How much is the benefits bill really being cut by?

Yahoo

5 hours ago

The government is set to plough ahead with its controversial welfare bill next week, which it says will slash billions from the benefits budget.
Despite a sizeable - and growing - rebellion among Labour MPs ahead of a crunch vote on the bill in the House of Commons next week, Sir Keir Starmer has maintained there is 'a clear moral case' for welfare reform.
Labour insists that by passing a new law that will cut the number of people eligible for PIP, as well as cutting and freezing the health component of universal credit, it will ensure the welfare system can support benefits claimants long into the future.
That view is not one shared by a number of disabled people and campaigners, who have expressed concern the government's calculations on the number of people affected by the proposals will be significantly more damaging than expected.
The government has said the cuts will save billions by 2029–30, making it the biggest cut to welfare in a decade. However, experts believe that the government's calculations are modest, and in turn, the implications of the cuts are far more wide-reaching.
The government's official estimate is that welfare spending will be cut by £4.8 billion by 2029-30.
This will come from tightening the eligibility criteria for PIP, a benefit which supports disabled people with their daily living and mobility costs. By restricting who is eligible, the government is estimated to save £2.3 billion per year by 2029-30.
The government will also freeze universal credit health top-up payments until the end of its term in 2029-30, and halve the amount available for new claimants. This benefit is for people who may have a limited capacity to work because they have a terminal illness, a complicated pregnancy, or cancer. The government estimates it will save £1.8 bn per year by 2029-30.
Another working-age benefit change will see the 'new style' employment and support allowance and 'new style' jobseeker's allowance merged into a single contributory "unemployment insurance" benefit in 2028/29.
This new benefit will be paid at the same rate as ESA but, crucially, will be time-limited. Unless you are placed in the support group, payment is limited to 12 months, saving the government £0.7bn.
An increase in the standard allowance of universal credit is the final factor at play. By raising the standard allowance of the benefit year-on-year, the government will sacrifice £0.5bn in savings.
Earlier government announcements and some reports referenced a target of £5 billion in annual savings, but the most recent official figures and statements indicate the expected net saving is £4.8 billion by the end of the decade.
According to the New Economics Foundation, the cuts will actually save the government closer to £6.7bn - not £4.8bn - a year by 2029-30.
The think tank says the government did not include the potential impact of plans announced by the previous Conservative government to reform the work capability assessment (WCA) announced in autumn 2023.
This policy would have changed the WCA to make it harder for people to qualify for a higher rate of universal credit on the basis of illness or disability. This would have saved the government £1.6bn and potentially pushed 100,000 people into poverty.
These proposals were ruled unlawful by the High Court in January 2025. However, Labour has been accused of including in its spring statement assessment that it has effectively "spent" £1.6bn by scrapping potential savings that never existed - and, at the same, downplayed by 100,000 the number of people projected to be pushed into poverty.
However, the Institute of Fiscal Studies thinks mapping the extent of the cuts is 'relatively uncertain, and believes the savings could actually be a lot less than the government thinks.
'The impact of reforms to assessment criteria is more difficult to predict than the effect of changes in amounts paid, as the way claimants approach the assessment is likely to change in response," the IFS said in March 'Previous governments attempting similar reforms have found that they have saved much less than hoped.'
According to the government's independent financial watchdog Office for Budget Responsibility, spending on health and disability benefits is projected to increase in the coming years, regardless of any cuts in the coming months.
Starmer made his feelings about the benefits bill clear in March this year when he described it as "unsustainable, indefensible and unfair".
But just how big is it?
According to the government's own spending figures, the previous Conservative administration spent £1,095bn in 2023-4, with £361bn of that figure allocated to welfare – close to a third of its overall budget.
That included £141 billion on the state pension and £220bn on other welfare, like universal credit.
Drilling down even further into the welfare budget, the £75 billion spent on sickness and disability benefits in 2023/24 is more than the total departmental expenditure on defence (£57 billion) and transport (£46 billion), but well below the figure for education (£111 billion) and overall health and social care spending (£221 billion), according to Treasury data.
However, spending on the welfare bill is set to increase, with the OBR identifying two key factors.
The first is higher spending on pensioners, which could increase by 29%.
This is because of the UK's ageing population and the 'triple lock', which guarantees pensions will rise each year by whichever is highest: the annual rate of inflation, average growth in earnings, or 2.5%.
The second factor is the rise in the caseload of people receiving health and disability benefits - the very reason Starmer is looking slash it in the coming years.