Britain’s growing sick note crisis could sink economic recover

Fraser Nelson

At first, it looked like a strange post-Covid blip: the number signed off sick from work was surging, with no proper reason. It might have been delayed effects from furlough, but ministers decided to wait to let things settle. They never did. Now some 5,000 a day are claiming sickness benefits, twice the pre-Covid rate.
This week, the Office for Budget Responsibility decided that the Government has lost control. It expects this slide to continue until 12 per cent of the country are on some form of sickness benefit. This is a swift and staggering change (it was not even 8 per cent before the lockdowns) but horribly consistent with other figures. Mental health issues are becoming the new pandemic with some 6.5 million of us now using antidepressants, up a million over five years. The number of adults reporting a disability has risen by a third in the last decade. The number of children and young people accessing NHS mental health services has surged by 25 per cent in the last two years. Something is going deeply, profoundly and expensively wrong.
Every major country had problems rebuilding its workforce after the pandemic, but everyone eventually managed it. Except Britain. Our sick note phenomenon is such, now, that the expected cost of paying those on health-related benefits has risen by £8 billion in just four months. The biggest single complaint behind new claims is mental health, and the proportion of successful claims has hit an all-time high. More are now on incapacity benefit (and its successors) than at any time under Labour. So the Tories have recreated the problem they once dedicated themselves to solving. Set aside the human welfare implications: all this has huge economic repercussions. With so many coming up for retirement – and so many more studying – who’s going to earn the money to foot the swelling welfare bill?
Jeremy Hunt this week said he’d tighten welfare conditions, but that’s expected to release just 10,000 more into the economy. More childcare subsidies should let 75,000 more parents take part-time work. The big change will come from calling in the overseas cavalry: mass immigration is soon expected to provide 160,000 more workers a year. Already, the arrivals are far higher than before Brexit. This is quite a moment for those of us who had thought that Brexit would cut immigration and force ministers to sort out welfare. To train an unskilled school-leaver or take someone back to work from long-term unemployment is a pain. Much easier to phone up an agency in Gdansk and fly some people over. But after Brexit, employers would have to learn that it was time to pay more or train more: they’d complain, they’d demand more immigrants. But if government held firm, a new economic model would be created.
So much for that idea. Vacancies soared but salaries certainly didn’t: in fact, in real terms, they’re falling at one of the sharpest rates ever seen. Nor has Brexit been a wake-up call to the reality of welfare dysfunction. No one seems to care that we’re now keeping five million people on dole of various kinds. No one in the House of Commons has ever pointed out that one in five potential workers in Liverpool, Glasgow and Manchester is on out-of-work benefits in the middle of the biggest worker shortage in history. Mental health is hard to talk about; it may well be a problem that no party wants to solve. To be sure, many claims will be spurious but NHS data shows the underlying trend is all too real. Politically, it’s easy to shovel claimants onto benefits by deeming them to have “limited capability for work-related activity” (the most severe group, into which most new claimants are sent). It’s harder to assess someone for what help they need, what work they can do. And harder to sort them out with the right therapist, given the length of the NHS waiting list.
Some officials working in the welfare system privately admit to being flummoxed, facing a new mental health problem for which they have no handbook. And realising too late that this was not a post-Covid freak but the new normal. There are complaints about the ease of being able to claim (in some cases, via a pharmacist) and shortcuts that, if used, can put you straight into the highest benefit award with no checks. Rishi Sunak is taking some steps to remedy this, with £400 million spent and Universal Support rolled out to go alongside Universal Credit. But it will take much, much more to move the dial.
There was a small celebration in Westminster this week to mark the anniversary of Iain Duncan Smith’s welfare reform bill. Bringing in Universal Credit was, at the time, a stunning achievement that – pre-pandemic – had lifted the proportion in work to the highest since records began. Now, that ratio is heading towards the lowest in a generation. A similar blast of energy is needed, but it has to start with candour. To admit just how bad things are, how little they are likely to change – and how the old methods will not work with this new problem.
There is so much that can be done. Mental health problems are far from unsolvable: techniques like cognitive behavioural therapy are widely practised and have a strong record of success. If the Department for Work & Pensions despairs at the size of NHS waiting lists, it could invest in its own therapists to do what the NHS will not. The basic economics – the cost of helping someone vs the cost of not doing so – make an overwhelming case for action.
Sunak is stepping gingerly in this area. In many ways, that’s understandable: mental health is a delicate subject and one that no prime minister wants to get wrong. But nor can he afford to let his economic recovery sink into a sea of sick notes, with an NHS unable to give proper help, and a welfare service that is once again incubating the problem of worklessness that it was set up to remedy. Only recently, the Tories knew how to fix this. It’s still not too late for them to do so again.