UK ministers have set out plans for a radical reform of welfare for the sick and disabled — including a £5bn cut to spending on health-related benefits, a new duty for claimants to engage with job support programmes, and a £1bn investment in back-to-work programmes.
Work and pensions secretary Liz Kendall said the changes would ensure sick and disabled people had “the same rights, choices and chances as everyone else”, while keeping support in place for those who could never work because of the severity of their conditions.
But analysts say that if the government presses ahead, in the face of fierce resistance from backbench Labour MPs, about 1mn people will have their income cut — yet only a small proportion will enter work as a result.
How will the current system change?
The government wants to ensure that benefits claimants have a financial incentive to work, receive much better support to help them find employment and do not risk losing vital income if they try a job and it doesn’t work out.
This will mean scrapping the “work capability assessment” for means-tested incapacity benefits and channelling all claimants through the assessment for “personal independence payments”, the main disability benefit, from 2028-29.
The idea is to decouple financial support from people’s work status but the change will mean some people lose eligibility.
There will be a new “right to try” work, with a guarantee that this will not “in and of itself” trigger a health reassessment or loss of benefits.
There will be a new duty on people receiving incapacity benefits to join regular “conversations” to learn about the job support available to them, with potential sanctions if they do not engage.
The government also wants to boost the basic rate of jobless benefits and cut incapacity benefits to address what it calls “perverse incentives”.
But it will add just £7 a week to the standard rate of jobless benefits in the universal credit system, taking it from £91 to £98 in 2026-27. Meanwhile the health element of UC will be cut by £47 to £50 per week for new claimants, and frozen for existing recipients — with young people under 22 excluded entirely, subject to consultation.
The biggest change is a significant tightening of eligibility for disability benefits. Changes to the assessment for personal independence payments will mean people only qualify for its “daily living” element — worth up to £108.55 per week — if they face big barriers to performing daily tasks such as cooking, washing, reading or going to the toilet.
Who will lose out?
Overall there will be less financial support available for people who have a wide range of health conditions, with much tighter eligibility for new claimants and for some existing benefits recipients when their claims are reassessed.
There will be a modest boost — of £7 a week in 2026-27 — to people claiming jobless benefits without health support, and a bigger, time-limited boost for people with a work history who suffer short spells of unemployment.
But Louise Murphy, senior economist at the Resolution Foundation think-tank, said these “tiny gains” would be “completely overshadowed” by the scale of income lost by those who will receive reduced or no support.
Between 800,000 and 1.2mn people looked likely to lose eligibility for Pip, she said — in particular, those with musculoskeletal conditions, who often struggle with a range of tasks but do not have severe difficulties in a single area.
Stephen Evans, chief executive of the Learning & Work Institute, a research organisation, said that over time, up to 1mn new benefit claimants could receive £2,000 per year less than they would today, because only those who passed the Pip assessment would receive the health-related element of UC.
Young people could be especially hard hit if they were excluded even from the reduced rate of health-related support through UC, Murphy noted.
How much will the changes save taxpayers?
Kendall said the package of reforms would save taxpayers “more than £5bn” by 2029-30 — making them the biggest cuts to welfare since 2015, when then Conservative chancellor George Osborne imposed austerity.
She said that, without the changes, the government would be spending more than £70bn on incapacity and disability benefits in five years.
Officials say cuts to Pip will account for the bulk of the savings but the green paper does not give any breakdown.
Instead, the Office for Budget Responsibility will give its assessment of the government’s costings when it publishes new fiscal forecasts at next week’s Spring Statement.
Analysts say the OBR will be more convinced that savings will materialise from upfront cuts to Pip and incapacity benefits that do not depend on consultation. The fiscal watchdog will be sceptical of more speculative savings from bringing people into the workforce.
But Tom Waters, associate director at the Institute for Fiscal Studies think-tank, warned that the fiscal effects of the package — as with previous welfare reforms — would be very uncertain because people would change their behaviour in response to new incentives.
There would now be a much stronger incentive to claim Pip as the only route to any health-related benefits, he noted, and tightening eligibility for Pip might simply change the way people approached the assessment.
Will the reforms help people into work?
Policy analysts say that measures to improve employment support and make it less risky to try returning to work are badly needed, but that their effect could be cancelled out by the accompanying cuts to spending.
David Finch, assistant director at the Health Foundation think-tank, said that given the need to “rebuild trust” with disabled people, “cutting benefits entitlements . . . risks undermining the government’s efforts”.
Arun Veerappan, interim research director at the Disability Policy Centre, said welfare savings would be offset by increased pressure on the NHS as people sought alternative support, and the legal costs of appeals.
Previous experience suggests that only a small proportion of people who have been out of work for more than two years because of health problems return, even with support in place.
Waters warned: “The risk is that it’s precisely the individuals receiving health-related benefits that are least responsive to financial incentives to work — and perhaps most in need of extra financial support.”
