People on PIP could see 'immediate' payment cuts in Labour move to trim benefits
People claiming PIP could see 'immediate' cuts to their benefits to bring down spiralling costs. Reducing the amounts handed out is among the options Labour faces in tackling the soaring bill for disability and incapacity benefits, according to the Institute of Fiscal Studies.
Labour is set to bring forward a raft of social security changes following earlier plans to reduce PIP spending including replacing cash payments with vouchers. Chancellor Rachel Reeves has already said the new government's first Budget at the end of October will involve "difficult decisions" on tax, spending and welfare.
The IFS report, which does not refer to the vouchers proposal, concludes that a cut in payments would be the simplest way to rein in escalating costs, stating: "A very direct option would be to reduce the level of health-related benefits. This could be done almost immediately and deliver predictable savings."
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However, it adds: "Naturally, any savings from either changes to eligibility or changes to benefit levels would reduce incomes for health-related benefit recipients. People on disability benefits are more likely to be in poverty and material deprivation than working-age adults in general. Making up the shortfall from any cuts could be extremely challenging for some claimants whose condition prevents them from working and this could have implications for their health."
The DWP's Personal Independence Payment (PIP) is the main disability benefit for people of working age, paying up to £737 a month to more than 3.6 million people, with the majority (almost 1.4 million) claiming it for mental health issues. Incapacity payments are separately available for those whose health limits their ability to work, with Universal Credit offering an additional £416 a month to those who have 'limited capability for work and work-related activity' (known as LCWRA).
Similar support for being unable to work is on offer through ESA (Employment and Support Allowance) which can pay out around £878 every four weeks, though thousands of these claimants are being moved to Universal Credit as part of a 'managed migration' from legacy benefits. Half of those on disability or incapacity benefits are claiming both types, the report found.
The IFS suggests that the number of PIP claims is soaring because it's not means-tested and is being used as an income boost because unemployment benefits aren't enough to live on. But campaigners have responded by saying that "slashing" disability payments will make life harder for millions of people.
An alternative approach would be reforming disability benefits but this wouldn't achieve the results needed, the IFS believes. It said: "Saving money by changing eligibility is difficult. The coalition government planned to reduce spending by replacing DLA (Disability Living Allowance) with PIP in 2013. In fact, spending grew faster following the introduction of PIP."
A further possibility would be tackling the nation's health issues more broadly through investment in the NHS and in programmes that support disabled people in finding work. But this would take time to have any effect on the number of claims and would mean significant upfront costs, it states in its new report published today.
The other response would simply be to "do nothing" which the IFS says would be "reasonable" if the rise in claims was purely down to worsening health in the population. But this would be an expensive decision considering spending on health-related benefits is forecast to rise by £15 billion by 2028.
James Taylor, director of strategy at disability equality charity Scope, has responded to the report, which described the increase in people claiming health-related benefits as a "fiscal headache" for the Government. He said: "There are 16 million disabled people in the UK, many are in work, some may want to work but have been denied opportunities and some may be unable to ever work. We should not be demonising disabled people for being unwell and regarding them as a burden on budgets.
"Government needs to take time to understand what is driving the rise in ill-health, why our public services are crumbling, and how best we can support those who are disabled. Going straight to slashing benefits will make life harder, not better, for millions of people."
The IFS report found that since the onset of the pandemic, there has been a substantial increase in the number of individuals claiming disability and incapacity benefits – with official projections saying claimant numbers will rise further still. It pointed out that the "rapid growth in health-related benefits seems to be largely a UK phenomenon" that isn't reflected in similar countries such as Australia, Canada, Germany, Ireland, the Netherlands, Sweden and the US, where claims have fallen.
The UK is on course to be one of the highest spenders on health-related benefits if no action is taken, the IFS said. Figures show more and more people are applying for disability payments, although the proportion of claims that are approved is about the same. With fewer people coming off these benefits, the numbers receiving them are continuing to mount up.
The authors of the report note that "the UK is one of the few countries with a disability cash benefit such as PIP, which is not conditional on employment or income", suggesting that it is easier to apply because there are fewer restrictions such as means-testing.
They also consider the impact of "the big increase in NHS waiting lists" but say worsening health can't be the sole reason for an increase in claims because similar rises aren't seen in other countries. The IFS says more people may be turning to disability benefits as an income boost because financial support for being out of work isn't enough on its own.
Spending on health-related benefits for those of working age has risen from £36 billion in 2019/2020 to £48 billion in 2023/2024, and official forecasts expect this spending to increase further to £63 billion in 2028/2029. Expenditure on these benefits for all ages has increased from £52 billion in 2019/2020 to £65 billion in 2023/2024, figures show.
Newer claimants tend to be younger, with a 150 per cent rise from the under-40s, and more likely to be receiving the benefit for mental health conditions (37 per cent of new awards). The majority (58 per cent) are women.
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