A surge in claimants for health-related benefits in England is caused by design flaws in the benefits system rather than worsening health or long waits for treatment, a committee of peers has said.
The House of Lords Economic Affairs Committee called on ministers to take urgent action to prevent the annual cost of incapacity and disability benefits from soaring from £64.7bn currently to a projected £100.7bn by 2029-30.
Its findings challenge assumptions that preceded the government's commitment to a review of the welfare system and highlight the pressures rising welfare bills are putting on spending on other public services.
In a letter to Work and Pensions Secretary Liz Kendall published on Monday, the committee said there was "no convincing evidence" that rises in benefit costs were due to worsening health or the NHS Caused by (NHS) waiting lists worsening.
"People who are out of work have an incentive to claim health-related benefits; once they receive them, there is neither incentive nor support to find and accept work," it warned.
Lord George Bridges, chairman of the committee, said: "This is a huge and growing social problem. The (government's) timetable does not show the urgency required."
He added that while ministers had promised to publish plans for welfare reform in the spring, it was too late to include any savings in this year's spending review.
The committee's diagnosis of the problem differs from Kendall's narrative in the autumn when he introduced reforms to support jobseekers, billed as a "Get Britain to Work" plan.
She described a post-pandemic health crisis that has left Britain the only G7 country to see a shrinking workforce, with 2.8 million people economically inactive for health-related reasons.
Peers said problems with official labor market data were clouding the situation, and it was unclear whether overall labor market inactivity was higher than in 2019.
However, the number of working-age people receiving health-related benefits has increased by 1.2 million since the start of 2020, and now totals 3.7 million.
The committee said this reflected a strong incentive for people to claim incapacity support rather than unemployment benefits because of the "clear financial difference" in the help on offer.
The committee said people assessed as unfit for work or unfit to find work could double their income and escape strict conditions by switching from job seekers allowance to incapacity benefit. The report adds that they run the risk of significant loss of income if they return to an unsuccessful job.
The number of new claims for incapacity benefits is not enough to explain the increase in recipients. This is largely because after re-evaluation, a higher proportion of claims are approved and fewer people drop out or leave the system.
The committee said the process for assessing applications needed to be more rigorous, but the government also needed to provide more support for people to return to work and ensure they did not lose out by taking a job.
Bridges said reform of unemployment and incapacity benefits was needed because of the interaction between the two, which could loosen unemployment benefit standards while tightening sickness benefits.
Some of the committee's recommendations are similar to those of former work and pensions secretary Mel Stride, but they have not yet been implemented, partly because of legal challenges to the consultation process.
A government spokesman said it was "determined to get Britain back to work" and had set out initial measures to boost employment and would consult on changes to health and disability benefits in the spring.
They added: "We have made clear that the current welfare system needs reform so it is fairer for taxpayers and people get the support they need."