Is reform of the welfare system still possible?

Times

7 hours ago

During the chaotic debate that led to the implosion of the government's disability benefit reforms, Liz Kendall, the work and pensions secretary, acknowledged: 'Welfare reform is never easy, especially perhaps for Labour governments.' The question after her full-scale retreat on disability benefit cuts is whether it is possible at all.
How did we get here?
Alarm has been growing over the surge in sickness benefit claims since Covid, with total spending of £81 billion this year, almost £30 billion higher than in 2019. Numbers claiming both for incapacity, because they cannot work, and disability, to compensate for the extra costs of sickness, have been rising. But the jump in the latter is been particularly stark: a thousand people a day start claiming, double pre-pandemic levels, and another two million claimants are projected by the end of the decade. The Conservatives announced plans to deal with it shortly before losing power and Labour took office pledging to control spending.
What was Labour proposing?
As well as an overhaul of Jobcentres and employment services, Kendall is pledging contentious reforms to benefits to get people back to work. This included a new requirement on the long-term sick to discuss plans to get back to work, and halving of incapacity benefit for new claimants to increase incentives to get a job. But the most controversial were cost-cutting plans that would have made it harder to claim personal independence payments (PIP), the main disability benefit. These were junked in a chaotic climbdown in the face of a mass revolt from Labour MPs.
What's left?
The universal credit health element will still be halved for new claimants deemed unfit to work, costing 730,000 people about £3,000 a year, while Labour MPs have largely accept the long-term sick do need to do more to consider work. A ban on those under 22 claiming incapacity benefits also remains. But so too does extra spending from boosting the standard rate of universal credit for 3.9 million people who get an extra £265 a year, cancelling previous Tory cuts and boosting spending on employment support by £1 billion a year.
What happens now?
Sir Stephen Timms, the disability minister, will lead a review into the future of PIP, promising that this will be 'co-produced' with disability groups and will not set out to make savings. Tom Pollard of the New Economics Foundation think tank, said it was possible this would lead to plans that could enjoy widespread support while controlling costs, but warned: 'There has been a lot of trust lost, and disability groups will go in alert to the idea that the government wants to save money, so the risk is you end up with a stalemate through lack of trust.'
Campaigners said that the cuts to public services and restrictions on social welfare would be detrimental to people receiving disability assistance
CARL COURT/GETTY IMAGES
Politically will Labour MPs accept welfare reform?
Most Labour MPs agree that Kendall's case for reform is strong. One loyalist said that PIP has 'become totally unmoored from its original purpose' and that more fundamental rethinking is now needed. But no one can agree who should lose out: squaring the circle of pleasing disability groups while saving money appears all but impossible. Ben Zaranko of the Institute for Fiscal Studies warns that 'there is no way to save big sums without taking big sums off people who are currently classed as disabled', and many Labour MPs have shown they will not accept this. Even the loyalists have been burnt by repeatedly defending contentious changes which were subsequently junked.
What happens if welfare is not reformed?
Spending on sickness benefit is back on course to top £100 billion by the end of the parliament, leaving less for public services. Zaranko warned that the benefits system 'clearly isn't on a sustainable trajectory' and that any government would have to make changes. 'We do need to have a view about slowing that rise and targeting support at those who need it most,' he said.
When can the government expect savings?
Most now accept that any reforms are going to take too long for the government to persuade the Office for Budget Responsibility to bank savings in the short term. Deven Ghelani, director of the consultancy Policy in Practice and one of the architects of the universal credit system, said the reforms were 'bungled because Treasury-led reforms don't work. While the government can score the savings at the start of the parliament, they are never able to deliver on them.' MPs and experts point out that welfare reform is notoriously slow — universal credit was introduced more than a decade ago and many claimants will not move on to it until next year.
What other ideas are there?
With MPs saying that 'tinkering' has not worked, there may be appetite for more radical options. The Centre for Social Justice has suggested those with milder mental health conditions should no longer be able to claim, with a portion of the savings ploughed back into NHS therapy. Joe Shalam, its director of policy and former DWP adviser, said that 'all is not lost for welfare reform', arguing: 'By targeting mental health benefits and investing in therapy and back-to-work support, ministers will save money and change lives'. Zaranko said PIP was 'designed with an old-fashioned view of disability when a lot of the fastest growth has been for mental health conditions'. He suggested that it should be 'redesigned from the bottom up. We need to think about what the most appropriate kind of support is, which for some people may be counselling'.
What about addressing the underlying problems?
While benefit claims have outpaced the rise in disability, there is no doubt we are becoming sicker. 'What's going on in the benefits system is symptomatic of an ill society where there is poor health, poor public services and a lot of poverty,' Pollard said. 'Ultimately the path to savings is to have fewer health problems because you're spending more on prevention.' Yet in the short term, that too is very costly. Whatever the future for welfare reform, the certainty is that there is no quick fix.