Working-Age Social Security Expenditure in the UK
Liz Kendall told the IPPR that, “Unless we get social security spending on a more sustainable footing, and unless we ensure public money is focused on those with the greatest need and is spent in ways that have the best chance of improving people’s lives, the risk is the welfare state won’t be there for people who really need it in future.”(1) Rachel Reeves said that “welfare costs” have “spiralled out of control”.(2) Keir Starmer said that the social security system is “unsustainable, indefensible and unfair.”(3)
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Instead, spending on working-age social security is at normal levels as a percentage of GDP, and is not increasing. It is therefore affordable add sustainable. Spending on disability and sickness benefits is rising within that, which means that support for people who are fit for work is falling, but this means that the social security system is doing what Kendall wants – focusing money on those with greatest need.
Furthermore, there are strong a priori reasons to expect spending on working-age social security to be around 5% of GDP, and the fact that it is still below 5% of GDP may instead be taken as an indicator that social security rates are not high enough, and/or social security is not going to enough people. There are also strong a priori reasons to expect the spending on sickness and disability to have gone up.
Spending on working-age social security
UK spending over time
Spending on working-age social security has varied between 4% and 5% of GDP since the early 1990s. Higher spending corresponds to economic downturns, such as in the early 1990s, after the 2007/08 financial crisis, and in the early months of Covid. It would also be reasonable to expect a slight trend upwards over time. An ageing population naturally has a higher proportion of older working-age people, and these people are more likely to be unable to work, and therefore receive working-age sickness and disability benefits. Despite this, expenditure is forecasted to still be below 5% of GDP at the end of the decade, and is therefore neither unaffordable nor unsustainable.
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The graph on UK working-age social security expenditure shows that spending was falling after the 2008/08 financial crisis, until Covid. Corresponding to this, employment rates were at an all-time high of 76.2%, and economic inactivity at an all-time low of just over 20%. There were no particular reasons to panic at that time, as the high employment and low inactivity generally meant that there was room within the social security system to be generous to people who were sick or disabled. There was also room for economic inactivity generally to rise, and employment to fall, without this needing to be seen as historically alarming or something that required knee-jerk cuts to social security in response.
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A number of factors mean that we should expect spending on social security to currently be at the top end of the normal range of 4-5% of GDP. These factors mean that, far from being alarmed, we should be happy that social security is meeting its purpose: providing income-replacement to people who cannot work or cannot find work. Social security expenditure will naturally fall as the factors driving the need for it fall; conversely, to artificially constrain social security to less than the amount of need is to stop social security from doing what it is supposed to be doing, whilst letting government off the hook for ensuring an economy and society which does not lead to the current level of need.
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First, and most importantly, the rise in the state pension age means that “625,000 people are claiming benefits in August 2023 who would not have been counted as ‘working-age’ back in 2010.”(4) This represents 8% of working-age social security recipients. These people probably account for more than 8% of working-age social security expenditure because they are more likely to be sick and disabled, and therefore receiving sickness and disability benefits, which cost more than basic Universal Credit for jobseekers. However, assuming that these people only account for 8% of spending, then social security for a consistent age group (18-59/64) is probably only around 4.5% of GDP,(5) which is not at all high.
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Secondly, the economy has never fully recovered from the 2007/08 financial crisis, and then was hit again during Covid, and a third time with energy prices. Social security expenditure naturally goes up during economically challenging times, as is right and proper. A struggling economy means both that social security receipt has gone up, and that GDP is gone down, compared to a thriving economy. Both of these factors contribute to social security expenditure being high as a proportion of GDP. It also means that an alterative route for lowering social security expenditure as a proportion of GDP is to focus on measures that grow the economy, even if social security expenditure didn’t also fall because of the growing economy.
Comparisons with other countries
Using OECD figures, the UK has normal levels of spending on non-pensioner cash benefits. In 2019, the OECD average was 3.6% of GDP, and the UK spending was 3.7%. Within this, the UK’s spending on incapacity-related benefits was unusually low, at 1.3% of GDP compared to an OECD average of 1.6%. It would therefore be reasonable to expect UK spending on incapacity to increase within non-pensioner cash benefits, in order to catch up to the OECD norm, assuming that the OECD norm reflects more accurately the actual level of incapacity within a population. The UK has a notoriously harsh sickness benefit system, so it would be reasonable to expect that there are people in the UK who are unfit for work but denied access to sickness benefits.
It is noteworthy that the countries spending less than the UK are predominantly poorer countries such as Portugal, Slovak Republic, Hungary, Greece, Chile, Costa Rica, Turkey, Columbia, and Mexico. Some poorer countries even manage to spend more than the UK, such as, Slovenia, Lithuania, Latvia, and Estonia.
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The UK has unusually high inequality. The poorest households in Slovenia and Malta are not as poor as the poorest household in the UK, whilst the poorest regions of countries like Germany and Austria are still substantially richer than the average for the OECD. The UK also spends relatively little on social security as a percentage of median wage, despite being a low-wage country, which means that our absolute spending is also low. The UK is therefore lagging very far behind comparable countries in terms of providing enough support to people in poverty.
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Most of the richer OECD countries spend more than the UK on cash benefits, including Norway, Denmark, Spain, and the Netherlands. This is despite the fact that Nordic countries typically provide services in-kind over cash benefits when supporting disabled people with extra costs; and the Netherlands and Spain “place heavy obligations on employers to support employees who fall ill or meet the associated welfare costs”.(6) We could therefore reasonably expect these countries to spend less on non-pensioner case benefits, instead of more. Yet they still spend more than the UK on non-pensioner cash benefits. If these countries can spend more on non-pensioner case benefits as a percentage of GDP, then it is not unreasonable to expect the UK to do so as well.
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Looking at wider welfare spending, which includes in-kind support, the UK is still not a high spender.(7) The UK is almost the same as the OECD average, at 22.1% and 21.98% of GDP respectively. Again, it is typically the poorer countries that spend less, and richer countries that spend more, than the UK and the OECD average. Relative to more comparable countries, then, the UK spends unusually little on welfare. There is therefore room for the UK to spend more without this being unaffordable or unsustainable. All countries are spending more on social expenditure over time, so it is not unusual or unexpected for the UK spending to also increase.(8) It is not a crisis.
Spending on sickness and disability
As well as reasons to expect social security expenditure to have risen, there are good reasons to expect spending on sickness and disability to have increased within that.
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There is evidence that the UK working-age population has become sicker in recent years. After controlling for age and sex, morbidity has remained broadly stable or is slightly worsening (although different conditions show different trends within that), which means that the total morbidity has increased, because the working-age population is older.(9) In terms of mental illness, there has been an increase in severe mental illness (after controlling for age and sex), whilst mild or moderate symptoms appear to track more with the wider economy. There may also have been some increase in musculoskeletal morbidity; again, this is after controlling for age and sex, which means that the actual increase is higher. Cardiovascular health has largely improved, but biomarkers for inflammation have increased even after controlling for age and sex.
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Furthermore, rises in illness are not restricted to people who are unemployed, as we would expect if it were simply that unemployed people would prefer to be labelled as too sick to work. Rates of mental illness, for example, have seen a proportionately larger rise amongst people in work than amongst people out of work.(10) These trends in health use data up to 2014. Since then, the impacts of austerity, Covid, and the cost-of-living crisis mean that we have good a priori reasons to believe that the health of the working-age population has got worse.
Spending on sickness benefit
The world of work is changing in a way that is not compatible with chronic illness. In previous decades, many people who were approaching the end of their working life could be kept on in ‘light duties’. These jobs do not exist to the same extent anymore. Modern workplaces rely on ‘just in time’ practices, which are not flexible to people’s moment-to-moment needs;(11) work is more intense, placing more demands on people’s resources whilst they are at work;(12) and the UK has a relatively high proportion of ‘toxic’ ‘high strain’ jobs which combine low autonomy with high demand.(13) These changes mean both that it is harder for people with chronic illness to meet the demands of work, and that work itself makes people sick.
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Additionally, the world of unemployment benefits has also changed in a way that is less compatible with chronic illness. The level of benefits paid has fallen behind both prices and median wage, whilst the demands placed on the unemployed person – to effectively ‘work’ full-time at the job of searching for work – have increased. Indeed, the modern jobseeker’s benefit arguably mirrors many of the worst aspects of the worst forms of work – high intensity with low autonomy – whilst adding in destitution and the removal of any opportunity for a meaningful contribution or purpose in society.
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At the margins, where a person can work only part-time, this may have pushed more people to put in a claim for sickness benefit, when a more generous and less onerous unemployment benefit may have been adequate for these people. However, these people don’t get awarded sickness benefit just because unemployment benefit is too harsh; they still have to meet the set criteria. The result is that they may instead be left in a wasteland, where they are not well enough for unemployment benefit, but not sick enough for sickness benefit. Here, or struggling to remain on unemployment benefit, the poverty and demands of unemployment benefit may drive physical and mental illness, which ultimately results in a person becoming sick enough to qualify for sickness benefit.
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There are therefore good reasons to expect the receipt of sickness benefits to have increased within the social security system, and for there to have been a shift away from unemployment benefits to sickness benefits. Instead, the highest receipt rate for sickness benefits was back in 2002/03, under Incapacity Benefit, at 7.6% of the working-age population. It would be natural to expect the rate of sickness benefit receipt to increase, as the working-age population becomes older, especially with the rising state pension age. Instead, receipt rate fell with the introduction of the Work Capability Assessment, which is a stricter test than the preceding Personal Capability Assessment. After the initial drop-off, receipt rate began to rise again. At 7.0% in 2023/24, receipt rate still remains below the historical levels, and it is entirely plausible that a ‘correct’ receipt rate is above 8%, given the age distribution of the working-age population and the impact of Covid and austerity. In this context, a forecast that sickness benefit receipt will reach 7.9% by the end of the decade does not appear to be a matter to be alarmed about.
Spending on disability benefit
The same issues as have been mentioned already also apply to PIP and DLA caseloads and forecasts. The state pension age is rising, the working-age population is getting older, and Covid and austerity have both impacted health. It is reasonable to expect the receipt rate of extra-costs benefits to increase over time. And this is what we see. But in particular, we see that the rate of increase of receipt was slowing down before Covid, and we may therefore have expected the caseload to stabilise. The graph below is only approximate, because it is based on the 16-64 population rather than 16 to state pension age. It therefore underestimates DLA and PIP receipt rates for the early years, when the working-age population was smaller than the 16-64 population; and it overestimates receipt rates for recent years, when the working-age population is slightly larger than the 16-64 year olds.
The caseload has clearly risen faster since Covid than the previous trend, and the projection assumes that this will continue to some extent into the future. Nevertheless, the caseload is still showing signs of levelling off, and not inexorably rising. There is no crisis here; there is simply a higher natural caseload since Covid and the cost-of-living crisis.
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This interpretation is supported by research conducted by NEF, which found that disability prevalence alone explains 71% of the PIP caseload in an area, but including deprivation explains 94% of the caseload.(14) People who were eligible for PIP were not necessarily claiming, until financial necessity forced it. The cost-of-living crisis and cuts to other parts of the social security system therefore make it natural that the claim rate for PIP will increase. The award rate of PIP hasn’t changed, which suggests that the additional people putting in claims are similar in profile to previous applicants.
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It is plausible that there has been a one-off increase in PIP claims due to Covid-related illness; delays in healthcare since Covid leading to increased disability; and the cost of living meaning that people who were already eligible for, but not previously claiming, PIP put in a new claim out of financial necessity. These factors may become increasingly less important over time, although the current government’s approach to healthcare and social security may in fact result in more disability and more disabled people needing to claim PIP out of financial necessity. Regardless, the evidence is that PIP is not out-of-control, but rather doing what social security is supposed to do – respond to adverse circumstances, such as a recession or global pandemic, by protecting people’s incomes.
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The award rate of PIP has not changed, which suggests that the type of people applying for PIP has not changed. A lower award rate would indicate that people are applying with less severe conditions, which would be plausible given that people are likely to be applying out of financial necessity. A stable award rate suggests that, instead of less-disabled people applying out of hope, there were many people previously not claiming PIP who were nevertheless eligible.
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1. Welfare reform: Speech to the IPPR by Work and Pensions Secretary (21/05/2025)
2. Reeves, R as quoted by Sabey, R (08/08/2024) in “Rachel Reeves vows to get jobless Brits back into work as £306bn welfare bill spirals ‘out of control’,” The Sun
https://www.thesun.co.uk/news/29751105/rachel-reeves-jobless-brits-welfare-bill/
3. Starmer, K as quoted in Watson, I (14/03/2025) “Rachel Reeves insists changes to welfare needed,” The BBC https://www.bbc.co.uk/news/articles/cwygx918vneo
4. Geiger, B (05/09/2024) Is welfare spending out of control? Inequalities Substack
https://inequalities.substack.com/p/is-welfare-spending-out-of-control
5. Geiger, B (05/09/2024)
6. https://obr.uk/box/international-comparisons-of-health-related-welfare-spending-and-generosity/
7. Data taken from OECD Social Spending
https://www.oecd.org/en/data/indicators/social-spending.html?oecdcontrol-00b22b2429-var3=2022
8. Public social expenditure as a share of GDP: Historical data – Lindert, OECD
https://ourworldindata.org/grapher/social-spending-oecd-longrun
9. Geiger, B (2020) Has working-age morbidity been declining? Changes over time in survey measures of general health, chronic diseases, symptoms and biomarkers in England 1994–2014. BMJ Open, 10:3 e032378. doi:10.1136/bmjopen-2019-032378
10. Geiger, B (2024) New data on rising disability and mental ill-health, Inequalities Substack https://inequalities.substack.com/p/new-data-on-rising-disability-and
11. Gregg, P (2024) Employment, economic inactivity and incapacity: past lessons and implications for future policy. The Health Foundation
See also Hale, C, Hoque, K and Geiger, B (2025) The 39 Steps: Realising the potential of Flex Plus working for disability inclusion. ESRC Centre for Society and Mental Health
12. Gregg, P (2024)
Geiger, B (2014) Fit-for-Work – or Work Fit for Disabled People? The Role of Changing Job Demands and Control in Incapacity Claims. Journal of Social Policy 3(2):289-310. doi:10.1017/S0047279413000810
13. Geiger, B (2014)
The Marmot Review (2010) Fair Society, Healthy Lives
14. Mosley, M (06/05/2025) What’s behind the rise in disability benefit claims. New Economics Foundation
https://neweconomics.org/2025/05/whats-behind-the-rise-in-disability-benefit-claims