particularly challenging time to enter the jobs market.
Since 1997 no period of falling permanent hiring has been “as long as the one between September 2022 and now”.
He said: “The market has been weakening for a couple of years now. When that happens, it tends to be people that employers are taking a bit of a chance on who find it most difficult.”
A government spokesperson said: “We are changing the rules to put more money into working people’s pockets and are committed to reviewing Universal Credit as we deliver on our plan to tackle inequality.
“Our plan to get Britain working is at the heart of our ambition to get more people into good jobs and reach an 80pc employment rate, by overhauling jobcentres, tackling inactivity, and ensuring every young person is either earning or learning.”
https://www.msn.com/en-gb/health/other/incapacity-benefits-more-lucrative-than-part-time-work-says-ifs/ar-AA1slnT5?ocid=msedgntp&pc=NMTS&cvid=80cba7d783274b40be971320cfd9cf58&ei=12#fullscreen
Britons with long-term sickness risk being up to £1,200 worse off if they come off incapacity benefits and work part-time, a leading think tank has said.
The Institute for Fiscal Studies (IFS) said discouragingly high taxes on working people were making it difficult to entice welfare claimants back into the labour market.
Someone on incapacity benefits deciding to re-enter the workforce for 16 hours per week would be as much as £1,200 worse off a year than if they did not work at all, analysis by the IFS found.
It added that four in five people on incapacity benefits have been out of work for more than two years, equivalent to around 2.6m Britons.
Sir Keir Starmer has said that people on long-term sickness benefits should be made to return to work “where they can” as part of his plans to “get Britain working”.
But Eduin Latimer from the IFS said: “It is easy for a government to say that they will get more people on incapacity benefits into work, but harder to actually do it. Most incapacity benefit claimants are a long way from the labour market and face weak work incentives.
“Clearly the fact that they are facing these high effective tax rates will disincentivise people from moving into work.”
Ministers are scrambling to solve Britain’s bulging long-term sickness problem, as the costs of supporting those out work are projected to surpass £100bn by the end of the decade.
Liz Kendall, the Pensions Secretary, is understood to be considering slashing benefits for those with mild mental health conditions to save £3bn.
However, Mr Latimer said getting people on incapacity benefits back into work would be “challenging” and there were no “easy solutions”.
His analysis found that people returning to work for 16-hours a week face an effective tax rate of more than 100pc when taking into account the loss of their benefits.
Even if they increased their hours to 20 a week, they would still be £360 poorer a year than if they did not work at all and the Government reviewed their situation, the IFS said.
This reflects that universal credit claimants generally lose 55p for every pound of income from working.
Meanwhile, claimants receiving additional support for poor health on top of that risks losing £4,994 if they work more than 15 hours a week.
This means that even a claimant taking on a full-time job on the national living wage making £20,900 a year would face an effective tax rate of 89pc.
Their income would as a result rise by less than £200 a month from working full-time as opposed to not working at all.
Mr Latimer said: “There is a strong incentive to work fewer hours”.
It comes as Rachel Reeves plots a tax raid at her maiden Budget on Oct 30 to plug a £22bn “black hole” in the public finances, which the Chancellor claims was left by her predecessors.
Sir Keir Starmer refused to rule out a tax on jobs on Tuesday, saying that Labour’s manifesto commitment not to increase National Insurance (NI) did not extend to businesses, only applying to their staff.
However, experts warned Ms Reeves that the potential rise alongside an overhaul of workers’ rights risked putting firms off hiring just as the jobs market is slowing.
Neil Carberry, the chief executive of the Recruitment and Employment Confederation, said this would particularly disadvantage those trying to come off benefits and young people.
Mr Carberry said: “Those things fall particularly heavily where an employer is making a 50-50 decision about taking a chance on someone.”
Official data on Tuesday showed that the number of long-term unemployed young people has surged to a near three-year high.
As of August, some 88,000 Britons aged 18 to 24 have been unemployed for at least a year, the Office for National Statistics (ONS) said, the highest level since the end of 2021 when the economy was still recovering from Covid lockdowns.
Paul Nowak, general secretary of the TUC, warned the rise risked “terrible scarring effects on young people’s life chances” and intervention was needed to stop them “from being left on the scrap heap”.
He added: “This is not a problem we can allow to get any worse, and today’s rise in long-term youth unemployment is particularly concerning.”
Mr Carberry, the REC chief executive, added that young people were facing a particularly challenging time to enter the jobs market.
Since 1997 no period of falling permanent hiring has been “as long as the one between September 2022 and now”.
He said: “The market has been weakening for a couple of years now. When that happens, it tends to be people that employers are taking a bit of a chance on who find it most difficult.”
A government spokesperson said: “We are changing the rules to put more money into working people’s pockets and are committed to reviewing Universal Credit as we deliver on our plan to tackle inequality.
“Our plan to get Britain working is at the heart of our ambition to get more people into good jobs and reach an 80pc employment rate, by overhauling jobcentres, tackling inactivity, and ensuring every young person is either earning or learning.”
https://www.msn.com/en-gb/health/other/incapacity-benefits-more-lucrative-than-part-time-work-says-ifs/ar-AA1slnT5?ocid=msedgntp&pc=NMTS&cvid=80cba7d783274b40be971320cfd9cf58&ei=12#fullscreen
Comments
https://www.msn.com/en-gb/health/other/four-in-five-claiming-incapacity-benefit-have-not-worked-in-two-years/ar-AA1sks74?ocid=msedgntp&pc=NMTS&cvid=80cba7d783274b40be971320cfd9cf58&ei=115#fullscreen
Let's look at where papers like the Telegraph make their attacks.
The Sick. Minorities. Refugees. Human Rights. Health and Safety.
While simultaneously claiming that the Govt spends more and taxes less.
Struggling to find a business that is quite as badly run as the Telegraph Group. Perhaps they should start looking at themselves. Much like their Creditors are.
If the government plans to encourage people back to work by making them up to £1200 pa worse off, then it is unlikely to work.
The cost of supporting people who are out of work reaching £100bn, by the end of the decade must surely be a concern to any government.
I have watched successive Governments say for 40 years that they have the answer to this problem. When they do not.
All we end up with is someone with minimal qualifications doing a snapshot on 1 day for people with long-term variable health conditions. Because someone with back problems, or chronic depression, cannot be judged on 1 day.
Coupled with a "crackdown" to "save" £50 million in Benefits. Great for politicians. Trouble is, tends to cost the taxpayer £100 million. So a net loss.
Not saying it isn't a real problem. It is. Just doesn't have a simple answer.
PS. Just how offensive is the word "lucrative" in that Headline?
At some point a government will have to come up with a long term plan on how we can afford to pay for benefits, NHS, state pensions, to name but a few.
Encouraging people off benefits by making them sustantially worse off, is not a plan that is likely to work.
The sh1t is likely to hit the fan on this after I pop my clogs.
https://uk.yahoo.com/news/benefits-frozen-2025-housing-dwp-125541695.html