A report from the Institute for Fiscal Studies (IFS) indicates that Labour could save approximately £8 billion annually by means-testing disability benefits, specifically targeting middle-class young people with anxiety. The report suggests that limiting Personal Independence Payments (PIP) for individuals under 30 to those with the most severe conditions could further reduce spending by £2.2 billion.
The IFS report proposes that integrating PIP into Universal Credit (UC), which is already means-tested, could achieve a one-third reduction in spending, resulting in an initial saving of £8.2 billion. However, the IFS cautioned that this saving might decrease over time due to 'behavioural responses' as more individuals may claim UC to retain their PIP benefits. Despite this, the think tank maintains that significant savings would still be realized.
Eduin Latimer, a senior research economist at the IFS, noted that reforms to PIP would result in 'losers as well as winners' and emphasized the need for the government to clarify the purpose of PIP. He stated, 'If it is to help disabled people in the greatest need, there is a case for targeting support on those with the most severe disabilities or on the lowest incomes.'
Recent figures from the Department for Work and Pensions (DWP) reveal that over four million people are currently receiving PIP, a record high under Labour. Spending on PIP has escalated from £14 billion in 2019-20 to an expected £25 billion in 2025-26, with forecasts suggesting it could reach £34 billion by 2030-31.
Last year, Labour abandoned plans to reduce the disability benefits bill by £5 billion following internal opposition and instead initiated a review led by social security minister Sir Stephen Timms, which is expected to report this autumn. The IFS has proposed various reforms for PIP ahead of the Timms Review and the upcoming Budget, including the suggestion to stop claims from the 689,000 individuals aged under 30, which could save £5.5 billion annually. However, the IFS acknowledged that many affected individuals have severe disabilities and recommended that PIP be limited to those under 30 with the most severe conditions, potentially saving up to £2.2 billion annually.
Additionally, a separate report from the Re:State think tank, which has influenced the Prime Minister's policies, highlights that the UK has a higher rate of disability benefit claims compared to other countries. The report notes that 7.8% of the UK's working-age population claimed extra-cost benefits due to medical conditions in 2024, a 50% increase since 2016. In contrast, only 0.2% of Denmark's, 0.6% of France's, and 2.5% of Norway's working-age populations claim equivalent benefits.
The report also indicates that the average annual amount received through PIP is £7,420, with 37% of claimants receiving enhanced elements, leading to a maximum total award of £10,120 per year. It describes the UK’s disability benefits as 'generous' by international standards, noting that the maximum payment over a four-week period is significantly higher than that of New Zealand and Denmark. Furthermore, the report points out that PIP claimants receive 'unconditional' cash, which can be spent without needing to provide evidence of costs associated with their conditions, unlike in Denmark, France, New Zealand, Norway, and Sweden, where evidence is required for claims.
Charlotte Pickles, chief executive of Re:State, remarked that the UK has 'confused cash with compassion' and criticized the government for 'breaking the welfare state.'