Those with “milder mental health” issues and “lower-level physical conditions” could see their disability benefits cut, as the government looks to shave £6bn off the welfare bill.
Liz Kendall, the work and pensions secretary, is expected to target sickness and disability benefit payments for savings on Tuesday, which comes ahead of the spring statement next Wednesday.
Politics latest: Welfare reforms ‘imminent’
Her welfare reform green paper will arrive after Downing Street insisted there is a “moral and an economic case for fixing our broken system”.
Government figures argue the rising sickness and disability bill, which has ballooned since the pandemic, is unsustainable and will “leave the welfare state losing legitimacy” in the eyes of the wider public if not dealt with.
The cuts come as the chancellor eyes a hole in the public finances on the back of lower than expected growth and rising borrowing costs, with the £9.9bn headroom she had at the budget in October now wiped out.
Rachel Reeves’ self-imposed fiscal rules mean day-to-day government spending must be covered by tax revenue by 2029-30, which leaves her needing billions of pounds in spending cuts (after ruling out further tax rises, her other option).
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What changes should we expect?
Ms Kendall is expected to target personal independence payments (PIP) – one of the main forms of disability benefits for those with long-term illnesses or disabilities – amid a spike in claimants.
The PIP bill has grown from £13.7bn a year before the pandemic to £21.8bn in the current financial year, and is set to increase to £34.1bn by the end of the decade.
The number of people claiming this disability benefit is projected to more than double from two million to 4.3 million.
The work and pensions secretary will tell MPs that Labour will protect those who have a serious condition and can’t work, and the government’s rowed back from plans to freeze PIP payments after backlash from its backbench MPs.
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These payments are now expected to rise in line with inflation, but the eligibility criteria will be tightened to whittle back the number of people eligible to claim.
One government figure told me it would result in some conditions, such as “milder mental health” or “lower-level physical conditions”, being ineligible for PIP.
But they stressed that those with more severe conditions and who are never going to be able to work would be protected and cared for.
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Which benefits could be cut?
Why Labour MPs are so uncomfortable
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The key principles driving reforms
The changes are likely to draw criticism from some MPs, though one senior Labour source said they didn’t think there would be any ministerial resignations over the benefit announcements.
Another Labour figure told me they would be “massively shocked” if there were resignations.
However, a number of Labour MPs have voiced their concerns, as has the Manchester mayor Andy Burnham.
In a bid to assuage MPs, the work and pensions secretary is also expected to earmark £1bn of savings into employment support programmes as she frames the reforms around three clear principles.
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The first will be to prevent people from falling into long-term economic inactivity with a better support offer to get people back into work quickly.
The second will be to change the incentive systems to move people away from welfare dependency.
This could see Ms Kendall slash the highest level of incapacity benefit for working age people who have an illness or disability that limits their ability to work, while increasing the basic rate of support for those out of work (universal credit).
This is because the lower level of unemployment benefit has led to more people claiming for additional incapacity and disability benefits, while disincentivising them to try to find work.
The government will also announce a “right to try” scheme, allowing those on incapacity benefits to try returning to work without the risk of losing their benefits, as happens in the current system.
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‘I don’t think they go far enough’
But with one in 10 working age people claiming sickness benefits, and one in eight young people not in education, employment or training, the reforms on Tuesday could be just the start of bigger changes – and potentially bigger political battles.
The cost of long-term sickness and disability benefits for working-age people has risen by about £20bn since the pandemic to about £48bn, and is forecast to hit almost £100bn by 2030.
“People are trapped on benefits and the bill is getting out of hand,” said one government figure.
“We are currently spending more than three times the annual policing bill on these benefits. It’s getting out of hand.
“I don’t think the reforms go far enough, and I don’t think people have clocked the size of the numbers going on here.”
