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Government Proposes Major Overhaul of Benefits System
The Secretary of State for Work and Pensions has announced a significant initiative aimed at redefining the structure of the UK welfare system, with an emphasis on addressing the “perverse incentives” that encourage reliance on benefits rather than fostering employment opportunities.
Liz Kendall outlined her vision for creating “a more proactive, pro-work system” that will benefit those who are capable of working while ensuring that adequate protections remain in place for those unable to do so. The proposed changes include tightening eligibility standards for disability payments, focusing assistance on those with the most severe needs, and replacing the current assessment criteria for additional universal credit payments related to health conditions.
As part of the reforms, existing health-related financial supplements will see a freeze in disbursement for current claimants, while new applicants may receive nearly half the current rates. The government’s comprehensive approach is expected to yield savings exceeding £5 billion annually by the year 2029/30, though the specific avenues for these savings have yet to be detailed.
The Institute for Fiscal Studies has expressed skepticism regarding the effectiveness of reduced eligibility as a method for achieving savings compared to direct cuts to benefit levels. Spending on health and disability benefits surged during the Covid pandemic, with projections marking an increase from £65 billion annually to an anticipated £100 billion by 2029.
Months of deliberation have led to these proposals, which have gained urgency in light of deteriorating economic conditions impacting the government’s fiscal strategies. Concerns among charities and Labour politicians have surfaced, warning that these financial adjustments may further entrench poverty among disabled individuals.
Addressing these apprehensions, the government has scrapped plans for a one-year freeze on Personal Independence Payments (PIP) that assist with living costs for individuals with enduring physical or mental health issues. Nonetheless, Kendall confirmed that the eligibility parameters for PIP, a crucial benefit in England, Wales, and Northern Ireland, will undergo tightening.
Currently, PIP applicants are evaluated based on their ability to perform everyday tasks. The system assigns points, with scores ranging from 8 to 11 qualifying for the standard rate, and 12 or more for the enhanced rate. Beginning in November 2026, a new requirement will mandate applicants to achieve at least four points in at least one activity to be eligible for the daily living component.
The mobility aspect of PIP, which assists those needing help with movement, will remain unchanged. Additionally, Kendall announced that the contentious work capability assessments currently determining an individual’s fitness for work will be eliminated by 2028. These assessments have been criticized for their complexity and the stress they inflict on claimants, relying on a simplistic binary classification of capability.
Future support for individuals with health conditions will exclusively derive from the PIP assessment, focusing on health impacts rather than job capacity. While there will be an increase in reassessments for continued eligibility, individuals with the most severe, unchanging conditions will be exempt from additional checks.
To discourage individuals from claiming incapacity as a form of financial incentive, Kendall revealed that starting April next year, the additional universal credit amount designated for health conditions or disabilities will be frozen for existing claimants and reduced for new ones. However, those with lifelong severe conditions will receive an additional premium.
In contrast, the standard allowance for universal credit will receive a consistent above-inflation increase, projected to be equivalent to a £775 annual increment by the fiscal year 2029/30. A “right to try” policy is also set to be introduced, allowing recipients to explore job opportunities without the risk of losing their benefits should the attempt not succeed. Furthermore, the government is weighing the option to limit universal credit top-ups for health conditions for adults under 22, coupled with enhanced support to facilitate employment.
‘Too Little, Too Late’
Responses from various stakeholders have been overwhelmingly critical, with charities, trade unions, and select Labour MPs decrying the proposed cuts to benefits. The Disability Benefits Consortium, representing over 100 organizations, condemned the cuts as “immoral” and warned that they would exacerbate poverty levels among disabled citizens.
The Scottish National Party (SNP) labeled the proposed measures as detrimental to vulnerable populations, suggesting they herald a troubling new phase of austerities. Debbie Abrahams, chair of the Commons Work and Pensions Committee, asserted that there exist more compassionate solutions for achieving budgetary balance without placing undue burdens on those who are sick or disabled.
Contrastingly, Conservative voices referred to the reforms as insufficient and urged for more stringent measures. Shadow Work and Pensions Secretary Helen Whately questioned the adequacy of the £5 billion annual savings benchmark against a steep rise in overall health and disability benefit expenditures, projected to surpass £100 billion by 2029/30. Liberal Democrat spokesperson Steve Darling contended that genuine reform should focus on rectifying the health and social care sectors as well as the operational challenges within the Department of Work and Pensions.
Some aspects of these proposed changes will necessitate new legislation, potentially leading to dissent within Labour ranks during parliamentary votes. However, the current composition of parliamentary majorities appears to mitigate the likelihood of significant opposition to these reforms.
Source
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