Single claimant receiving out-of-work, health and housing benefits can receive £27,400 a year, tax free
National Living Wage worker must earn more than £33,000 – requiring more than 50 hours a week – to take home the same amount
Around 6.2 million full-time workers take home less than the combined benefit package
Calls for next generation of welfare reform to tackle “new benefit trap” ahead of crunch Budget
A worker on the National Living Wage must work more than 50 hours – equivalent to six days a week – to take home as much as a claimant on combined benefits, a major report has found.
Analysis by the Centre for Social Justice (CSJ) found that a single economically inactive claimant receiving Universal Credit health and housing support alongside Personal Independence Payment can receive approximately £27,400 a year, tax free.
A worker would need to earn more than £33,000 before tax to take home the same amount, rising to almost £35,000 if a minimum pension contribution is made.
The report, to be published on Tuesday, warns that the rapid growth in mental health-related claims has turned this into a “new benefit trap”.
PIP claims for psychiatric conditions, including anxiety, depression and ADHD, have more than doubled since 2019, from around 690,000 to 1.5 million.
Although claimants can keep some benefits in work, the research corroborates recent findings from the Milburn Review that for young people with a health condition, inactivity can offer “higher income, less hassle and lower risk than trying to find work”.
The findings will be published in State of Dependency, a 250-page report and part one of the CSJ’s landmark Welfare 2030 inquiry, chaired by former Work and Pensions Secretary Sir Iain Duncan Smith MP.
The report estimates that 6.2 million full-time workers – around one in four – take home less than the combined benefit package.
The Government has reduced the Universal Credit health element for most new claims from £429.80 to £217.26 a month, reducing the package to approximately £24,800 a year. However, this does not affect over three million claimants already on the system.
The gap is even larger when compared with part-time employment. An average part-time worker putting in 16.5 hours a week at the National Living Wage earns approximately £10,900 a year.
The combined benefit package is worth around £16,500 more than those earnings – more than £300 a week.
The report concludes that, despite Universal Credit strengthening work incentives, the growth of combined benefits risks encouraging claimants to remain on welfare rather than move into work.
An estimated 1.3 million people now receive the combination of income, health and housing support examined in the report – with other “passported” entitlements including healthcare discounts, Motability cars, council tax reductions and a range of other perks and benefits.
While PIP can be claimed in work, fewer than one in six PIP claimants are in employment. Around two thirds of working-age PIP claimants also receive the health element of Universal Credit.
One participant in the CSJ’s Big Listen in the North East said:
“Some young people are aware that they technically can work with their benefits, but practically it’s so confusing to work out that they don’t.”
Joe Shalam, policy director at the Centre for Social Justice, said:
“The welfare state must provide security for people who genuinely cannot work, but the Government is right to recognise perverse incentives pushing people away from employment, especially through claims for milder mental health conditions.
“When someone who has chosen work over welfare has to graft for six days a week on the National Living Wage to match a combined benefit package, something has gone badly wrong.
“The next generation of reform must go further to restore work incentives and give claimants the care and attention they deserve, rather than simply writing a cheque and waving goodbye.”
Around 6.7 million people across England, Wales and Scotland now receive at least one out-of-work benefit, equivalent to one in six working-age adults.
Since 2019, the number of working-age claimants facing no requirement to seek or prepare for employment has increased by almost 1.7 million. The working-age benefit bill is set to reach £136.1 billion in 2026/27, up £49.6 billion in real terms since 2019/20.
The full findings of State of Dependency will be published on Tuesday 13 October.
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