‘Unsustainable’ sickness benefits cost UK more than defence, Lords warn
The UK is spending more on “financially unsustainable” sickness benefits than defence, and “urgent” reform to the welfare system is needed to rein in costs, a group of Lords has said.
In a letter to the work and pensions secretary, Liz Kendall, the cross-party Lords Economic Affairs committee said the current benefits system penalises people looking for work and tackling the spiralling costs of welfare payments should be a “top priority” for the government.
Spending on sickness and disability benefits has grown to almost £65bn after rising by more than 40 per cent in real terms since 2013, with around 3.7m working age adults receiving support.
This is 20 per cent higher than the defence budget of £53.9bn in 2023-24, with ministers set to spend almost £57bn on the UK’s defence budget this financial year, and rising to just under £60bn in 2025-26, the group told Kendall.
“The health benefits system is financially unsustainable, wastes human potential and – in the words of the employment minister – ‘does not work for anybody’,” said committee chairman Lord Bridges of Headley.
He added: “Given the pressure on the nation’s finances, tackling this must be a top priority for the government.”
The committee has stressed the need for urgent reform to health benefits in the UK after an inquiry into the relationship between welfare and long-term sickness.
Their letter warned: “The danger is that people have incentives to claim health-related benefits; and, once in receipt of them, have neither the incentive nor support to find and accept a job.
“If the government does not set out how it intends to address these weaknesses, this growing area of welfare spending will remain a challenge for the forthcoming spending review.”
The committee also said it received “no convincing evidence” that higher NHS waiting lists were the “main driver” of growing health benefit claims, and highlighted that if some 400,000 people out of work due to ill-health were able to find jobs, this could save the UK £10bn.
But the benefits warning comes as reports emerged that the UK’s path to increasing defence spending could be threatened by tariffs imposed by President Donald Trump, who has dangled the prospect of global import taxes of up to 20 per cent on goods entering the US.
Modelling suggests the UK’s GDP could fall in response by up to 0.9 per cent, with defence spending having to be reduced by almost £2bn, the Times reported.
Business and trade select committee chairman Liam Byrne told the paper: “Higher duties mean weaker defence.
“Britain needs to explain in really simple terms that we want to raise our defence spending, but that the amount is going to be smaller if growth is less because of American tariffs.”
The committee also called for GPs to refer people to occupational health professionals; for reforms to the work capability assessment; enhanced support for young people; a review of disincentives, such as benefits being immediately stopped when someone returns to work; and for the NHS to share health data with the Department for Work and Pensions (DWP).
Lord Bridges added: “Urgent action is needed to reform both the unemployment and health-related benefits system, and how they interact.
“There should be more support to help those who are able to find and accept work – and to ensure that those who cannot work for a period are not abandoned to a life on benefits.”
A government spokesperson said Starmer and Reeves are determined to “get Britain working again” and have set out their “first steps towards delivering an 80 per cent employment rate – by joining up local work, health, and skills plans”.
“We have been clear that the current welfare system needs reform, so it is fairer on the taxpayer and people get the support they need to move into work,” the spokesperson said, adding that ministers will bring forward proposals for reforming the health and disability benefits system in the Spring.