Disability benefit claims
Department for Work and Pensions figures released this week suggest that only 7% of applicants for the new disability benefit, Employment Support Allowance (ESA), during the two years since its inception, are found unfit for work. The implicit suggestion is that the previous regime was widely abused by ‘scroungers and malingerers’. Yet the total number of claims for disability related workless benefits is almost exactly the same, at 2.6 million, in the latest data (November 2010) as it was in 2008, when the new benefit started. Even among claims less than two years old and hence all assessed under the new regime there are 640,000 claimants, which is exactly the same as in 2008. So, how can the impression of a big crackdown on claims under the new test, and the absence of any decline in numbers claiming be reconciled?
The answer is three fold. Firstly, although only 7% of new applicants go on to be deemed unfit for work, another 17% are eligible for ESA, but deemed that with the correct support and improvements in health they may get back into work. ‘May’ being the important word here. I designed the structure of support for this group under the ‘Work Related Activity Group’ banner, which will be delivered under the new Work Programme. How successful it will be is yet to be demonstrated. So, 24% of new claims go on to be eligible for ESA, not 7%.
The second key point is that a large number of applicants never got onto Incapacity Benefits (IB), the forerunner of ESA, either. Some people simply got better before the assessment phase was completed and so never got tested, or were denied access through the test applied at the time. People start a claim for disability related benefits but begin in an assessment phase, during which they receive the same benefits as they would for unemployment. It is only after this is completed, at around 13 weeks, that the recipient receives the eligibility decision as to whether they move on to the full ESA benefit. A lot of people withdraw before the test occurs and always have; 36% of applicants in the new figures. A useful guide to this would be what proportion of claims under 13 weeks go onto the main benefit. However, as so many claims go to appeal, during which time people remain as though they are still in the assessment phase, a better picture emerges after 6 months. The figure below highlights the survival rates for claims before and after the new ESA regime was introduced in late 2008. It shows the proportion of claims under 13 weeks old, and hence in the assessment phase, which are still live a further 3 months, 6 months and so on after their commencement. After 3 months some 72% of applicant’s claims are still live and after 6 months this falls to 50%. Of key importance here is that this was around 80% and 60% respectively under IB pre-October 2008. Hence, ESA has reduced the numbers of applicants reaching at least 6 months duration by 10%, and this appears to persist through to the longest duration data we have. So the new regime is leading to around 10% fewer people, after the appeals process is completed, being passed as eligible for ESA. A story far removed from just 7% being found unfit for work.
The third reason this has not had any effect on the total number of claims under 2 years duration, and thus assessed under the new test, is that the total number of new claims has risen from around 130,000 per quarter in 2008 to around 160,000 now. This is almost certainly as a result of the recession but past experience suggests it will take quite a long time to abate fully. So, between 1 and 2 years duration we now have the first quarter of data that is fully under the new regime. After all the assessment and appeals have been completed we can derive that the number of claims has fallen to 206,000 from about 235,000 prior to the reform. This is around 12% lower, but this is currently offset by shorter duration claims. As time progresses and the impact of the recession diminishes the new ESA tests will make a clearer difference to the total number of claims. However, it will be a long time before this is very visible. What will be more important over the next 3 years will be the re-testing of existing IB claimants, as well as the removal of eligibility to ESA for those claiming for more than 1 year and who are not eligible for means tested benefits.
Figure 1 Proportion of Claims of 0-13 weeks duration that are still live after intervals specified