Millions of UK Workers Face Incentive to Claim Benefits Over Employment
New research highlights a growing concern in the UK labor market, where more than six million full-time workers could receive higher income from welfare benefits than from their after-tax salaries. This situation raises alarms about the potential for increased benefit claims and the risk of fostering a dependency culture that strains public finances.
The analysis from the Centre for Social Justice (CSJ) reveals that individuals on modest wages might benefit financially by obtaining medical certification for health-related issues and accessing a mix of out-of-work and disability payments. Specifically, one in four full-time employees could see their income rise by switching from wages to benefits.
Projections indicate a sharp increase in disability claims, with an estimated 1,000 new applications daily over the next decade. Mental health issues, including anxiety and depression, have surged since the pandemic, contributing to this trend.
Expert Warnings on Welfare System Flaws
Sir Iain Duncan Smith, founder of the CSJ and former Work and Pensions Secretary, emphasized the need for reform. He stated: “My reforms changed the welfare system to make work pay and brought workless households to an all-time low. But because of the post-Covid collapse in vetting and rise of health-related welfare claims, millions of workers could take home more from welfare than wages after tax. This is an outrageous state of affairs. The system must stop writing off thousands every day and incentives to work need to be restored to end this ruinous waste of human potential. Welfare reform is ultimately about transforming lives. The danger now is that Britain turns into a welfare state with a bankrupt country attached.”
The CSJ is initiating the Welfare 2030 project to address the escalating benefits crisis by reinstating work incentives and supporting employment pathways.
Financial Comparisons and Real-World Examples
For the 2025-26 period, an economically inactive claimant receiving universal credit for ill-health, along with average housing benefits and personal independence payment (PIP), could secure an annual income of approximately £25,200. This equates to the net pay from a pre-tax salary of £30,100.
Current data shows 6.2 million full-time workers in positions where combined benefits surpass their take-home pay. Examples include a prison officer in Leicester earning £28,187 annually, a store cleaner in Birmingham at £26,312, and a nursing assistant in Manchester on £24,465— all below equivalent benefit levels after tax.
Even those on the National Living Wage, working 37 hours weekly for £20,400 after tax, would receive £4,800 more through the benefit package. The CSJ notes that while around two million universal credit recipients are employed, fewer than one in six PIP claimants hold jobs. The total number of out-of-work benefit claimants without work requirements now exceeds four million.
This disparity risks creating a permanent sickness-based welfare system, with significant impacts on personal health, government budgets, and economic growth.
Calls for Reform Across Political Lines
Jonathan Ashworth, former Labour Shadow Work and Pensions Secretary, acknowledged the urgency. He said: “The number of people being abandoned to health-related benefits shows why welfare reform cannot be left on the ‘too difficult pile’.” He added that the Welfare 2030 initiative will “develop a blueprint for a system that values contribution, protects the most vulnerable, and helps thousands more people gain all of the advantages that come with a job.”
Joe Shalam, the CSJ’s policy director, observed: “Universal credit showed that welfare reform can work when rooted in clear principles and designed for implementation. But soaring health benefit claims are reversing those gains and pushing thousands away from the workforce each day.”
Richard Tice, Reform UK deputy leader, criticized current policies: “Labour is waging a war on work. Benefits should never pay more than a full-time job. This Government penalises hard work, taxes graft, and rewards dependency. Only Reform UK is on the side of alarm-clock Britain – we’ll cut taxes, end welfare traps, reduce the burden on families, and make sure hard work finally pays again.”
Helen Whately, Conservative Shadow Work and Pensions Secretary, stated: “Work should always pay, but Labour have scrapped reform, weakened checks, and allowed health-related benefits to balloon out of control. Labour are trapping people on welfare, and working families are treated like mugs for getting up every morning. Only the Conservatives have a leader with a backbone, the strong team and a plan to reform welfare, cut taxes and double apprenticeships to build a stronger economy and get Britain working again.”
Government Response and Ongoing Efforts
A Department for Work and Pensions spokesperson responded: “We are glad this report confirms that the vast majority of people are better off in work, and that some PIP claimants are working. This is a snapshot, as some of the jobs mentioned are likely to be roles on which people would progress to higher salaries during their careers. We will continue to ensure that people are better off in work, and are already rebalancing the rates of universal credit for sickness and unemployment this year, as well as investing £1 billion to support people with health conditions back into the workplace.”
