A significant transformation of the welfare system is anticipated this spring as the Government aims to implement benefit spending cuts of up to £5 billion. Work and Pensions Minister Liz Kendall has committed to overhauling what she describes as a “broken benefits system,” focusing on aiding individuals in their return to the workforce. She remarked earlier this month, “Individuals claiming health and disability benefits have been pigeonholed by the system as ‘unable to work’ and excluded from job opportunities, despite their urgent pleas for support.” Her goal is to “assist disabled individuals and those with long-term health conditions in securing employment, reduce the benefits expenditure, and stimulate economic growth.”
According to the House of Lords Economic Affairs Committee, approximately 3.7 million working-age individuals rely on health-related benefits, with spending on incapacity and disability benefits, nearing £65 billion, surpassing the budget allocated for defense. Lord Bridges of Headley, chair of the committee, stated, “The current health benefits system is financially untenable, squanders human potential, and, as noted by the Employment Minister, ‘fails to benefit anyone.’” He emphasized, “In light of the pressures on the nation’s finances, addressing this issue must be a priority for the Government.”
Reforms concerning the health and disability benefit system are set to be revealed in a Green Paper this spring, with modifications following consultations both within Parliament and with the public. Sir Stephen Timms, Minister for Social Security and Disabilities, confirmed that the Green Paper will be published alongside a public consultation on the proposals prior to Chancellor Rachel Reeves delivering the Spring Statement on Wednesday, March 26.
A crackdown on benefit fraud is also planned under the Public Authorities (Fraud, Error & Recovery) Bill, which was introduced to Parliament last month. The Government’s intention to reform benefits is driven by the need to achieve significant savings of £5 billion. (Photo: Andrew Aitchison / In Pictures/ Getty)
Personal Independence Payments
As part of the Government’s Health Transformation Programme, the application process for Personal Independence Payments (PIP) will undergo simplification. Applicants will have the convenience of claiming PIP online, and the eligibility and payment procedures will be made more efficient. Furthermore, a new health assessment service will replace all previous types of assessments, with information shared across various services. The national implementation is slated for 2029.
Additionally, the Government is reportedly considering further modifications to the Personal Independence Payment (PIP) system as part of this spring’s Green Paper on benefit reform. Among the proposals is a tiered payment model that would categorize claimants based on the severity of their conditions. This model would ensure that payments correspond to the level of support required for personal care, medical equipment, home adaptations, and other disability-related expenses. This concept is inspired by systems currently operational in Norway and New Zealand.
The Commission on Social Security, an independent body comprising individuals with firsthand experience of the welfare system, has also suggested a tiered payment structure with three payment levels:
- £83.70 per week (£334.80 every four weeks) for minimal support.
- £152.15 per week (£608.60 every four weeks) for moderate support.
- £230.77 per week (£923.08 every four weeks) for those with significant needs.
Currently, PIP consists of two components: daily living and mobility, each with standard and enhanced rates. Another potential modification under consideration includes one-off payments for specific needs rather than monthly payments, possibly utilizing vouchers or grants for equipment and services. Debbie Abrahams, chair of the Commons Work and Pensions Committee, has criticized the notion of replacing PIP with vouchers as “nonsense,” asserting it is unlikely to happen. However, this option has not been entirely dismissed by the Government and could be included in the Green Paper. Additionally, there are indications that eligibility criteria for PIP may be tightened, potentially leading to an increase in the frequency of health assessments, particularly affecting those with mental health issues who may find it more challenging to meet the criteria.
Likelihood: All proposed changes remain under discussion and have yet to be officially announced ahead of the Green Paper’s release next month. Even after publication, the document will merely present proposals for discussion at an initial stage.
Incapacity Payments
Expenditures on incapacity benefits are projected to rise from £25.6 billion last year to £35.5 billion by the decade’s end. Reports from The Times suggest that Kendall is considering the elimination of the “limited capability for work or work-related activity” category under Universal Credit, which currently provides financial support of £5,000 to 2.4 million individuals without requiring them to engage with work coaches. Additionally, those receiving long-term sick benefits may be expected to fulfill certain work obligations, which would entail a “duty to engage” with employment services ranging from actively seeking employment to receiving assistance with CVs and training.
A model reminiscent of the Work Choice program, which concluded in 2019, is believed to be under consideration. This program previously supported disabled individuals receiving benefits in their efforts to re-enter the workforce through services like CV writing, interview coaching, and mentoring once employed. Labour Minister for Employment, Alison McGovern, has emphasized that the Government aims to tackle economic inactivity and assist disabled individuals and those with health conditions in finding work.
Likelihood: The Government has committed to collaborating closely with charities, organizations, and disabled individuals to ensure their perspectives shape the proposals featured in the forthcoming Green Paper for health and disability benefit reform. Once published, further consultations will occur both within Parliament and with the public before any final decisions are made.
Fraud Crackdown
Under proposed plans being explored by ministers, benefit claimants may be required to disclose the financial status of their bank accounts. Officials have been directed to investigate options for an “open banking” system, as reported by The Times, which would allow the Government to access a benefit applicant’s true financial status. An estimated £10 billion was lost to fraud and error in the welfare system last year.
In an effort to curb this figure, the Government is advancing the Public Authorities (Fraud, Error & Recovery) Bill in Parliament. As part of this legislation, banks may be requested to analyze their data and disclose account details of any claimants who do not meet the eligibility criteria for benefits. The Department for Work and Pensions (DWP) has stated that the bill encompasses “an eligibility verification measure, which will require banks to share limited data on claimants who may wrongly be receiving benefits—such as universal credit recipients with savings exceeding £16,000.” However, it clarified that this will not grant the DWP access to benefit claimants’ bank accounts. It is important to note that this measure would apply solely to the account designated for benefit payments, meaning savings exceeding £16,000 could still be distributed across multiple accounts and remain undetected.
Likelihood: The bill was introduced to Parliament last month and is currently in committee stage. It must progress to the House of Lords and subsequently return to the Commons before it can be enacted into law.
