Lords committee calls for urgent reform of health-related benefits

The cross-party House of Lords Economic Affairs Committee published the findings of its inquiry into the relationship between the welfare system and long-term sickness on 20 January 2025, calling for urgent reform of health-related benefits¹. The committee set out its conclusions in a letter to the Secretary of State for Work and Pensions, Liz Kendall, the same day¹.

Around 3.7 million people of working age receive health-related benefits, the committee said, which is 1.2 million more than in February 2020¹. It added that spending on incapacity and disability benefits is now almost £65 billion, more than defence, and that the figure is set to rise¹. The committee also estimated that if 400,000 people who are out of work due to ill health were able to find work, this could save around £10 billion through higher tax revenue and lower benefit spending¹.

The committee's recommendations cover the fit note, the Work Capability Assessment (WCA) and the conditions attached to claiming. It said the fit note should be overhauled, with GPs encouraged or enabled to refer an individual to an occupational health professional, and that people signed off work for more than a month should undergo additional or ongoing assessments¹. It described the WCA as not rigorous enough and susceptible to error, and said the assessment should be face-to-face and seek to establish what work an individual can do rather than looking to corroborate what they cannot do¹. It also said the lower level of conditionality attached to health-related benefits creates an incentive to apply for them¹.

On returning to work, the committee said the Government needs to review the conditions for those receiving health-related benefits so that people are not at risk of immediately losing those benefits if they return to work, or immediately faced with having to reapply if a job proves unsuitable¹. It recommended that, just as unemployed people have a work coach, so should those on incapacity benefit for the first two years of their period on benefits¹.

The committee said it received no convincing evidence to support the claim that the Government's targeting of NHS waiting lists will have a material impact on the number of sickness-related benefit claims, and that the Department for Work and Pensions and the NHS must share and analyse health and benefits data to establish whether targeted intervention to cut waiting lists could reduce labour market inactivity¹.

Why it matters for households

The figures describe a system that has grown by 1.2 million working-age claimants since February 2020, with spending on incapacity and disability benefits at almost £65 billion¹. The committee's proposals would change how claims are assessed and how they interact with work. Under its recommendations, the fit note process would be overhauled, with referrals to occupational health professionals and further assessments for anyone signed off for more than a month¹. The WCA would move to face-to-face assessment focused on what work a person can do¹. Claimants on incapacity benefit would have a work coach for their first two years on benefits¹. The committee also wants the conditions reviewed so that returning to work does not mean immediately losing benefits, and an unsuitable job does not mean immediately having to reapply¹. No implementation dates for any of these measures are given in the committee's announcement¹.

What happens next

The committee has written to the Secretary of State for Work and Pensions setting out its conclusions and has urged the Government to accelerate its plans to reform health-related benefits¹. It said that without a clear plan of action, growing welfare spending will remain a significant challenge for the forthcoming Spending Review¹. The Government has not yet responded to the committee's recommendations, and no timetable for reform has been reported¹.

For background on how health-related and other benefits work, see the site's guide to benefits in the UK and the benefits hub.