Green Paper delivers tiny income gains for up to four million households, at cost of major income losses for those who are too ill to work or no longer qualify for disability benefit support

The Health and Disability Green Paper will boost Universal Credit (UC) support for up to four million families without any health conditions or disability by around £3 a week. But these tiny gains are overshadowed by reforms that risk causing major income losses for those who are too ill to work, or those who no longer qualify for disability benefits, the Resolution Foundation said today (Tuesday).

The Green Paper today sets out major reforms on entrances into the benefits system, entitlements within the system, and exits into work that aim to cut spending by £5 billion a year by the end of the decade, and change how people interact with the system.

The main savings are to be achieved through restricting entitlement to PIP – a benefit that is paid regardless of whether someone is in work, to compensate for the additional costs of being disabled.

The Foundation says that if the Government plans to save £5 billion from restricting PIP by making it harder to qualify for the ‘daily living’ component, this would mean between 800,000 and 1.2 million people losing support of between £4,200 and £6,300 per year by 2029-30.

With seven-in-ten PIP claimants living in families in the poorest half of the income distribution, these losses will be heavily concentrated among lower-income households. This looks like a short-term ‘scored’ savings exercise, rather than a long-term reform, says the Foundation, given that Ministers have also said they will look again at how PIP is assessed in the future.

Further savings are to be achieved by cutting the level of the health-related LWCRA element within UC, which is currently claimed by 1.6 million people. The proposed cuts are focused on young people (aged 16-21), who may no longer be eligible for any extra support, and those who fall ill in the future, as their additional support will be halved, from £97 per week in 2024-25 to £50 per week in 2026-27.

Reinvesting some of the cuts to health-related UC into boosting the basic award for UC (which, at around £3 more per week, is roughly a sixth of the temporary £20 a week uplift to UC during the pandemic), and greater support for the newly unemployed should benefit up to four million families who don’t receive health-related UC.

Reducing the financial gap between health-related and basic UC should reduce the incentive for people to claim incapacity benefits (which, for a single adult, is over twice as much as basic UC at present). Along with the additional employment support provided to people on UC, the Government hopes this will boost employment, although figures will not be available until the Office for Budget Responsibility publishes its spring forecast next week.

Louise Murphy, Senior Economist at the Resolution Foundation, said:

“The package of measures announced in today’s Green Paper should encourage more people into work. But any living standards gains risk being completely over-shadowed by the scale of income losses faced by those who will receive reduced or no support at all – irrespective of whether they’re able to work.

“Around one million people are potentially at risk of losing support from tighter restrictions on PIP, while young people and those who fall ill in the future will lose support from a huge scaling back of incapacity benefits.

“The irony of this Health and Disability Green Paper is that the main beneficiaries are those without health problems or a disability. And while it includes some sensible reforms, too many of the proposals have been driven by the need for short-term savings to meet fiscal rules, rather than long-term reform. The result risks being a major income shock for millions of low-income households.”