Benefits could change under Labour - how likely is it and how would it affect you

A major overhaul of the welfare system is on the cards this spring as the Government looks to make up to £5bn in benefit spending cuts.

Work and Pensions minister Liz Kendall has pledged to reform what she has termed a “broken benefits system” and support people back into work.

She said earlier this month: “People claiming health and disability benefits have been classed by the system as ‘can’t work’ and shut out of jobs and have been ignored – when they’ve been crying out for support.”

Her aim is to “support disabled people and those with long-term health conditions into work, bring down the benefits bill, and grow the economy”.

Around 3.7 million people of working age receive health-related benefits, according to the House of Lords Economic Affairs Committee, with spending on incapacity and disability benefits (almost £65bn) greater than that on defence.

Lord Bridges of Headley, the committee’s chair, said: “The health benefits system is financially unsustainable, wastes human potential and – in the words of the Employment Minister – ‘does not work for anybody’.

“Given the pressure on the nation’s finances, tackling this must be a top priority for the Government.”

Reforms to the health and disability benefit system are due to be unveiled in a Green Paper this Spring, with changes implemented after consultation inside and outside Parliament.

Sir Stephen Timms, minister for Social Security and Disabilities, has confirmed it will be published, along with a public consultation on the proposals, before Chancellor Rachel Reeves delivers the Spring statement on Wednesday 26 March.

There is also a planned crackdown on benefit fraud under the Public Authorities (Fraud, Error & Recovery) Bill introduced to Parliament last month.

Under the Government’s Health Transformation Programme, the application process for Personal Independence Payments (PIP) will be simplified.

People will be able to claim PIP online and the eligibility and payment process will be streamlined.

And a new health assessment service will replace all previous types of health assessments, with information shared across different services.

The national rollout for this is planned for 2029.

However, further changes to the Personal Independence Payment (PIP) system are understood to be under consideration by the Government as part of this spring’s Green Paper on benefit reform.

Among the options on the table for PIP is a tiered payment model, which would categorise claimants based on the severity of their condition.

This would mean payments reflected the level of support needed for personal care, medical equipment, home adaptations and other disability-related costs.

It would be based on systems already in existence in Norway and New Zealand.

A tiered system has also been suggested by the Commission on Social Security, an independent group made up of people with lived experience of the welfare system.

It proposed three payment levels:

At present, PIP is made up of two components – daily living and mobility. These have standard and enhanced rates.

Another option under consideration is making one-off payments for specific needs rather than monthly payments, with vouchers or grants for equipment and services.

Debbie Abrahams, chair of the Commons Work and Pensions Committee, has said that the idea of replacing PIP with vouchers is “nonsense” and will not happen.

But it has not yet been ruled out by the Government and could make its way into the Green Paper.

Officials are also said to be considering tightening the eligibility criteria for PIP, to reduce the number of claimants.

Currently you can apply for PIP if you are over 16 and have a long-term physical or mental health condition or disability.

Tightening the eligibility could include more frequent health assessments, while those with mental health issues could find it harder to meet the criteria to claim for PIP.

Likelihood: All of these are yet to be officially announced and remain under discussion ahead of the Green Paper’s publication next month. Even after the paper is published, it will only set out for proposals for discussion at a formative stage.

Spending on incapacity benefits is due to increase from £25.6bn last year to £35.5bn by the end of the decade.

Kendall is reported by The Times to be looking at abolishing the “limited capability for work or work-related activity” category under Universal Credit in which 2.4 million people are given £5,000 extra without being required to have contact with work coaches.

And those claiming long-term sick benefits may also be asked to meet certain work obligations.

Claimants could be given a “duty to engage” with employment services, ranging from actively seeking work to getting help with CVs and training.

A model similar to the Work Choice programme, which ended in 2019, is understood to be under consideration.

This supported disabled people claiming benefits to get back to work through help with CV writing, interview preparation and mentoring once employed.

Minister for Employment Alison McGovern has said the Government plans to address economic inactivity and support disabled people and those with health conditions into work.

Likelihood: The Government has said it will work closely with charities, organisations and disabled people to ensure their voices help shape any proposals which feature in the Green Paper for health and disability benefit reform out next month. Once published, they will still be consulted inside and outside Parliament before any final decisions are made.

Benefit claimants could be forced to reveal the financial status of their bank accounts under plans being investigated by ministers.

Officials have been asked to look at options for an “open banking” system, according to The Times, in which the Government would be able to see the true state of a benefit applicant’s financial status.

An estimated £10bn was lost to fraud and error last year in the welfare system.

The Government it looking to cut this figure with the introduction of its Public Authorities (Fraud, Error & Recovery) Bill to Parliament.

The DWP told The Times the bill includes “an eligibility verification measure, which will require banks to share limited data on claimants who may wrongly be receiving benefits — such as those on universal credit with savings over £16,000.”

But it said this will not give the DWP access to benefit claimants’ bank accounts.

However, this measure would only apply to the account into which benefits were to be paid. So savings exceeding the £16,000 could still be split over several accounts and remain undetected.

Likelihood: The bill was introduced to Parliament last month and is currently at committee stage. It will need to go to the House of Lords and then back to the Commons before it can be passed into law.