Welfare cuts will leave an estimated quarter of a million more people, including 50,000 children, in relative poverty after housing costs across Great Britain by the end of the decade, according to the Government’s own impact assessment.
The Chancellor claimed the “broken” welfare system must change and help more people into work, otherwise “we are writing off an entire generation that cannot be right”.
A previously-announced tightening of eligibility for the main disability benefit personal independence payment (Pip) and changes to the sickness element of universal credit (UC) had already prompted stark warnings from charities who urged a rethink.
But on Wednesday, Rachel Reeves also confirmed UC health benefits for new claimants will be halved in 2026 and then frozen until 2030.
An impact assessment into the predicted effects of the reforms, published by the Government on Wednesday, estimated that “there will be an additional 250,000 people (including 50,000 children) in relative poverty after housing costs in 2029/30 as a result of modelled changes to social security, compared to the baseline projections”.
The figures cover England, Scotland and Wales.
The document stated the estimate does not include the impact of the £1 billion annual funding, by 2029/30, for measures supporting people into work “which we expect to mitigate the poverty impact”.
Meanwhile, the Office for Budget Responsibility (OBR) said the reforms are estimated to reduce spending by £4.8 billion in 2029-30, lower than the Government’s claim last week of a more than £5 billion saving.
The OBR said the main savings would come from the tightening of Pip eligibility, cutting payments for around 800,000 claimants, and slashing the level of health-related UC for three million families.
A £1 reduction in the amount the main rate of UC had been expected to rise to per week – £106 in 2029/30 rather than £107 – prompted a prominent economic think tank to suggest benefit reform is being made mainly for the purpose of “chasing a fiscal number”.
Institute for Fiscal Studies director Paul Johnson said the Chancellor risks “losing the wood for the trees” with her announcement.
He said: “If it was right to announce halving the health-related element of universal credit last week, is it now really appropriate not only to halve it, but also then to freeze it for the rest of the parliament?
“Knocking a pound a week off the main rate of universal credit in order, it seems, to return the fiscal headroom to exactly where it was last October, really does risk undermining the idea that benefit reform, which is much needed, is being made for any reason other than chasing a fiscal number.”
Ruth Curtice, chief executive of the Resolution Foundation think tank, said that while “reform to health and disability benefits is needed, the scale and last-minute nature of many of the changes announced today suggest that long-term change is playing second fiddle to short-term savings”.
She warned of the need for protection for those who face “income shocks” from the reforms.
She said: “The boost to unemployment support is welcome and long overdue, and closing the gap between standard and health-related support should encourage more people into work.
“But the Government will need to tread very carefully with disability benefit reforms, including transitional protection for those at risk of income shocks, not least as its own assessment suggests these measures will push a quarter of a million people below the poverty line.”
Paul Kissack, chief executive of the Joseph Rowntree Foundation said: “The Chancellor said today that she would not do anything to put household finances in danger, yet the Government’s own assessment shows that their cuts to health related benefits risk pushing 250,000 people into poverty, including 50,000 children.
“This will harm people, deepening the hardship they already face.”
Charities have reported a surge in calls and visits to their advice pages following last week’s announcement by the Work and Pensions Secretary, which came after lengthy speculation about what might be in store.
The impact assessment also estimated a £500 million cut in carers benefits by 2029/30, with around 150,000 people not receiving carer’s allowance or the carer element of UC as a result of the changes.
Carers UK said the announcement was the “first substantial cuts to carer’s allowance in decades, realising many carers’ worst fears” and is an “unprecedented step in the wrong direction”.
Liberal Democrat Leader Sir Ed Davey, who has previously spoken of his experiences of being a carer for his mother and his disabled son, described the cuts as a “double whammy” hitting disabled people who cannot work while cutting support for their carers.
He said: “Snatching away the little support these carers get will do nothing to help people into work; it will just put more pressure on already over-stretched carers, social care and the NHS.
“The Government is putting the big banks and gambling companies ahead of disabled people and carers. It is not just cruel, it is a false economy and I urge ministers to think again.”
