Two million people 'not entitled to sickness benefit', says top government advisor

Almost two million incapacity benefit claimants should not be getting the money, the Government's welfare adviser warns today.

David Freud, an investment banker, claims the tests used to award disability aid worth £81.35 a week are "ludicrous" and are costing the taxpayer billions of pounds each year.

And he attacked the system as one where – compared to unemployment benefit – "you get more money and you don't get hassled, you can sit there for the rest of your life".

He added: "The system we have at the moment sends 2.64million people into a form of economic house arrest and encourages them to stay at home and watch daytime TV. We're doing nothing for these people."

Of the 2.64million incapacity claimants, who cost the taxpayer more than £12billion a year, Mr Freud estimated that fewer than one third are truly entitled to aid, while between 5 and 7 per cent of all claims are fraudulent.

Up to 185,000 are actively defrauding the system by working illegally while receiving the benefit, he said.

He suggestedthe "real figure" of those unable to work because of illness or disability was closer to 700,000.

"When the whole rot started in the 1980s we had 700,000," he said.

"I suspect that's much closer to the real figure than the one we've got now."

Since the 1980s, there have been claims that successive governments have allowed the incapacity benefit total to grow inorder to keep down the more politically sensitive count of the unemployed.

Mr Freud said of the medical tests needed to claim the handout: "If you want a recipe for getting people on to incapacity benefit we've got it.

"It's ludicrous that the disability tests are done by people's own GPs – they've got a classic conflict of interest and they're frightened of legal action.

He went on: "The people who are really disabled are often theones who are really desperate to work but there are then a load of people who don't want to be made to work regardless."

Mr Freud's report into welfareto- work schemes heavily influenced reforms set out by James Purnell, Work and Pensions Secretary. on Monday.

Under the plans, private firms could be paid "bounties" to help get claimants off incapacity benefit and into jobs.

Lone parents would also be encouraged to go back to work as soon as their children started school.

In an interview with The Daily Telegraph, Mr Freud said he believed Gordon Brown was ready to press ahead with the biggest shake-up of the welfare state for 50 years.

Mr Purnell would tackle the problem with "much more single minded ferocity" than his predecessor Peter Hain, who quit last week, he added.

Recent figures show more than 500,000 people under 35 are now claiming incapacity benefit.

Around 40 per cent are claiming for mental health problems, 250,000 for stress-related illness, while others cite alcoholism, obesity or eating disorders.

Shadow work and pensions secretary Chris Grayling said: "It is time to ask every claimant of Incapacity Benefit to go through a proper independent medical check.

"Those fit to work should have their Incapacity Benefit withdrawn immediately and those with the potential to work should get proper support to help them back into employment."

Liberal Democrat work and pensions spokesman Danny Alexander said: "David Freud's analysis is a stark condemnation of 10 years of Labour failure on welfare reform.

"Millions of people on Incapacity Benefit want to work and would be doing so today if the government had put the right support in place.

"Getting the private and voluntary sector more involved is the right approach, but progress is painfully slow. If the right help is there, people should have a responsibility to access it.

"Britain's welfare system is the most complex in the world, which is why errors and fraud are too high. Making the system much simpler, as we have proposed, is crucial to making sure benefits are going to the right people and that they are getting the right help to find a job."