Modest savings from targeting the "workshy"

Workshy scroungers have cost the taxpayer £28 billion over the past decade, the Daily Express splashed  on Monday. That sounds a lot – can it be true?
Not entirely. The report relates to sickness benefits, (now called Employment and Support Allowance) which is paid at a slightly higher rate than Jobseekers’ Allowance. The difference between the lower level of the benefit and Jobseekers’ Allowance is around £26 a week, quite enough to make it advantageous to be ruled unfit for work rather than simply unemployed.

                 Daily Express, August 16 2010. (Picture unrelated, I assume)

Since 2008 tests have been in place for new applicants and the latest figures show that from 27 October 2008 to 30 November 2009, 686,500 new claimants were assessed, and 270,400 (39 per cent) ruled fit for work. A further 252,800 had their claim closed before the assessment was complete, possibly because their disability was short-term, possibly (as the Express puts it) because they knew their claim would not succeed.
Taking into account the appeals process, which overturns 40 per cent of the original Fit for Work  assessments, the Department of Work and Pensions says that the process to the end of May 2010 had found 66 per cent of applicants fit for work, 10 per cent in the most disabled Support Group, and 24 per cent in the Work Related Activity Group, who are mandated to take part in a programme called Pathways to Work.
So 66 per cent of those new claimants are assessed are fit for work – either because the assessment found them to be so, or because they abandoned their claim. The Express has applied this percentage to the total bill for sickness benefit for the past decade - £42 billion – to work out that £28 billion went to “workshy scroungers”.
It’s a bit of a leap, for two reasons. First, work capability assessments (WCAs) have yet to begin on existing claimants, and when they do, in October, the proportion found fit for work may be different. It  is also inappropriate to apply to those already on sickness benefit the proportion of new claimants who withdraw their claim – by definition, those on benefits cannot have withdrawn their claims.
In fact, it’s impossible to calculate with any accuracy from the existing statistics the effect of the WCAs on the 2.6 million already on sickness benefit.  Let’s assume that 39 per cent of them are ruled fit for work (the same proportion as new claimants), they all appeal, and 40 per cent win their appeals. That would cut 608,400 people off sickness benefit – 23 per cent, not the 66 per cent figure used by the Express. The figure losing benefit may be higher if a higher proportion of people already on it withdraw their claims once faced with a WCA, but we don’t know this.
Or, to look at it another way, in just over a year of assessments for new applicants, 136,800 have been ruled to be entitled to some level of benefit – either the Support Group (40,100 so far) or the Work Related Activity Group (96,700). The period involved is 13 months, so that’s 126,000 a year, rounded to the nearest thousand.
Disability charities are already protesting the tests are too strict, and Employment Minister Chris Grayling has set up a scrutiny group to carry out a review. If there is any relaxation in the tests, the 126,000 figure will be exceeded.  
If that went on for ten years, the total deemed eligible would be at least 1.26 million, more than the number of existing claimants likely to be cut as a result of WCAs. This suggests that the bill for sickness benefits is likely to rise, not fall, over the next decade.  
A final note. Let’s assume, generously, that Mr Grayling gets a million people off sickness benefit - the number the last Government said were getting it improperly. If they are all on the lower level of sickness benefits and all move to Jobseekers’ Allowance (£26 a week less) the annual saving would be £1.35 billion a year, at current rates.
Ah, but they won’t. They’ll move into jobs, or at least that’s the hope. But if they do, it will most likely to at the expense of somebody else who is on Jobseekers’ Allowance, so the result will be the same. Only if overall employment rises will that not be the case.
There are savings to be made by reforming sickness benefits. But they are far smaller than they appear. Nobody’s about to save £28 billion, or anything like it. Even the Conservatives, before the election, were promising to save no more than £600 million a year by moving people on to Jobseekers’ Allowance.