Rachel Reeves has confirmed exactly how benefits will be changing for millions of claimants as she unveiled her spring statement on Wednesday.
A massive £6.4bn will be cut from the health and disability benefits bill by 2029/30, analysis by the Office for Budget Responsibility (OBR) shows. This will be offset by an uplift to the standard rate of Universal Credit (UC), which will bring the total cuts down to £4.8bn.
The government’s own impact assessment estimates 3.2m families will be affected by the cuts, losing on average £1,720 per year compared to inflation in 2029 and 2030. That is set to plunge 250,000 people, including 50,000 children, into poverty by the end of the decade.
Confirming the cuts, Ms Reeves said: “The Labour Party is the party of work. We believe that if you can work, you should work. But if you can’t work, you should be properly supported.
“This government inherited a broken system,” she said, adding: “If we do nothing, we are writing off an entire generation. That cannot be right, and we will not stand for it. It is a waste of their potential and it is a waste of their futures.”
Furious charities and campaigners have criticised the cuts in the week since they were announced, with a coalition of more than 100 calling them “immoral and devastating”.
Responding to the chancellor’s speech, Charles Gillies, Senior Policy Officer at the MS Society and Policy Co-Chair at the Disability Benefits Consortium, said: “Since the cuts were announced last week, we’ve seen an outpouring of fear and dread from disabled people,” adding, the extra cuts announced “will heighten alarm even further, largely hitting those who are unable to work and rely on these benefits to survive”.
Here are the key changes and how much they will save the Treasury:
PIP eligibility to be tightened – £4.1bn saving
Labour has confirmed the eligibility for the Personal Independence Payment (PIP) will be tightened, resulting in fewer claimants being eligible. While this won’t affect those who currently claim, it will affect them when it comes to reapplying or being reassessed after the new rules come into force.
At the moment, PIP is paid based on two parts – daily living and mobility – at a higher or lower rate dependent on severity. This means there are four possible weekly payment levels ranging from £28.70 to £184.30.
The new rules see the qualifying criteria changed. Assessors currently ask applicants to carry out a range of activities and measure these against a set list of activities that they can and can’t do. Labour has added a new rule which means that the number of points applicants need to score in at least one daily living component of the assessment has increased to four.
This change will form the bulk of the savings, at £4.1bn. The OBR says that if 1.5 million people lose their eligibility under the new rules, that amount to a saving of £7.9bn.
However, the watchdog adds that the ‘behavioural response’ will reduce this to around 800,000 people. This is because, they predict, the greater incentive to score four points on the assessment will cause more people to demonstrate that they qualify and reapply if unsuccessful. The report adds that this is a ‘highly uncertain judgement’.
Universal Credit health benefit slashed – £1.7bn saving
From April 2026, the payment rate for the health element of UC will be frozen. Those already receiving it, will still get £97 a week until 2029/30. But new claimants will get just £50 a week – almost half.
Around 2.7 million families are forecast to be in receipt of the health element when the changes come into effect, the OBR says, with all of them affected.
People with no prospect of improvement in health or a return to work will now see their incomes protected through an additional premium. They will also no longer need to be reassessed in the future. This has not been factored into the OBR’s costings because ‘key components’ of the policy ‘are still being considered’ by the Department for Work and Pensions, it says.
But standard Universal Credit rate to rise – PLUS £1.7bn
Labour said it will “rebalance payment levels” in UC to “promote work and address perverse incentives” in the system, beginning in April 2026.
To do this, an across-the-board increase to the standard UC allowance for new and existing claims will come alongside the cut to UCHE. Ms Kendall noted this marks the first time the payment has received an above-inflation boost. This will be a boost of £7 a week, to £98.
Work Capability Assessment to be scrapped – costing unknown
Labour will scrap the work capability assessment in 2028, which is used to determine a person’s ability to work. It decides what work-related activities they can do and if they are entitled to the health-related element of UC.
These claimants will either be found to have ‘limited capability for work’ (LCW), meaning they may not be able to look for work now but are expected to in the future, or ‘limited capability for work and work-related activity’ (LCWRA), meaning they are not expected to be able to work soon, and do not need to prepare for work.
The assessment will now instead be folded into the same one used to assess eligibility for PIP, creating one unified health assessment and benefit. However, the health elements of UC and PIP are distinct benefits with different purposes.
Labour has confirmed this single assessment will still be based on the impact of a disability on daily living, as is the case with PIP, and not on a person’s capacity to work, as is the case with the health element of UC. The Green Paper on the cuts explains: “This will de-couple access to the health element in UC from work status, so people can be confident that the act of taking steps towards and into employment will not put their benefit entitlement at risk.”
The OBR says this is the “most significant policy that has not been costed” in its forecast because “several key policy details are still outstanding on the proposal”.
New benefit ‘Unemployment Insurance’ – costing unknown
Labour will also introduce a new benefit called ‘Unemployment Insurance’. It will replace Jobseeker’s Allowance and Employment and Support Allowance - both of which were already being replaced by UC - with a new single entitlement.
It will be “time-limited”, said Labour, designed to provide “stronger income protection during periods of unemployment for those with a recent work record, while revitalising the ‘something-for-something’ contributory principle in the working-age system”.
It will be non-means tested, and the amount it pays will likely be decided by a person’s previous national insurance contributions, similar to how the state pension works.
This policy was not mentioned in the OBR report, presumably because it is subject to ongoing consultation.
Universal Credit age restrictions – costing unknown
Another unexpected announcement came in the form of an unprecedented age restriction on UC health top-ups.
The government will consult on an increase to the minimum age for those who are eligible for extra UC payments, if their health condition or disability limits their ability to work.
The consultation will suggest that only people aged over 22 will be able to apply for this “health top-up”; in a move to encourage young people back into work.
Investment in employment support and DWP – Plus £1.3bn
The government is committing an additional £1bn a year to support employment, health and skills, to make the system more “pro-work”.
Disabled and unwell people will have access to one-to-one support under the government’s new plans, which would focus on skills training not solely tailored towards work.
This will include more personalised support for those who receive out-of-work benefits and are limited by health conditions.
There is little information as to how this funding will be divided between health and employment, but will go alongside the government’s increased investment into the health and social sector and existing employment support.
The government has also said it will spend £385m on investment in the DWP to deliver its welfare reforms.
Ms Kendall has confirmed the DWP will introduce a “right to try” policy which will see disabled benefit claimants retain their entitlement if they get a job that does not become long-term. It is unclear from the OBR report how this policy has been costed.
What will the government actually save?
The sweeping overhaul of the welfare system will save around £4.8bn by the end of the decade, the OBR confirms.
This will come from £6.4bn in cuts to disability and health benefits, reduced by £1.9bn for the rise in UC and a further £1.3bn for investment in employment support and the DWP. Additional investment in the DWP reduces the overall figure to the total savings amount.
The OBR’s report also casts doubt on Labour’s aim of encouraging more people into work via the cuts.
The watchdog said that while the cuts would be expected to “reduce income and so increase work incentives for existing claimants” the true picture may be more complicated. This is because PIP is not an out-of-work benefit, it said, and because those on disability benefits “generally have restricted capacity to work”.
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