Claimants may face PIP cuts as UK plans to replace cash benefits with vouchers and therapy

It is proposed that slashing spending on Personal Independence Payment (PIP) could result in almost 1.4 million claimants being offered vouchers and treatment as a replacement for ongoing cash awards of up to £737 monthly.

Economic analysts believe that those claiming the disability benefit for mental health problems are likely to be targeted by cost-saving reforms aimed at reducing the UK's rising welfare bill by £12 billion, reports Birmingham Live.

The Institute of Fiscal Studies states that PIP cutbacks are the only plausible way for the Department for Work and Pensions to reduce costs at such a significant scale. They predict that spending on PIP will reach a lofty £30 billion by 2028/2029 - the anticipated timeline for these comprehensive overhauls.

A reduction of £12 billion would equate to a devastating 40 per cent cut. This percentage mirrors the proportion of claimants who receive PIP for mental health conditions: including anxiety, depression, PTSD, bipolar disorder, and OCD.

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These individuals could lose their payments, forfeiting "significant sums" of up to £9,500 annually, and instead be offered therapy.

In total, there are upwards of 3.5 million people receiving PIP, with 2.6 million of these being of working age (between 16 and 66). The number of people claiming PIP for mental health issues has now increased to 1,347,889 - the most recent figure for April 2024. This reveals an increase of over 120,000 from the 1,227,348 claimants in May 2023.

The IFS said: "Where might a £12 billion saving come from? The only other announcement where a sizeable reduction in spending seems at least possible is the pledge to 'reform our disability benefits to halt the unsustainable rise in claims, while ensuring the right support is being targeted at those who need it most.

"The intended focus is on reducing claims related to mental health, which account for roughly 4 in 10 disability benefit claims, and a similar share of the post-pandemic increase.

"At the time of the last election, there were 2.3 million working-age individuals receiving disability benefits (Personal Independence Payment or its predecessor), payments that are intended to provide financial support to individuals with health conditions that impose additional financial costs.

"This is forecast to reach 3.6 million this year and to climb to 4.6 million in 2028/29. Rising numbers of PIP claimants are behind much of the forecast increase in total health-related welfare spending, and so one can see why the government might focus on this benefit."

Further, the IFS stated: "Cutting anything near £12 billion would be a huge proportion of the existing bill, meaning a lot of people losing significant sums."

It also highlighted that when PIP was introduced in 2013 as a replacement for Disability Living Allowance, the intention was to reduce disability benefit spending, yet the outcome has been quite the opposite: "With PIP, a reform intended to reduce spending has actually increased it."

This is partly because PIP is often awarded for much longer than DLA, resulting in people receiving payments for extended periods of up to 10 years, which increases the caseload. Moreover, although PIP's two levels of payment (standard and enhanced) were intended to be simpler and more cost-effective than DLA's three tiers (lower, middle, and higher rates of care), this has not been the case in practice.

In fact, over 60% of recipients who moved from DLA to PIP found themselves better off financially, with a third going from the low rate of DLA to the enhanced rate of PIP.

The Institute for Fiscal Studies (IFS) has indicated that potential reductions in PIP expenditure could be achieved by denying new applications and discontinuing payments for current recipients when their awards are reviewed.

It stated: "Rather than rapidly reassessing all existing claimants, reforms like these often apply only to new claims and end-of-award reassessments, and they should certainly be carefully piloted before being rolled out. This means that any reductions in benefit spending can often take quite a while to realise."

The Department for Work and Pensions (DWP) commented: "Personal Independence Payment (PIP) was introduced in 2013 with the intention that it would be a more sustainable benefit that would support disabled people to live independently by helping with the extra costs they face. However, the caseload and costs are now spiralling.

"This is in part fuelled by the rise in people receiving PIP for mental health conditions such as mixed anxiety and depressive disorders, with monthly awards doubling from 2,200 to 5,300 a month since 2019. Since 2015, the proportion of the caseload receiving the highest rate of PIP has increased from 25 per cent to 36 per cent. And many more people being awarded PIP now have mental health conditions than when it was first introduced.

"By more accurately targeting support, we will ensure the large scale of government expenditure on PIP translates into better outcomes for disabled people and those with health conditions.

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"We are considering options including one-off grants to better help people with significant costs such as home adaptations or expensive equipment, as well as giving vouchers to contribute towards specific costs, or reimbursing claimants who provide receipts for purchases of aids, appliances or services. This reflects the fact that some claimants will have significant extra costs related to their disability, and others will have minimal or specific costs.

"We know other forms of support including health care, social services care provision and respite are also important to help people to realise their full potential and live independently. We are also considering whether some people receiving PIP who have lower, or no extra costs, may have better outcomes from improved access to treatment and support than from a cash payment."

The Department for Work and Pensions (DWP) is inviting disabled individuals, people with health conditions, their representatives, and local stakeholders to provide feedback on the proposed PIP reforms. These proposals are part of the Modernising Support for Independent Living: the Health and Disability Green Paper, and the consultation period will run until July 22, 2024.

The consultation will conclude three weeks after the General Election scheduled for July 4.