The benefits system is ill-equipped to deal with surging long-term sickness levels, as the number of people signed off without having to look for work hits 2.3 million.
The warning from the Resolution Foundation highlights the challenges facing the next government as Universal Credit begins a full roll-out to seven million families.
The number of benefit claimants out of work from ill health has nearly doubled since Universal Credit was introduced in 2013 to 2.3 million, according to the think tank.
While health-related inactivity is near a record high, the unemployment rate has plunged from 8.5pc in 2011 to only 3.8pc last year.
Meanwhile, there are 35,000 couples with children in Britain where one or both parents are out of work.
The benefits system will need to change to reflect this, the think tank said.
“Whoever wins the election will be governing a ‘Universal Credit Britain’, as the final stage of what has been the biggest benefit reform in a generation is due to end with a system covering seven million families by 2029,” the report said.
The Government has recently announced changes to Universal Credit designed to encourage people with ill-health to seek work. This includes assessing whether someone is able to carry out work from home before signing them off as sick.
The Resolution Foundation said the next government would need to build on these reforms, while recognising that the benefit could not by itself tackle growing sickness problems.
Alex Clegg, from the foundation, said: “Universal Credit was designed to address unemployment – to encourage people who can work through incentives and increased conditionality such as stricter rules and sanctions.
“None of that applies if the system deems you unable to work or having limited capability to work. You don’t have that kind of conditionality so you fall outside of what Universal Credit was designed to do.”
More than a third of the benefit caseload is for people who are not expected to work at all as they are deemed too unwell.
The warning comes as a rise in poor mental health and musculoskeletal problems has pushed up the number of people too unwell to work since the pandemic.
The Office for National Statistics estimates there are about 2.7 million people who are not in work or looking for a job because of health problems. This is about 600,000 more than before Covid.
The think tank said that while the Government has announced some reforms to the system, the benefits system will struggle to meet the challenge of rising inactivity from sickness.
Mr Clegg said: “We cannot expect Universal Credit on its own to solve those problems.”
He added: “Compared to the old system, Universal Credit offers greater support for renters and stronger incentives to enter work. But its original design did not anticipate there being over two million claimants with poor health or disabilities.
“Alongside efforts from the NHS, education, and labour market policy to address the drivers of ill-health, Universal Credit will need to change to tackle Britain’s new challenge of long-term sickness.”
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