The general public might be forgiven for being somewhat anxious about the forthcoming budget, given the months of talk of ‘black holes’ and hard choices.
But new research from the Disability Policy Centre shows that not all reforms to drive economic growth must be framed as potential sacrifices or cuts: there are some areas where reform fosters productivity and nurtures society all at once, and disability employment might be one of them.
Our new research projects a £20bn rise in government revenue over the course of the Parliament (by 2029) if disabled people and carers who want to work are helped back into employment.
The report proposes three low-cost reforms which could unlock the economic potential of disabled people and carers by helping them back into work, something we’re calling our ‘Non-Friction Jobs Package’.
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The research also shines a light on the existing annual £38bn deficit the Treasury is already experiencing failing to close the employment gap for disabled people and carers.
This consists of a £25 bn loss from disabled and long-term sick people who are out-of-work, and a £13 bn loss from carers each year, made up of lost tax revenues and welfare spending.
Of course, the fiscal ‘black hole’ has itself been highly contested as has its real size, but regardless, this annual loss currently being experienced by the Treasury is positively supermassive in comparison.
But it shouldn’t be this way, as we have tried, tested and costed reforms that can be rolled out over the coming months.
And what’s more, these reforms wouldn’t represent a ‘difficult choice’, but an unlocking of the potential of thousands of disabled people and carers whose career prospects are currently severely capped by the limits our jobs market and welfare system is putting on them.
We think our Non-Friction Jobs Package, which consists of three main policy ideas, can make employment more accommodating both for long-term sick and disabled people, as well as prospective and current employers.
Firstly, we believe there’s an opportunity to reform national insurance by creating new incentives to employers. Running from 2025 to 2027, this would work by offering a 50% deduction in Year 1 and a 100% deduction in Year 2 in employer NI contributions for businesses hiring people who have been out of work for at least 6-8 months.
We might expect relatively low uptake due to existing skill gaps, but we estimate that if 15% of the 700,000 – 1 million who are disabled or long-term sick and want a job are able to secure part-time or full-time roles during this period, the scheme could cost £0.5bn annually.
Secondly, the Government should consider ‘super-deducting’ occupational health to the tune of a 110% tax relief on occupational health services for two years. Evidence shows this would drive investment into workers’ health and improve uptake in the sector by creating a strong incentive for employers to provide reasonable adjustments.
Finally, we should roll out an £800m ‘Social Outcomes Fund’ to improve job searching and help up to 100,000 into work. Current approaches provide no guarantees, so instead we propose that social impact investors provide upfront funding and only receive a return if more people are supported into long-term work.
This would transform the current system at job centres, which offer limited incentives to assist people with complex disabilities.
The research projects these policies would result in a net cost for the Exchequer for the first two years (2025-26) before revenue starts to accrue in 2027 (+£10.7bn), leading to a cumulative gain of £20bn by 2029.
Our research shows that unpaid carers who provide care over the 20 hour a week limit, often are forced out of their paid employment, or make sacrifices that impact their own health. Carers, on average, face a sharper drop off when they leave the workforce. Disabled people, unfortunately, are often held back in their earning potential throughout their lives.
What’s more, health and social care is the sector where most of those who are long-term sick have worked (18%), suggesting a potential additional boost to the UK’s health workforce at a time of critical need.
Overall, our new report makes clear that helping more disabled people and carers who can work and want to work into jobs they love, can be mutually beneficial for this government’s economic growth mission.
And beyond growth, helping more disabled people and carers stay in the workforce would ensure that we all have the freedom to live the life that we choose.
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