Labour changes to Universal Credit and PIP spending amid economic growth plans

The Department for Work & Pensions office in London
-Credit: (Image: John Stillwell/PA Wire)

The Labour Party has committed to "kickstart economic growth" following a 14-year tenure of the Conservative Party. But how will this impact the benefits system?

The party manifesto lays out broad strategies for job increase, although it does not provide particular details about their plans for revamping the Personal Independence Payment, speeding up the transfer of legacy benefit claimants onto Universal Credit, or the circumstances that require individuals to refund their Carer's Allowance when they unintentionally exceed the earnings limit.

However, it is clear from the Labour Party's standpoint that they aim to facilitate more disabled people into work, by reducing the considerable number of Universal Credit beneficiaries who are dismissed from the job-seeking process, as reported by Birmingham Live.

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The party proposes either a reform or abolishment of the current assessment that determines whether an individual is unfit for employment. The manifesto asserts that "too many people are out of work or not earning enough", attributing part of the blame to the NHS waiting lists for treatment.

Here's a look at what the party has stated so far regarding its plans.

Universal Credit and PIP

Analysts have highlighted the urgent need to address the escalating costs of Personal Independence Payment (PIP), with Tom Waters, Associate Director at the Institute for Fiscal Studies, commenting: "The number of people receiving financial support from the government for a health-related benefit has increased sharply since the pandemic and is forecast to continue growing.

"This is one of the big drivers of the large increase in public spending since 2019 and into the next parliament. So it is understandable that whoever is in office after the election should want to take a careful look at this."

While the Labour manifesto does not reference the Department for Work and Pensions' (DWP) Conservative-led plans to curb the soaring PIP expenses through a significant overhaul, which may involve swapping cash payments for vouchers for specific equipment and treatment, Labour has reportedly signalled its intention to review the responses to these proposals after the consultation concludes on July 22, which falls three weeks post-election.

Labour has announced plans to decrease economic inactivity and increase employment among disabled individuals, addressing the significant number of people deemed unfit for work through the Universal Credit system. The party believes that the work capability assessment - which determines if a Universal Credit claimant is fit for work or eligible for an incapacity top-up of £416 per month - requires a revamp.

Approximately one-third of Universal Credit recipients fall into this 'limited capability for work and work-related activity' category, with the majority also receiving Personal Independence Payment.

Labour has reassured those with disabilities and physical and mental health conditions that their benefits will not be reduced or halted as soon as they attempt to work.

The party's manifesto states: "Too many people are out of work or not earning enough. Long waits for treatment of health conditions, particularly mental health, are contributing to the rise in economic inactivity. Labour will reform employment support so it drives growth and opportunity. Our system will be underpinned by rights and responsibilities people who can work, should work and there will be consequences for those who do not fulfil their obligations."

"Labour will work with local areas to create plans to support more disabled people and those with health conditions into work. We will devolve funding so local areas can shape a joined-up work, health, and skills offer for local people. We will tackle the backlog of Access to Work claims and give disabled people the confidence to start working without the fear of an immediate benefit reassessment if it does not work out. We believe the Work Capability Assessment is not working and needs to be reformed or replaced, alongside a proper plan to support disabled people to work."

State Pension

Labour has pledged to maintain the triple lock system used to calculate the annual increase in the State Pension. This means that pensions rise every April by the highest of three factors: the previous September's Consumer Price Index measure of inflation, May-July earnings growth, or a default minimum of 2.5 per cent.

Despite concerns that the triple lock is not sustainable in the long term, Labour has stated it will keep it for now. It said: "We will keep the pension triple lock and give pensioners security in retirement. Labour will protect the triple lock on pensions and increase the State Pension each year in line with inflation, average earnings, or by 2.5 per cent, whichever is higher."

Cost of living

The Department for Work and Pensions, under the Conservative Government, has stated that it has no plans for additional cost of living payments. However, they have extended the Household Support Fund until September 30, injecting an extra £421 million to enable local authorities to provide their own payments and other forms of assistance with food and energy bills.

For example, Birmingham is offering £200 hardship grants to low-income families and individuals who qualify by receiving specific benefits.

Labour, on the other hand, has not proposed any further cost of living payments, nor has it clarified what will happen with the Household Support Fund beyond September. However, they have outlined strategies to address the cost of living crisis.

Labour attributes "the eye-watering cost of living" directly to Rishi Sunak and 14 years of Conservative rule, claiming that under the Tories, people's living costs would increase by £5,883 a year. This includes an additional £479 on energy, £1,040 on groceries, £421 on council tax, £2,880 on mortgages, £189 on motoring, and £874 on personal tax.

Labour pledges "to deliver economic stability with tough spending rules, so we can grow our economy and keep taxes, inflation, and mortgages as low as possible."

They plan to tackle "out of control bills" by launching Great British Energy, a publicly-owned clean power company funded by a windfall tax on oil and gas giants, aiming to permanently reduce annual energy bills, and also insulate millions of homes.

Labour's plans include making work pay by "banning exploitative zero hours contracts, ending fire and rehire, and delivering a genuine living wage that for the first time takes account of the cost of living."

Labour has stated: "The New Deal is a core part of our mission to grow Britain's economy and raise living standards in every part of the country. Labour will make Britain work for working people."