Disability benefits such as PIP are actually good for the economy, economists say

Disability benefits are more positive for the economy than costly, economists have found, as the government pledges to slash the welfare bill to save money.

Pro Bono Economics researchers found that disability benefits improve people’s wellbeing and health.

Treasury guidance attaches a monetary value to wellbeing, and the economic value of claiming disability benefits is estimated to be around £12,300 per person.

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Around 3.5 million people claim the personal independence payment (PIP), meaning a total of £42bn in annual economic benefits.

That far exceeds the annual cost of administering these benefits, which is approximately £28bn.

In other words, for every £1 spent on disability benefit support, there is an economic benefit in the improved wellbeing of recipients which could be valued at £1.48.

Matt Whittaker, chief executive at Pro Bono Economics, said: “Disability benefits provide crucial financial support for millions of people, helping to offset the extra living costs that many disabled people face in their day-to-day lives.

“But we now know that they do so much more: boosting the mental wellbeing and life satisfaction of recipients to a level well beyond the cash cost of delivery. 

“Reforms to simplify the claims process would make this support even more effective, by improving the experience for existing claimants and removing barriers for many more who could benefit.”

Labour has committed to cutting the welfare bill and ensuring that more disabled people are in work. Keir Starmer said his government will “get to grips with the bulging benefits bill blighting our society”.

Experts warn that this could have the adverse impact of worsening claimants’ mental and physical health, pushing people further away from employment and increasing pressure on health services.

Big Issue has reported extensively on the difficulties of navigating the disability benefits system and the impact this is having on people’s health.

For example, a woman had a stroke and lost three stone as a result of her disability benefits being stopped, and others have said the system has led to suicidal feelings.

Pro Bono Economics’ analysis, carried out in partnership with charity Z2K, has found disability benefits enable people to engage in social activities, which helps combat loneliness.

This is crucial as disabled people were more than four times more likely to report feelings of loneliness “often or always” (15.1%) compared to non-disabled people (3.6%) in 2021.

Whittaker said: “Fortunately for the government, charities like Z2K are actively supporting disabled people to navigate the benefit system. Working in partnership with the social sector, government has a real opportunity to improve the system and make life better for millions of disabled people.”

The positive effects of financial security, increased independence, better health and social inclusion could contribute to a reduction in psychological distress and improved life satisfaction.

Ayla Ozmen, director of policy and campaigns at Z2K, said: “These findings show that the narrow focus on the rising cost of disability benefits misses the bigger picture. Our report reveals that disability benefits actually provide a boost to the economy: spending on disability benefits should be seen not as a drain on public finances but as an investment in economic growth.

“Instead of focusing on how to make short-term savings by reducing financial support for disabled people, the government needs to recognise the wider economic gains of disability benefits and instead concentrate on ensuring support is available to everyone who needs it.”

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