Labour Plans to Reform Welfare Benefits to Save £5 Billion

The government has unveiled sweeping reforms to the welfare system in an effort to save £5 billion, aiming to address the sharp rise in sickness and disability benefit claims. Over the past five years, the number of incapacity benefit claimants has grown by 700,000, reaching 3.3 million, a figure predicted to surpass 4 million within two years. Disability benefits have seen an even steeper increase, with new claims doubling post-pandemic, leading to a total of one million additional recipients over the same timeframe.

This surge has placed significant pressure on public funds, with the annual cost of sickness benefits rising from £46 billion in 2019 to £65 billion today. Projections suggest this could exceed £100 billion by 2030. The reform plans, led by work and pensions secretary Liz Kendall, aim to curb future expenses whilst addressing social and economic issues linked to rising benefit dependency.

One major driver of the increase is the prevalence of mental health conditions, which now account for at least half of the post-Covid rise in both sickness and disability claims. Surveys indicate that 23% of working-age adults now report living with a disability, compared to 16% a decade ago. While the government acknowledges the genuine distress many individuals face, critics argue that the process of medicalising wider social problems has exacerbated the issue.

A key aspect of the reforms will see the abolition of the universal credit work capability assessment. The system currently links benefit payments to an individual’s capacity to work, but critics have highlighted incentives in place that discourage recipients from seeking employment. For example, a single universal credit claimant deemed unfit for work can receive more than double the basic rate, bypassing requirements such as job-seeking conditions. The reforms will address this by restructuring benefit levels and expanding intensive support programmes to assist claimants in returning to work.

One controversial measure involves restricting eligibility for personal independence payments (PIP). To qualify, claimants will need to demonstrate significantly more severe difficulties, such as challenges with essential daily tasks like washing, dressing, or eating. This change is expected to impact around one million people and represents the largest component of the expected £5 billion savings. Disability benefits, which include PIP and associated support structures, are projected to reach £59 billion annually by the end of the decade, accounting for a considerable portion of welfare expenditure.

Despite efforts to frame the proposals as a moral obligation to reduce dependency and encourage work, opposition within Labour’s ranks has been mounting. Senior MPs have expressed unease over the reforms, particularly regarding cuts to disability benefits and the potential impact on those in genuine need. Ministers anticipate strong backlash both within Parliament and from party activists. Despite this, with Labour’s current parliamentary majority, the reforms are expected to pass even if significant dissent arises.

As the government seeks ways to implement these changes without immediate votes in Parliament, the debate over welfare expenditure, fairness, and economic responsibility is set to continue.