Reports suggest that Labour is gearing up to make significant cuts to disability benefits, including Personal Independence Payments (PIP), as part of a strategy to ease market worries about its economic policies. According to claims, key figures in Downing Street and the Treasury see substantial reductions in the Department for Work and Pensions (DWP) budget as essential, with PIP earmarked for major changes.
The Shadow Chancellor, Rachel Reeves, has reportedly told the Treasury she intends to be “tough” on spending, as reported by The Telegraph, preferring to slash budgets in unprotected areas rather than raising new taxes. This focus on expenditure reduction comes at a time when economic growth projections are weakening, and inflation rates are dropping more slowly than expected, GB News reported.
PIP, which can amount to as much as £9,600 per year, was established to assist those with disabilities and health conditions in managing extra expenses. Since their inception in 2013, PIP applications have surged, particularly for mental health and anxiety-related claims.
From 2019 to 2023, monthly new claims for anxiety or depressive disorders more than doubled, jumping from 2,200 to 5,300. Officials are now considering implementing stricter criteria for disability payment qualifications, which could include more stringent proof of disability requirements.
Labour is continuing efforts initiated by the previous Conservative government to review possible reforms to the PIP system, with discussions around making the criteria for qualifying mental health conditions more explicit.
Tightening health conditions and requiring enhanced medical evidence before approving claims, Work and Pensions Secretary Liz Kendall has rejected the idea of swapping cash benefits for vouchers. Meanwhile, officials are exploring different alternatives to weekly cash payments.
These welfare reforms present a concerted effort by senior personnel in No 10, who aim to challenge Reform’s growing appeal, as well as the Treasury, which is on the lookout for significant cutbacks.
Friday’s markets were shaken with noticeable volatility, seeing interest rates on 30-year government bonds hitting their highest point since 1998. Speaking to the economic uncertainties, Barclays Bank’s UK chief economist Jack Meaning flagged that there’s a “high chance” the Chancellor may be compelled to enforce emergency spending cuts in the impending Spring Budget.
Despite mounting pressure from opposition parties to address market worries, Reeves continues her diplomatic dialogue in China. The oscillations in the market have cast a shadow over the Chancellor’s commitment to finance everyday expenses through taxes rather than borrowing.
Economic analysts argue that the recent tremors in the market might have eradicated the £10billion “fiscal headroom” that Reeves had banked on to uphold her budgetary promises—this cushion being notably leaner compared to those kept by her predecessors.
The Labour administration now faces the task of addressing the Conservatives’ original consultation on Personal Independence Payment (PIP) reform proposals. The document lays out several potential amendments, including more precise criteria for mental health conditions eligible for assistance.
Another reform under consideration would require claimants to provide more extensive medical evidence before their claims are approved. The consultation also explored the possibility of replacing some cash payments with non-cash benefits.
Despite Work and Pensions Secretary Liz Kendall dismissing the idea of shifting to a voucher scheme, other alternatives are still on the table. These contemplated changes echo those previously proposed by Rishi Sunak, who, during his tenure as Prime Minister, placed PIP system reform at the heart of his approach to welfare.
A DWP spokesperson conveyed: “We don’t comment on speculation. We have been clear that the current benefits system needs reform so it is fairer on the taxpayer and people get the support they need to move into work.”