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Ministers have been warned against welfare changes that would see people stripped of their benefit entitlements and pushed into poverty ahead of Labour’s crunch Spring Statement.
Chancellor Rachel Reeves will be revealing the party’s plans on 26 March, with pencilled-in cuts to the benefits bill thought to have risen to as much as £5 billion. This will come alongside a Green Paper from the Department for Work and Pensions (DWP) outlining the proposals.
It’s understood the changes will focus largely on health and disability benefits, as government spending rose to £65bn last year – up 25 per cent from the year before the Covid pandemic – and is forecast to rise to £100bn before the next election.
DWP secretary Liz Kendall said on Thursday: “We inherited a broken welfare system that is failing sick and disabled people, is bad for the taxpayer, and holding the economy back.
“For too long, sick and disabled people have been told they can’t work, denied support, and locked out of jobs, with all the benefits that good work brings.”
But ahead of the fiscal event, experts have warned the chancellor that changes must not hit the living standards of disabled people, who already face some of the highest levels of hardship of any group.
Analysis by the Joseph Rowntree Foundation (JRF) has found that half of the people who receive the health-related element of Universal Credit are struggling to pay for the essentials, compared to 11 per cent of households not receiving any benefits.
Meanwhile, almost a quarter (24 per cent) of working-age adults in a family in a family receiving health-related UC had to use a foodbank in the last year, compared to three per cent of the general population.
The charity adds that 30 per cent of the growth in incapacity benefit caseload between 2018 and 2023 came from the rise in State Pension age, demographic developments and changes to legacy benefits. The goes “against the idea the idea that this increase is solely down to people now claiming benefits as a lifestyle choice,” analysts add.
JRF Senior Policy Adviser Iain Porter said: “Many people will be waiting anxiously to hear what the government is planning in their upcoming green paper but talk of cutting billions is causing deep fear among people with serious and ongoing health problems.”
“The green paper needs to address the underlying causes of poor health, support people to stay in work where they can, and make moving into work a safer option for people who feel unable to take the risk of losing their benefits if a job doesn’t work out.
“The Chancellor has an unenviable task but she does have choices, and in an increasingly uncertain world, the financial pain and risk shouldn’t be passed on to those who can least afford it in the form of cuts”.
Changes to the work capability assessment are likely central to Labour’s plans to cut welfare spending, with a plan to “reform” the measure confirmed in the party’s manifesto. This is the main assessment used to determine a person’s ability to participate in the workforce, deciding if they qualify for any health elements of Universal Credit and how much work-related activity they must carry out, if any.
Ministers are understood to be looking to save £1.3 billion a year from changes to the WCA after pledging to match spending commitments made by the previous government – but not necessarily the policy detail. The party has said it will re-consult on the changes after the Conservatives’ consultation on the plans was found unlawful by a High Court judge for being “unfair” and “misleading.”
Through changes to the eligibility criteria, the changes would have seen 400,000 fewer people receiving the support they require, analysis by the DWP in April 2024 found, while only around 15,000 would have been helped into work.
Labour has also not ruled out changes to the Personal Independence Payment (PIP), despite this not being an out-of-work benefit. Unlike the WCA, assessments for PIP set out to determine if someone needs help with extra living costs, even if they’re working.
The previous government had also consulted on changes like means-testing the benefit, introducing vouchers for specified costs instead of cash payments, or introducing new, lower rates of payment.
However, analysts at Resolution Foundation have advised against this, arguing that it would go against the central aim of PIP. Instead, the influential think tank argues, Labour should consider more regular assessments, improving the experience of coming off health-related benefits, and focusing on long-term improvements over short-term cuts.
Louise Murphy, Senior Economist at the Resolution Foundation, said: “Britain is getting older and sicker as a nation. The consequence is a fast-rising working-age incapacity and disability benefits bill, which is on track to rise by £32 billion over the 2020s.
“Rather than focus solely on restricting eligibility for support, reforms should reduce the financial gap between basic and health-related out-of-work benefits that incentivises health-related claims. Far more can be done to boost exits too, which will require investment in the functioning of the benefit system and rebuilding trust among claimants.
“While the Government is keen to score short-term welfare savings ahead of the 26 March, truly effective reforms will take time to deliver.”
