Universal Credit: Health Caseload

Introduction

Last week, the government announced plans for major reforms to address increasing economic inactivity and encourage more people back into work. At the heart of this is a significant rise in health-related benefit claims, specifically reflected in the recent growth of Universal Credit (UC) health caseloads.

What Does the Chart Show?

The chart illustrates the percentage of each age group receiving health-related Universal Credit from January 2019 to December 2024. Since 2019, the proportion of people receiving health-related Universal Credit has grown substantially, especially among older working-age groups. The largest increases have occurred in adults aged 45–54 and 55–64, with roughly 6% of individuals in these age groups claiming UC health benefits by the end of 2024. In contrast, younger groups, particularly those aged 16–24, have experienced relatively small increases, maintaining a caseload of slightly above 2%. Similarly, the 25–34 age group also remains lower compared to older cohorts. 

Why is the Chart Interesting?

Recent public narratives have heavily emphasised mental health challenges among young people as a major reason for their economic inactivity. However, this perspective is not strongly supported through UC health claims. Despite widespread concern regarding youth mental health, the proportion of 16–24-year-olds receiving UC health benefits remains comparatively low. This could indicate that young people have other support systems, such as family networks, educational settings, or informal work, or face barriers to accessing UC support, potentially due to the stigma associated with it.

Instead, the data points to greater issues among older working-age adults, suggesting that physical health deterioration, long-term illnesses, and structural labour market problems play a more significant role in driving welfare dependency.

The increase in UC health caseloads brings significant financial challenges. Spending on health-related benefits has risen by approximately £20 billion since the pandemic. Future forecasts predict these costs could surpass £70 billion annually within five years. Such expenditure represents a substantial portion of public spending, equivalent to more than a third of the current NHS budget and three times that of policing. 

Central measures to combat this include abolishing the current Work Capability Assessment in favour of assessments focused on daily living impacts, restructuring Universal Credit payments to incentivise employment, and introducing targeted early intervention programmes to support individuals back into work. 

The proposed reforms, while aimed at encouraging employment and reducing long-term dependency on disability and incapacity benefits, raise concerns regarding their potential impact on vulnerable individuals. According to analysis by the Institute for Fiscal Studies (IFS), these reforms may adversely affect those with genuine health-related barriers to employment. The tightening of eligibility criteria and the abolition of the Work Capability Assessment (WCA), replaced by assessments focused on daily living activities, could result in individuals with considerable health limitations experiencing significant reductions in financial support.

Additionally, the effectiveness of the approach in incentivising employment among recipients of health-related benefits can be called into question, as people with health-related conditions may not be in a position to benefit from increased incentives to work. There may be a need for more targeted, supportive interventions rather than cuts in financial assistance. Without adequate investment in tailored employment support, healthcare access, and workplace accommodations, there is a risk that these reforms could inadvertently push individuals further from the labour market.