Ministers have committed to reducing the welfare bill by more than £5bn by 2030 and are eyeing up disability and sickness benefits to do so.
As first revealed in The i Paper, an additional £2bn needs to be cut from the welfare bill over the next five years if the government is to keep to the spending plans it has promised – bringing the total to £5.4bn by 2029-30.
Doing so could be politically difficult for Labour, which traditionally aligns itself with progressive and compassionate values.
Government sources say they are preparing for challenging conversations about the proposed changes – knowing that any suggestion of restricting benefits will be unpopular among Labour MPs.
The Government, which is due to publish a Green Paper looking at how disability benefits could be reformed in the coming months, has not been specific in spelling out exactly where the savings will be found.
But ministers have stipulated three key areas they are looking at: young people who are not in education or employment, sick or disabled people whose condition prevents them from being in work, and disability benefits paid to those with conditions regardless of their employment.
The third cohort is those in receipt of benefits paid to people who require extra financial support to live independently – known as personal independence payments (PIP).
PIP operates differently from out-of-work incapacity benefits, which support people who cannot work due to a disability or health condition, and offers cash payments to help cover the cost of living with a disability – whether or not a person is in employment.
A consultation proposed by the former government suggested looking to change the eligibility of PIP and the way it is offered.
But Work and Pensions Secretary Liz Kendall has said she intends to bring forward her own, new, proposals for slimming down the welfare bill.
Kendall is compelled to mirror the savings because Chancellor Rachel Reeves committed to retaining them in her Autumn Budget.
And Labour insiders are privately concerned about the optics of cutting benefits for disabled people off the back of restricting support for pensioners, through means-testing winter fuel payments and refusing to scrap the two-child cap on benefits.
One party source said there were concerns that the reforms could prove unpopular among constituents.
“MPs have been forced to take the child poverty vote and the winter fuel payment vote on the chin and party members and constituents are furious. Now we’re going after disability benefits claimants,” they said.
And policy experts argue that, to save significant funds, the focus has to be on out-of-work sickness benefits, rather than disability support for the most vulnerable.
However, ministers have argued that the PIP system needs reform to function better.
Currently, PIP recipients receive either £72.65 or £108.55 per week for daily living support – depending on whether they have the higher or lower award. They can also receive £28.70 or £75.75 per week for mobility tasks – which is help to get around.
A person is eligible if they live with a long-term physical or mental condition or disability – or if they need support with everyday tasks due to a condition. The highest rate of PIP can amount to around £800 a month.
What are the options for saving money – and what would the impact be for claimants?
One proposal put forward by the Tory government was to replace the cash payments for services in kind with a voucher system or reimbursement for specific services if a claimant can provide a receipt.
The suggestion was criticised by disability campaigners at the time because it would have involved reducing the amount of autonomy people have to spend the money as they wish.
Kendall recently told the Work and Pensions Committee of MPs that she was acutely aware of concerns that replacing payments with vouchers would take away independence from people.
Pressed on whether she would rule out continuing with a voucher system, she declined to do so.
The Centre for Social Justice think-tank has argued that replacing payments with services in kind, such as therapies or support, would be an effective way of reducing the amount of cash expenditure.
This could mean those in receipt of PIP have their cash payment reduced dramatically and instead are offered free transport, counselling, or home adaptations.
James Taylor, executive director of strategy at Scope, said doing so would be detrimental because people rely on the payments to cover day-to-day expenses.
“Around a quarter of disabled people live in low-income households and if we were to switch from cash to vouchers many of those wouldn’t have PIP money to fall back on,” he said.
He also said the “bureaucracy that would be needed to implement a voucher or receipt system would be huge”.
One simple way to reduce the cost of disability payments would be to restrict the eligibility of who is entitled to them.
Currently, a person is assessed on whether they can complete certain tasks, and whether their condition restricts them, and this is used to decide whether to award PIP.
But one suggestion previously put forward was to categorise someone’s eligibility based on a diagnosis of a condition, rather than an assessment to consider their capabilities.
There have been reports the Government could be considering restricting whether to remove eligibility for PIP for certain conditions.
But Taylor suggested this could open the Government up to legal challenges if payments were restricted based on condition.
“PIP is about how you function rather than your disability – which I think is often misconstrued,” he said. “Two people might have the same condition but experience it in very different ways.”
But charities like Scope have welcomed proposals around simplifying the assessment process.
“There was a suggestion that assessments should be carried out by someone with a very specific knowledge of someone’s condition rather than a general assessor. What we often hear from disabled people is that the person doing their assessment doesn’t understand how their condition affects their day-to-day life so either are not awarded PIP or are awarded it at a lower rate, so that would be a good change,” Taylor said.
If the eligibility were changed to be based on a person’s economic state then those in higher-income households would no longer be able to receive it.
It is hard to assess how much that would save the Treasury without a clearer idea as to how this could be calculated.
But this kind of change is highly unlikely. Government sources have strongly denied that PIP could become means tested and, even if that were to be the case, a high proportion of PIP recipients are already in low-income households.
Introducing more specific tiered payments – rather than the two higher and lower awards – or even bringing in a one-off cash payment for things like home modifications are proposals considered by officials in the past.
This could, in theory, mean that people currently receiving PIP will have the amount they are entitled to restricted – if they were assessed and deemed to require a lower level of support than they currently receive.
Taylor said that this would, however, be “out of step” with public opinion – pointing to polling suggesting consistent support for disability benefits to be more generous.
The Government could also face pushback from MPs if it is perceived that millions of claimants could see payments reduced by hundreds of pounds a month.
There are also concerns that ongoing uncertainty about exactly where the cuts will fall is prompting worried correspondence from constituents.
In a report, published last year, the Resolution Foundation argued that the decision to get rid of the lowest level of support within PIP had actually pushed up the value of average awards rather than lowering them – because more claimants are bumped up to the higher level.
This implies that introducing more lower levels of the benefit could lower the cost to the Treasury.
But the report also noted that the main health conditions where PIP claims are rising fast – including learning disabilities – are ones where the awards are higher than average, indicating that there is a higher need for support among the fast-growing caseload.
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