A recent analysis reveals that more than six million full-time workers in the UK could receive higher income from benefits than their after-tax earnings. This situation raises concerns about a potential surge in claims, potentially transforming Britain into a welfare-dependent economy.
Key Findings from the Welfare Study
The study highlights that individuals on modest wages often find that a mix of out-of-work and health-related benefits surpasses their post-tax salary, provided they secure medical certification. One in four full-time employees faces this incentive to shift from employment to benefits.
Projections indicate around 1,000 new disability claims daily over the next decade, driven by rising mental health issues like anxiety and depression since the pandemic. The analysis, conducted by the Centre for Social Justice (CSJ), launches the Welfare 2030 initiative to address this growing benefits crisis and restore work incentives.
For instance, an economically inactive claimant on universal credit for health reasons, including average housing benefits and personal independence payments, would receive about £25,200 annually in 2025-26—equivalent to a pre-tax salary of £30,100. Currently, 6.2 million full-time workers earn less after tax than this combined benefits package.
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. The benefits total exceeds the £20,400 after-tax income from the National Living Wage for a 37-hour week by £4,800.
While approximately two million universal credit recipients remain employed, the comparison underscores the appeal of leaving low-paid, taxed jobs for higher, no-work benefits. Fewer than one in six personal independence payment claimants hold jobs, and the total number of out-of-work benefit claimants without work requirements now tops four million.
This trend risks creating a permanent sickness-based welfare system, impacting individual health, public finances, and overall economic growth.
Expert and Political Perspectives
Sir Iain Duncan Smith, founder of the CSJ and former Work and Pensions Secretary, 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.”
Jonathan Ashworth, former Labour Shadow Work and Pensions Secretary, commented: “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 project aims to create a system that values contributions, protects the vulnerable, and supports more people into employment.
Joe Shalam, the CSJ’s policy director, noted: “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, remarked: “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, said: “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
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.”
