It is estimated that around half a million people claiming state Incapacity Benefit (IB) are to be forded to work or have their benefits slashed. This moves comes as the government aims to cut as much as £4 billion of welfare expenditure.
Of the £4 billion in proposed welfare cuts around £2 billion will be saved on incapacity benefit.
New government incapacity plans
Under new plans all individuals claiming incapacity support for all types of disability will have to undergo strict medical tests. Those who pass the tests will be told to find employment or start claiming Jobseekers’ Allowance (JSA), which provides a far lower level of weekly benefit.
The Telegraph newspaper has also published a story claiming that it has information asserting that plans are being considered to means test Incapacity Benefit or even limit the benefit payment period to a maximum of one year, which would leave many long-term sick helpless.
Although means testing benefit is an obvious and likely choice in a ‘fair society’ it would be political suicide to leave the genuine long-term sick to fend for themselves with a maximum benefit term.
The cost of incapacity
The current welfare budget in the UK is running at £195 billion and incapacity benefit alone has cost the state £135 billion over the past ten years. Currently there are some 2.1 million people claiming state benefits for disability.
It is hoped that these new measures will save as much as £16 billion by 2015, thus helping to bring public expenditure and debt levels back to a sustainable threshold.
The new medical tests
This new government cost saving initiative is already being trialed in Burnley and Aberdeen, with those who are deemed fit to work will be told to find work or claim Jobseekers’ Allowance.
It is expected that the tests will implemented across country by April 2011. The government expects to be able to test 1.5 million people at an astonishing rate of 10,000 people a week. At this rate of testing there is a serious concern about the quality and thoroughness of these tests. The government expects around 500,000 of the current 2 million claimants to be deemed fit to work.
The government argued that many individuals have given up on trying to get back to work and have resigned themselves to a lifetime of benefits. The new scheme is not only to reduce the public debt but also to help those individuals back into work and put an end to the ‘lost potential’ sitting on incapacity benefits.
The long-term solution
Given the scale of the incapacity bill the government needs to provide tax incentives for people to take out disability protection in the private market. For a start the government needs to remove Insurance Premium Taxation (IPT) from these plans.
Income protection insurance is the only true form of incapacity protection as it allows individuals to protect 50-65 per cent of their gross earnings all the way until retirement, therefore allowing living standards to be maintained whilst incapacitated.