The Social Market Foundation said their findings showed that repeated changes in disability policy have failed to provide either sufficient financial security for disabled people or help for those that can and want to work.
The current system of support for disabled people is “broken”, it concluded.
The SMF, a cross-party think-tank, worked with the disability equality charity Scope on the report.
The report estimates that had the Government met the 2015 Conservative manifesto target of halving the disability employment gap, nearly 1 million more disabled people would be in work today, boosting Exchequer benefits by around £17 billion a year.
The report calls on the Government to urgently bring forward its Green Paper and cross-departmental national disability strategy with “reasonable expectations” of when and how reforms will be delivered.
Matthew Oakley, Senior Researcher at the Social Market Foundation, said: “The benefits system for disabled people is broken. It is simply unacceptable that more than four in ten people (42%) living in families that rely on disability benefits are forced to live in poverty.
“Successive governments have repeatedly failed disabled people, their families and communities for decades. The pandemic has underlined this failure and had a tragic impact on disabled people’s lives. Now is the time to think again.
“Not only is failing policy damaging the lives of disabled people – it also means that the UK is missing out on everything that disabled people can bring to the economy and society.
“Reforms have wasted billions of pounds of taxpayer money and failure to support more disabled people to fulfil their working ambitions has deprived the economy of as much as £50 billion of output every year.
“The Government needs to use its long-awaited Green Paper and cross-departmental disability strategy to commit to change.
“What we need is a benefits system that ensures disabled people are lifted out of poverty and delivers support in a dignified, fair and respectful manner. Delivering this will require significant changes; but our work shows that the foundations of a new system of support for disabled people can and must be delivered within this Parliament.
James Taylor, executive director of strategy, impact and social change at disability equality charity Scope, said: “Too many disabled people are in poverty and are being failed by our welfare system.
“The constant stress, uncertainty and distress it causes are symptoms of having to battle a system that should be there to support a decent standard of living, rather than one that penalises and treats disabled people unfairly.
“For a long time, too many disabled people have been trapped in poverty by a string of inflexible, bewildering and cruel rules and decisions that have focussed on trying to stop people claiming the very benefits that would help enable them to get out poverty in the first place. As a result, 1.5 million more disabled people are in poverty compared to 15 years ago.
“It doesn’t have to be this way. A welfare system should be there to provide support to disabled people in and out of work, to help offset the financial penalty of being disabled, and ultimately to improve lives.
“In the short term, we need urgent changes to make sure disabled people are getting the support they need. But the Government has a momentous opportunity with its forthcoming welfare green paper to set out a longer-term vision for how the welfare system can improve disabled people’s lives. If it simply tinkers at the edges, we will judge it to have failed.
“Scope and the SMF together cannot stress enough how important this moment is. The last year has seen thousands upon thousands of disabled people lose jobs, and many more are having to make impossible choices about how to make ends meet.
“We urge Government to challenge itself and put disabled people at the heart of its thinking into what a successful welfare system needs to look like, not just now but in the long term.
“We hope it takes up that challenge.”