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More than 10% of rise in disability benefit spending pre-Covid directly caused by other benefits being cut, IFS says

Cutting benefits paid to healthy people leads to more people claiming disability benefits, the Institute for Fiscal Studies has found.

It has published a report showing a direct link between cuts in one part of the benefits system, and rising claims in another part of the system, and it says that more than 10% of the rise in disability benefit spending between 2010 and 2019 (the period covered by the research) can be explained by cuts to other benefits.

The IFS focused on this period because there were big cuts to non-health benefits during this period, while health and disability benefits were less affected.

Explaining the study, the IFS says:

We study four reforms: the 2011 cuts to housing benefit for private renters; the increase in the female state pension age between 2010 and 2018; the lowering of the benefit cap in 2016; and the introduction of the ‘lone parent obligation’ between 2008 and 2012, which required more single parents on out-of-work benefits to look for paid work. In each case, we find the reform increased the number of people receiving disability benefits, and we also find that two of the reforms increased the number of people receiving incapacity benefits.
Explaining the link, the IFS says it “could be because the cuts to non-health-related benefits worsened the health of those affected or because take-up of health-related benefits may have increased”.

The IFS concluded:

Overall, a back-of-the-envelope calculation suggests that all changes to non-health-related benefits and direct taxes from 2010 to 2019 increased disability benefit spending by £900m. This represents 13% of the £7bn increase in disability benefit spending during the 2010s.
As for other reasons why spending on disability benefits has risen since 2010, the IFS says the increase in the size of the working age population, health declines since Covid, and the sharp rise in the cost of living between 2021 and 2023 are all factors.

Commenting on the findings, Eduin Latimer, a senior economist at the IFS and one of the authors of the report, said:

Across four different reforms, we find an unintended consequence of benefit cuts – that they lead to more people claiming disability benefits …
One result of these spillover effects is that the fiscal savings from cutting non-health-related benefits are slightly smaller than previously thought. These effects will likely also have a long-term legacy, as people often stay on disability benefits for many years. The big-picture lesson for policymakers is that changes to one part of the benefit system can shift pressures elsewhere, rather than remove them entirely.