The UK government is grappling with soaring costs for disability and long-term health benefits, a system that, despite its expense, still leaves many claimants struggling financially and

disconnected from the workforce.

Spending on these benefits already surpasses the national defense budget and is projected to reach £100 billion ($129 billion) by 2030, up from the current £65 billion, according to official estimates.

This week, Prime Minister Keir Starmer described the existing welfare system as “economically and morally indefensible” and emphasized the need to bring more people back into work. His government is expected to unveil proposed reforms next week.

Concerns over proposed cuts

According to broadcaster ITV, the reforms may include £6 billion in cuts—an alarming prospect for some Labour Party members. Finance Minister Rachel Reeves is under pressure to curb welfare spending, particularly as the official fiscal forecasts, due on March 26, could indicate that the government is on track to miss its debt-reduction targets.

Welfare experts caution that while budget cuts may offer short-term savings, they could undermine long-term efforts to increase employment among disabled individuals.

“Trust in the system is very low,” said Louise Murphy, a senior economist at the Resolution Foundation think tank. She noted that many disabled benefit recipients fear financial loss or harsh treatment from job coaches if they attempt to enter the workforce.

A spokesperson for the Department for Work and Pensions emphasized the government’s responsibility to put welfare spending on a “sustainable path” through meaningful reforms rather than indiscriminate budget cuts.

A path back to work

Chelsea Shubert, 23, represents the kind of person the government hopes to support in returning to work. Diagnosed with autism and also dealing with anxiety and dyslexia, she left school without key qualifications and relied on unemployment and disability benefits for years.

In 2021, a government employment advisor encouraged her to take an unpaid six-month position at a charity shop, though it didn’t lead to a permanent job. However, she recently passed an English exam and started her first paid job as a school crossing guard in January.

“It’s really rewarding and gets me out of the house, even if it’s only for an hour a day,” she said. She hopes to eventually work with children for longer hours and reduce her dependence on benefits.

“Living with a disability in this world is tough. There just isn’t enough support,” she added.

A dysfunctional system

Bad experiences with the UK’s benefits system are common. Ben Baumberg Geiger, a professor of social science and health at King’s College London, found in a recent survey of nearly 4,000 claimants that two in five reported feeling they would be better off dead or had considered self-harm.

“We have a system that spends a vast amount of money, yet fails to provide adequate support,” he said.

Despite the UK’s relatively low unemployment rate of 4.4%, about 10% of the working-age population claims disability or incapacity benefits—an increase from 8% before the COVID-19 pandemic. This rise has not been observed in other European nations, which analysts suggest may be linked to the UK's relatively high disability benefits compared to unemployment support.

Currently, single unemployed individuals receive £393 per month plus some housing support, while those deemed too ill to work receive £810. Additionally, disabled individuals—whether employed or not—can receive a separate benefit averaging £586 per month to cover disability-related costs.

Murphy from the Resolution Foundation said the government is right to consider narrowing the gap between unemployment and incapacity benefits, but warned that stricter eligibility rules might disproportionately impact a vulnerable minority.

“The government needs to stay focused on increasing employment rather than just cutting costs,” she said.

Learning from Europe

Geiger pointed out that countries like the Netherlands take a different approach—placing the initial financial responsibility on employers when a worker is unable to continue due to health issues, giving them more incentive to retain staff.

He also noted that European nations with higher employment rates for disabled people have achieved this through better workplace accommodations rather than benefit reductions.

In the UK, fewer than 1% of those receiving the highest rate of incapacity benefit return to work each month—half the rate recorded in 2012, according to the Resolution Foundation.

One organization aiming to reverse that trend is the Shaw Trust, a charity contracted by the government to help people with health issues re-enter or stay in work through intensive, specialized support.

Although its programs cost over £2,000 per participant, the charity claims an average return on investment of £2.42 per £1 spent within the first year—rising to £9.22 over three years.

Shaw Trust’s chief commercial officer, Richard Clifton, hopes these outcomes will help protect its programs from funding cuts.

“In reality, these programs pay for themselves within a year,” he said.