It is time for Labour to ‘think the unthinkable’ on welfare once more

9 March 2025, 10:01

The Government faces tough choices on welfare.

For Liz Kendall, Work and Pensions Secretary, health and disability benefits are ‘broken’; some claimants she says, ‘taking the mickey’. 

The Chancellor eyes cuts to balance the books and to enable an uplift to defence spending.

Any reforms to welfare will be controversial. 

But they are sorely needed. We have to be honest: our compassion as a nation currently outstrips our means.

The OBR estimates spending on health and disability benefits could reach £100bn by 2030 – equivalent to one in every four pounds of income tax raised.

Individuals in the so-called ‘Limited Capability for Work and Work-Related Activity’ cohort of Universal Credit (where there is no obligation to seek work) has increased to 2.5 million individuals – an increase of 35% over the past five years.

Awards of the Personal Independence Payment (PIP), a disability benefit designed to cover additional costs of disability, for ‘psychiatric conditions’ (including anxiety and depression) grew from an average of 2,600 per month in 2019 to 5,700 by 2024.

A new report from Policy Exchange – of which I am a co-author – states the system isn’t working fiscally, technically or morally.  

Backed by the Labour Peer and former Work and Pensions Secretary, Rt Hon Lord Blunkett, he is clear reform will be “painful and vital”.

So what should the Government do? 

Tweaks to criteria to limit eligibility whilst softening the blow with employment support look likely, but the Government should use the opportunity to kick-start a broader, national conversation.

Incentives in the system need fundamentally rewiring.

Claimants currently prove what they cannot do, rather than what they can; greater expectation should be placed on claimants to engage, balanced by more appropriate and connected support.

Policy Exchange make the case for a radical reform to PIP so it becomes a ‘conditional’ benefit for those under 30, with a requirement to engage (by working, volunteering or  studying) – except in exceptional circumstances.

We also propose creating a ‘Single Assessment’ to reduce backlogs and to ensure medical evidence is provided to support every claim. (In 20% of Universal Credit Health claims this isn’t the case.)

We should enable assessors to refer claimants to other support during the assessment process itself (such as to the DWP programme, Access to Work).

None of the options facing Government are straightforward, but reform is firmly in the national interest. 

It is time for Labour to ‘think the unthinkable’ on welfare once more.

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Sean Phillips is Head of Health and Social Care at Policy Exchange

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