Proposed cuts could potentially target new claims and end-of-award reviews for Personal Independence Payment (PIP), the Department for Work and Pensions has suggested.
The department is exploring ways to curb the escalating expenditure on the disability benefit, which currently supports approximately 3.5 million claimants.
Suggestions under consideration in the Modernising Support for Independent Living: The Health and Disability Green Paper include replacing PIP cash payments with vouchers, grants and shopping catalogues that would allow beneficiaries to secure medical treatments and equipment.
At this time, over 80,000 PIP applications are submitted each month, with about 33,000 new awards granted.
In light of an expected surge in PIP approvals, whose annual cost to the taxpayer is projected to reach £28 billion by 2028/29 reflecting a 110 per cent spending increase since 2019 the DWP aims to make the benefit more responsive to specific disability costs.
While these proposals were initially introduced by the previous Conservative government, the current Labour leadership states it will closely examine these recommendations and the feedback received after the consultation ended on July 22.
The leadership has expressed its commitment to “support more disabled people and those with health conditions into work.”
The Institute For Fiscal Studies has signalled that a potential crackdown on PIP could lead the DWP to enforce a tougher stance on new applications and reassessments when current awards end, as these are the most viable options to rein in escalating costs.
However, such actions would likely mean that any substantial cuts in spending may be slow to emerge.
PIP is usually awarded for periods ranging from nine months to an entire decade, after which the claim is reviewed to decide if it should be decreased, increased, kept the same, or stopped altogether.
Some claims are ‘short-term’, ending automatically after two years or less, while others are ‘ongoing’ with no fixed termination date, requiring just a light-touch review after 10 years to confirm that no alterations are needed.
The IFS said: “Rather than rapidly reassessing all existing claimants, reforms like these often apply only to new claims and end-of-award reassessments, and they should certainly be carefully piloted before being rolled out. This means that any reductions in benefit spending can often take quite a while to realise.
“In this context, it might be worth noting that just before the May 2015 general election the Conservative Party Manifesto committed to delivering £12 billion a year in cuts to the working-age benefits bill by 201718.
“A few weeks later in the July 2015 Budget they did indeed set out measures that were costed as reducing spending by £12 billion a year, but only by the fourth year of the Parliament.”
Tom Waters, Associate Director at the Institute for Fiscal Studies, commented: “The number of people receiving financial support from the government for a health-related benefit has increased sharply since the pandemic and is forecast to continue growing. This is one of the big drivers of the large increase in public spending since 2019 and into the next parliament.
“So it is understandable that whoever is in office after the election should want to take a careful look at this. And reducing the scope of the state is one possible response to the broader public finance challenges that we face. The most substantial proposal that is not already baked into the forecast is one intended to reduce the numbers who are able to receive disability benefits on the basis of a mental health condition. Cuts are certainly possible.
“But history suggests that reductions in spending are often much harder to realise than is claimed. Delivering an additional £12 billion saving from this set of measures relative to what was forecast in the March Budget looks difficult in the extreme. That said, even if it was achieved, it would still only leave spending around its current level.”
