Labour Have Cut £5bn From The Benefits Bill. Here's What Is Going To Change

The government has just unveiled significant cuts to the welfare bill in a bid to save the public purse billions of pounds.

Work and pensions secretary Liz Kendall published a green paper to slash the ballooning benefits bill and boost the country’s struggling economy with more than £5bn of savings by 2029 to 2030.

While unpacking Labour’s plan to get people who can work back into employment, Kendall claimed the current social security system is “failing” those it is supposed to help – and pointed out that one in 10 people of working age now claim a sickness or disability benefit.

The announcement is the most controversial set of reforms Labour has unveiled since it was elected in July last year.

There are fears there could be a significant rebellion from backbenchers over it, while charities and unions have already condemned the “indefensible” move.

Here’s what you need to know about the divisive plan.

Work Capability Assessment (WCA) to be scrapped

Kendall confirmed the WCA – which determines if someone has a health condition or disability which makes them eligible for benefits – would be dropped by 2028.

The 700,000 people who currently undergo a WCA per year will now have a “support conversation” instead.

The government said this means their eligibility for benefits will be based on their health condition and disability rather than their capacity to work.

Kendall’s plan means anyone trying to claim benefits will no longer be categorised into one of two groups – “can or can’t work” – and should reduce the number of assessments they have to go through.

PIP eligibility made stricter 

Personal independence payments help people cover the extra expenses they incur due to their disability. Both those in and out of work can claim it.

The exact amount claimed – up to a maximum £600 a month – depends on a daily living component and a mobility component.

The government confirmed today that PIP will still not be means-tested, nor will the amount paid to claimants be frozen, as had previously been reported.

But the eligibility criteria for the the benefit will be made stricter, meaning around 1 million people will no longer receive it.

Kendall said: “We will legislate for a change in PIP so people will need to score a minimum of four points in at least one activity to qualify for the daily living element of PIP from November 2026.”

This will not affect the mobility component of PIP and only relates to the daily living element.

Universal Credit

Kendall announced the government would be pumping an additional £1bn into the budget for the Universal Credit (UC) standard allowance by 2029-30.

UC supports anyone with a work-limiting health condition or disability who wants it. 

But Kendall also confirmed UC payments are being “rebalanced” from April next year, as the current system sets up “perverse financial incentives”.

The work and pensions secretary claimed those who are too sick to work get paid more than others out of work right now, as the UC health top-up is worth double the standard allowance at £400 a month.

So the health element will be slashed, from £97 per week in 2024-25 to £47 per week for new claimants. Those currently in receipt of it will see their payments frozen at £97 until 2030.

Under-22s will also be prevented from claiming health top-up for universal credit under the reforms.

There will be an additional premium for those with severe lifelong condition that mean they will never be able to work “to give them the financial security they deserve”.

Kendall added that there will be “permanent above-inflation rise to the standard allowance in universal credit for the first time ever” – that works out to a £775 annual increase in cash terms by 2029-30.

Meanwhile, the single person on UC over 25 rate will increase by £7 per week, up to £98 per week in 2026-27.

Those with the most severe life long health conditions will have their incomes protected through an additional premium.

Unemployment insurance

Kendall announced plans to set up “unemployment insurance” which will offer greater income protection for those who have paid into the system, and help them find a job which makes the most of their skills.

Those who receive the health element of universal credit – which is means tested – will still be able to benefit from a work allowance too, under the a new “right to try” regime.

That will mean that claimants will be able to apply for jobs without worrying about potentially losing their benefits.

Kendall said this would give “people the confidence to take the plunge and try work without the fear this will put their benefits at risk”.

What next?

The Office for Budget Responsibility will publish its assessment of Labour’s savings next week, as Rachel Reeves unveils her Spring statement.

The OBR has already forecast that spending on health and disability benefits for working-age adults will increase from £48.5 billion in 2023-24 to £75.7 billion in 2029-30.

Labour’s plan also has to be voted through parliament before it passes into law.