Downing Street has initiated discussions with Labour MPs regarding a potential “guarantee” for individuals transitioning from disability benefits to employment. This initiative aims to ensure that these individuals are not financially disadvantaged if their attempts to secure work do not succeed. This guarantee, which one MP likened to a “try before you buy” approach, seeks to address growing discontent among backbenchers regarding a substantial welfare cuts package that the Government is planning to unveil next week.
The Government is facing mounting pressure to control the benefits expenditure, as a forecast from the Office for Budget Responsibility, expected later this month, is likely to indicate that the “fiscal headroom” that Chancellor Rachel Reeves established during last year’s Budget has been significantly diminished. Recent official data showing a contraction in the UK economy during January has only intensified the scrutiny on Reeves.
In the forthcoming package of reforms, Work and Pensions Secretary Liz Kendall is anticipated to tighten the eligibility criteria for the personal independence payment (PIP) disability benefit and implement a freeze on its value for one year. Additionally, universal credit is set to undergo significant changes to encourage greater employment engagement.
Cabinet Alarm
However, these proposed measures have raised alarms among some Labour backbenchers and even within the Cabinet. According to the Financial Times, Energy Secretary Ed Miliband and Leader of the Commons Lucy Powell have expressed their concerns during a recent Cabinet meeting. One minister confided to The i Paper: “I would personally be very apprehensive about any adjustments to PIP. This truly worries me.” Another MP, who identified as a “loyal backbencher,” remarked: “The freeze on PIP is particularly troubling.”
To assuage the concerns among wavering members, No 10 is reportedly working on a safety net for those on disability benefits who venture into the workforce. One Labour MP noted: “We are hearing indications from discussions with ministers and No 10 that a compromise may be forthcoming, providing assurance for those fearful of losing their disability benefits if they attempt to return to work.”
Try Before You Buy
“There is talk of a guarantee that allows individuals to ‘try before you buy’ when entering the workforce,” the MP explained. Under such a guarantee, should an individual fail to secure employment, “your benefits won’t be cut if you revert back,” the MP elaborated. Several Labour MPs corroborated that the anxiety of losing eligibility for disability benefits remains a significant obstacle preventing many from pursuing employment opportunities.
One Labour backbencher shared: “I have encountered young individuals who have been long-term unemployed, striving to enter the workforce. They have invested years in securing a benefits package and are apprehensive about losing that support if their attempts at employment do not succeed. Thus, a crucial aspect for me is how we can ensure a security guarantee allowing them to explore work opportunities without jeopardizing their existing benefits.”
Another backbencher added that individuals receiving incapacity benefits are “fearful of losing their financial support or their eligibility for higher rates if they attempt work and it doesn’t pan out.” “We recognize that this fear constitutes a major barrier,” they emphasized.
This week, Labour MPs were invited to Downing Street for briefings conducted by the No 10 policy unit, aimed at persuading them of the necessity for welfare reform. One backbencher remarked that the briefing highlighted “the numerous flaws in the system,” including “incentives that lead in the wrong direction,” alongside the “brutal reality” that, if left unaddressed, the UK is projected to expend £100 billion on health and disability benefits by the end of the Parliament.
“Regardless of the specific reforms proposed, there will always be individuals who are dissatisfied with certain elements; however, there seems to be a fairly widespread, if not universal, consensus among Labour MPs that this system is broken, having been inherited from the previous government, and it requires change,” the MP affirmed.
Wider Cuts
The welfare reforms are part of a broader strategy of spending cuts designed to assist the Chancellor in adhering to her self-imposed fiscal rules, which restrict borrowing. Deputy Prime Minister and Housing Secretary Angela Rayner, Home Secretary Yvette Cooper, and Justice Secretary Shabana Mahmood are all believed to have voiced their concerns regarding cuts affecting their departments. All three oversee “unprotected” departments that are facing potential reductions in funding.
A Government source stated that it is natural for ministers to be “advocating for their departments.” A second source indicated that there was collective support for the fiscal rules expressed within the Cabinet, with some ministers merely highlighting the “tough choices” that such policies would necessitate.
When asked about the unease within the Cabinet and among Labour ranks regarding the welfare proposals, a No 10 spokesperson refrained from divulging details of Cabinet discussions. The spokesperson added: “If left unchanged, the system we’ve inherited would consume more taxpayer funds and leave more individuals trapped in a cycle of unemployment and inactivity. This is detrimental not only to the economy but also to individuals, which is why this Government will soon unveil plans to overhaul the health and disability benefits system to support those who are able to work while safeguarding those who cannot, paving a more sustainable path for welfare spending to foster growth.”
The Department for Work and Pensions has been contacted for further comments.
