DWP PIP vouchers set to replace cash payments for 1.4m claimants in £12bn benefit cuts

Proposals to slash spending on Personal Independence Payment (PIP) could result in nearly 1.4 million claimants being offered vouchers and treatment instead of ongoing cash awards of up to £737 a month. Economic analysts suggest that those claiming the disability benefit for mental health conditions are likely to be targeted by reforms aiming to save £12 billion on the UK's escalating welfare bill.

The Institute of Fiscal Studies says PIP cuts are the only way the Department for Work and Pensions could reduce costs by such a substantial amount. Spending on PIP is set to reach £30 billion by 2028/2029, the timeframe when the overhaul would be completed. A cut of £12 billion would equate to removing 40 per cent of that.

This figure mirrors the 40 per cent of claimants who receive PIP for mental health conditions, including anxiety, depression, post-traumatic stress disorder (PTSD), bipolar disorder and obsessive-compulsive disorder (OCD). They could see their payments stopped, losing "significant sums" of up to £9,500 a year, and would be offered therapy instead.

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In all, there are more than 3.5 million people on PIP, including 2.6 million who are of working age (between 16 and 66). The number claiming PIP for mental health issues has now risen to 1,347,889, the latest figure for April 2024. This is a rise of over 120,000 on 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."

It goes on to say: "Cutting anything near £12 billion would be a huge proportion of the existing bill, meaning a lot of people losing significant sums." And it points out that when PIP was introduced in 2013 as a replacement for Disability Living Allowance, the intention was to trim disability benefit spending but the opposite has happened: "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 so people are receiving the payments for extended periods of up to 10 years, leading to an increased caseload. In addition, despite the aim for PIP's two levels of payment (standard and enhanced) to be simpler and more cost-effective than the three tiers of DLA (which has lower, middle and higher rates of care), in reality this has not happened. More than 60 per cent of recipients transferred from DLA to PIP end up better off, with a third moved from the low rate of DLA to enhanced PIP.

The IFS suggests that potential cuts to PIP will come from rejecting new applications and stopping payments for existing claimants when their award comes up for review.

It said: "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 DWP said: "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.

"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."

There's a chance to have your say on the PIP reforms, which were put forward in the Modernising Support for Independent Living: the Health and Disability Green Paper, until the end of July 22, 2024. It can be found here and the DWP is inviting disabled people, people with health conditions, their representatives, and local stakeholders to give their feedback.

The consultation period will end three weeks after the General Election on July 4. Labour has indicated that it will review these proposals and the feedback received if it gets into power.

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