People who come off long-term incapacity benefits and back into work could find themselves up to £1,200 worse off a year than staying signed off, an analysis of Britain’s sicknote crisis warns.
The Institute for Fiscal Studies (IFS) found that someone working part time for 16 hours a week or more on the National Living Wage (NLW) would see their income plunge dramatically as their handouts are cut off.
They would have to work at least 22 hours a week before their income returned to the level they received in handouts.
And their income would only increase by £2,200 a year if they started working a 35-hour week on the NLW, earning £20,900 a year.
In contrast a person Universal Credit could get a financial benefit of about £3,500 in yearly income if they work under 16 hours a week on the NLW, a level called ‘limited capability for work or work-related activities’ or LCWRA.
More than four out of five people claiming incapacity benefit have not worked for the past two years, according to analysis
But if they tip over this threshold they could be reassessed by the Department of Workforce and Pensions and lose part of their Universal Credit putting them at massive financial disadvantage for working.
Compared to what they would get in benefits this represents a potential loss of £5,000 per annum.
In summary, the IFS said this was colossal disincentive for benefit claimants on long term sick leave to seek work above this threshold and many, nervous about accidentally tipping over for any reason, may work even less.
It comes after it was revealed more than four out of five people claiming incapacity benefit haven’t worked for the past two years.
The IFS said the figures illustrated the challenge facing the Government as it aims to move more people back into work and boost growth.
‘The longer someone is out of work, the less likely they are to transition back into work,’ the report reads.
It came as separate official figures show the number of people off work due to long-term sickness has fallen slightly to 2.75million, the lowest level in nearly a year, although it remains close to record highs.
Britain has been suffering its longest-running sick note epidemic for a quarter of a century with the youngest and oldest workers driving the trend, recent analysis shows
The IFS said moving more incapacity benefit claimants back into work was an ‘understandable aim’ with number increasing by 28 per cent to 3.2million since 2019.
IFS figures show that just 5.1 per cent of incapacity benefit claimants were doing any work, while 82.9 per cent hadn’t worked in the past two years.
It also said that 83 per cent of the claimants were signed off with ‘the most severe level of incapacity’, meaning they are ‘likely to be a long way from re-entering the labour market’.
Eduin Latimer at the IFS said: ‘There are unlikely to be easy solutions to the rising share of the population out of work due to ill health.’
The news comes after a previous report found worklessness due to long-term sickness has soared six-fold in parts of Britain since pre-Covid.
In July, those languishing at home with an illness hit a high of 2.8million, up by around 700,000 before the pandemic rocked the country.
Spiralling rates of mental ill health has driven the ‘economic inactivity crisis’, which Labour has promised to tackle as part of its plans to give the economy a boost and save taxpayers billions on welfare hand-outs.
Shockingly, young people are now just as likely to be out of work because of long-term illness as people in their 40s, according to the Resolution Foundation.
MailOnline analysis of official statistics shows more than 14 per cent of the working age population of Dover are now estimated to be ‘economically inactive’ because of a long-term illness, or 9,700 people.
For comparison, the figure was nearly 2.5 per cent in 2019-20.
And earlier this year it was revealed that soaring workplace illness is costing UK firms an extra £30billion a year with days off sick doubling since 2018, a report reveals.
Employees now phone in sick an average of 6.7 days a year, which is up from 3.7 days six years ago.
This means the annual cost of staff absence has increased by £5 billion over this period, analysis by the Institute for Public Policy Research revealed.
However, the biggest cost to business comes from ‘presenteeism’, when Brits turn up to work despite being unwell and unable to give their best, the think tanks claims.
Its report says a typical employee now loses the equivalent of 44 days productivity a year due to working through sickness.
This is up from 35 days since 2018, with the additional slack days hitting profits by £25billion a year, researchers found.
IFS data also revealed a 150 per cent increase in new disability claims by the under 40s in the past four years – and a sharp rise in the number of benefit applications on mental health grounds.
The research highlighted how benefit claims are going up at a much faster rate in Britain than elsewhere – even though other comparable countries have also seen an increase in reported disability cases.
It comes after health secretary Wes Streeting revealed the Government wants to use fat-busting jabs like Ozempic to boost the economy and get unemployed obese Brits back to work.
Weight-related illness costs the economy £74billion a year, with people who are overweight at increased risk of heart disease, cancer and type 2 diabetes.
The controversial plan has the backing of Prime Minister Sir Keir Starmer who insisted it could help ease demands on the NHS and boost the economy.
This is despite dire warnings that some 3,000 Brits to fall ill so far this year after taking either Ozempic and Wegovy.
Defending the drugs, the PM told the BBC: ‘I think these drugs could be very important for our economy and for health.’
He added: ‘This drug will be very helpful to people who want to lose weight, need to lose weight, very important for the economy so people can get back into work.
‘Very important for the NHS because, as I’ve said time and again, yes, we need more money for our NHS, but we’ve got to think differently.
‘We’ve got to reduce the pressure on the NHS. So this will help in all of those areas.’
However NHS chiefs have privately warned the plan risks overwhelming an already stretched service.
