Labour’s planned benefit spending cuts have reportedly ballooned to as much as £5 billion as Rachel Reeves grapples with ministers over her upcoming spending review.
Department for Work and Pensions (DWP) boss Liz Kendall is understood to be pushing for more funding for initiatives on back-to-work programmes for the long-term sick. The minister has argued that measures to give claimants better help now will ultimately fund themselves in the future.
But chancellor Rachel Reeves remains under pressure to find substantial departmental cuts, The Times reports. And while government sources indicate that a £5 billion cut is the most likely option to be selected, packages in excess of £10 billion have been floated.
It comes as the Treasury faces renewed calls to boost defence spending in the wake of Donald Trump’s drastic approach to the conflict in Ukraine. The US president has demanded all European nations increase their target to five per cent of GDP, with the UK currently spending around 2.3 per cent.
Last year, Labour pledged match the previous Conservative government’s spending target and shave £3 billion from the welfare bill. It now appears that this could be a minimum, and the actual amount possibly much higher.
Ms Kendall has said she wants to tackle “spiralling inactivity” in the labour market, with 2.7 million people out of work due to long-term sickness between October and December last year. This includes 270,000 young people who are not working due to a mental condition, up 26 per cent in the year to February.
Earlier this month, the DWP secretary shared a department-commissioned survey that found about a third of people claiming health and disability benefits want to get a job. This “show that the broken benefits system is letting down people with mental health conditions who want to work,” she says.
But leading disability charities have warned against cuts which would simply raise the threshold to qualify for health-related benefits. Disability charity Scope’s executive director of strategy James Taylor said: “The Chancellor has a choice – to cut benefits and plunge more disabled people into poverty, or invest in an equal future for disabled people.
“If brought forward, these dangerous proposals would take away a vital lifeline from thousands more disabled people, pushing them into poverty.
“Life costs a lot more when you’re disabled, on average more than £1,000 every month. After years of rising prices, disabled people are already on the brink. Cutting disability benefits would deal a catastrophic blow to disabled people’s lives.
The DWP is set to release a green paper in the coming weeks with more details on their plans. Changes to how people are assessed for health-related benefits remain widely expected, including the long-promised ‘reform’ to the work capability assessment – one of the main ways a claimant’s eligibility for health-related benefits is assessed.
Under Conservative plans, £1.3 billion was pencilled in to be saved through changes that would have made claiming health-related benefits harder. However, Labour has said it will re-consult on the detail of these plans, after the high court found that the previous government’s consultation was unlawful.
Changes to the personal independence payment (PIP) are also thought to be in the scope of the paper. This is a separate health benefit, for both those in and out of work. It is designed to help with extra living costs for those who have a long-term physical or mental illness that affects their ability to do everyday tasks or get around.
Latest statistics from the DWP show that the amount of people claiming PIP increased by 400,000 in the year to August 2024, continuing a trend of increased claims that began during the Covid pandemic. However, PIP was only introduced in 2013, and brought in to replace disability living allowance which is being gradually phased out.
Scope has warned ministers against cost-cutting changes to the benefit, with Mr Taylor commenting: “PIP is not easier to claim than it was, and the success rate has not changed since the benefit was introduced. Applying for PIP involves reams of paperwork and a stressful, degrading assessment. Far too often decisions are wrong, as shown by the consistently high rate of appeal success.
“Instead of focusing on an amount they want to cut, the government needs to work with disabled people to create a system which supports disabled people.”
As ministers battle over the final policy package for disability benefits, reports also indicate that there is disquiet amongst MPs about Labour’s choice to maintain the two-child benefit cap. Rumoured concessions from the DWP include changing the policy to a three-child benefit cap, as they look to maintain some of the £2.5 billion pencilled in from the decision, Politico reports.
A DWP spokesperson said: “We will bring forward reforms to health and disability benefits in Spring, so the system is fairer on the taxpayer and helps disabled people and those who are long term sick into work, while ensuring support is provided for those who need it.
“We’re working closely with disabled people, disability organisations, and people with health conditions so their views and voices are at the heart of our plans.”
