Significant Benefit Cuts Anticipated in Upcoming Announcement
Major reductions to welfare benefits are on the horizon as Chancellor Rachel Reeves is set to make a crucial public spending announcement later this month. The Treasury has reportedly outlined billions in savings, including substantial cuts to the welfare budget, which are currently under review by the Office for Budget Responsibility (OBR) in preparation for Reeves’s Spring Statement. Labour ministers have been diligently crafting plans to reduce welfare expenditures and motivate more individuals to enter the workforce.
Work and Pensions Secretary Liz Kendall has recently expressed that certain individuals on benefits are “taking the mickey.” This sentiment has led to considerations of adjustments to both incapacity benefits and personal independence payments (PIP). As the Labour Party strives to economize, The i Paper examines potential benefit changes and expert warnings regarding the unintended consequences of such plans.
Changes to Out-of-Work Benefits
Labour is contemplating significant modifications to the Work Capability Assessment (WCA), the evaluation used to determine an individual’s fitness for work and eligibility for universal credit. Current plans initiated by the Department for Work and Pensions (DWP) under the previous Conservative government could affect over 450,000 individuals by shifting them from the highest support category to a lower one, thereby necessitating job search efforts and resulting in a loss of £417 per month.
Labour has committed to achieving similar levels of cuts, targeting savings of £5.4 billion by 2030, but has indicated intentions to implement its own unique alterations to the WCA. Reports suggest that Labour might eliminate the highest support category altogether, leading to even greater fiscal savings for the Treasury.
If Labour proceeds with plans resembling those of the current DWP, individuals with mental health conditions, such as depression and anxiety, may find it increasingly difficult to qualify for the highest tier of support. Disability charities and economists have raised alarms over the potential ramifications of reducing financial aid for those with mental health issues, warning that it could exacerbate their conditions. This, in turn, could result in increased spending on the NHS, social care, and emergency funds for local councils as more individuals slip into poverty. As Ayla Ozmen from the anti-poverty charity Z2K stated, “Their physical and mental health will deteriorate, pushing them further away from work.”
Reforming Personal Independence Payment (PIP)
Streamlining eligibility for PIP is reportedly a “top priority” for Labour. Any initiative aimed at restricting access to these weekly payments, which assist disabled individuals with mobility and daily living needs, is likely to stir controversy. Those grappling with mental health issues are anticipated to encounter more challenges in securing claims. Recent statistics reveal that the number of individuals claiming PIP for anxiety or depression has surged to over 450,000 in the last five years.
Proposed changes may build on earlier suggestions put forth by the Conservatives, including comments from former Work and Pensions Secretary Mel Stride, who stated that disability benefits should not be available to those who are merely “a little bit depressed.” Although Tory proposals for one-off vouchers for equipment and therapies were reportedly dismissed, Labour ministers are believed to have contemplated one-off cash payments designated for specific forms of assistance.
Disability charity Scope has warned that limiting access to PIP could have a “devastating impact,” pushing even more disabled individuals into poverty rather than facilitating their entry into the workforce. The Government has been cautioned that cuts to PIP may provoke significant political backlash, inciting anger among many Labour MPs without yielding immediate financial relief for the Treasury. Scope has suggested that any modifications to PIP eligibility are unlikely to be implemented before 2026, with broader reforms to the assessment processes for both PIP and the WCA possibly taking even longer.
Louise Murphy, a senior economist at the Resolution Foundation, has expressed concern about the risk of hastily implementing cuts that may backfire, noting, “We’ve seen reforms before that led to increased spending.”
Enhanced Crackdown on Benefit Fraud
Labour has pledged to initiate the “largest fraud crackdown in a generation” aimed at combatting what it terms “benefit cheats.” A legislative bill introduced in January will grant the DWP extensive new powers to recover funds directly from individuals’ bank accounts if they are found to be involved in fraudulent activities. Both Age UK and Big Brother Watch have criticized this “snoopers’ charter” fraud bill, arguing that it represents a significant expansion of financial surveillance capabilities.
Commentators have cautioned that the drive to crack down on benefit fraud could inadvertently raise expectations of substantial savings, with billions of pounds anticipated to be saved each year. Joshua Reddaway, director of fraud at the National Audit Office (NAO), recently informed The i Paper that the DWP will need to significantly enhance its ability to identify fraudulent claims to address the estimated £10 billion lost annually to fraud and error. He emphasized that the department must improve its use of artificial intelligence, upgrade outdated IT systems, and ensure adequate staffing to investigate suspicious claims.
Efforts to Increase Workforce Participation
Labour has articulated that a primary goal of its reforms is to increase workforce participation, promising the “most significant reforms to employment support in a generation.” The “Get Britain Working” White Paper has committed £240 million to new employment initiatives targeting disabled individuals and those facing long-term health challenges. However, the Centre for Social Justice (CSJ) think tank has warned against the “over-medicalisation of mental health,” which has led to an increasing number of individuals being classified as unfit for work.
Ed Davies, CSJ policy director, stated, “We cannot allow this ever-growing number of individuals on health-related benefits. There is immense untapped potential. It is essential that we encourage people to work.” Davies also urged Labour to enhance its plans to decentralize employment services to local authorities, noting that Whitehall officials may not fully grasp local job markets well enough to effectively increase employment rates.
However, Mikey Erhardt, a campaigner at Disability Rights UK, contended that there is still “not enough” funding allocated for job support programs. He cautioned that attempts to reduce benefits without a substantial expansion of job assistance would “drive the poorest disabled individuals into even deeper poverty.”
