IFS: Options for adjustments to the universal credit and personal independence payment bill

Next week's benefits bill includes reforms from the government's Green Paper which are set to cut spending by around £5 billion in 2029–30. The long-run legacy of the Green Paper reforms as a whole will be bigger still, eventually representing an £11 billion per year cut. There is significant speculation that some of the measures may be scaled back. In this press notice we briefly discuss some of the government's options. 

• Adjust the personal independence payment (PIP) health assessment plans. Under the proposals, as well as scoring at least eight ‘points' at the PIP health assessment, a claimant must get four or more points on at least one ‘daily living activity' to receive the daily living element of the benefit. One adjustment would be to reduce the four point requirement to three. Compared to the bill as it stands, this would increase eligibility by 190,000 and spending in 2029–30 by £0.8 billion. 

• Protect existing PIP recipients indefinitely. The bill proposes reassessing existing claimants under the tighter system at their next health reassessment, meaning some will lose eligibility. If the tighter system was only applied to new claimants it would increase PIP eligibility by 370,000 and spending by £1.5 billion in 2029–30 compared to the bill as it stands. This would increase the incentive for PIP claimants to remain on PIP, as once they stop claiming it would be harder to restart a claim. In the very long run it would deliver the same savings as the current bill.  

• Reduce the cut to the universal credit health element (UCHE) for new claimants. Claimants of universal credit (UC) who cannot work due to ill health receive an extra element in their UC award. Under the bill's proposals, that amount will be (in today's prices) £4,620 per year for existing claimants, and £2,370 for new claimants, of which there expected to be 700,000 by 2029–30. Giving new claimants £3,370 instead would, compared to the bill as it stands, increase incomes for those 700,000 by £1,000 per year and increase overall spending by £700 million in 2029–30 and significantly more once the policy is fully rolled out.   

• Increase the UC standard allowance further. The bill increases the UC standard allowance by 4.8% in real terms. Doubling this to 9.6% would increase spending by £1.8 billion, benefiting 6.9 million households (both with and without disabilities).  

Of course, there are numerous other ways in which the system could be made more generous compared to current plans. It is worth noting that under any of these proposals there will still be a substantial additional cut as we enter the 2030s and the package is rolled out further. 

Eduin Latimer, a Senior Research Economist at IFS said:

“The sharp increase in spending on health-related benefits since the pandemic has left the government with some hard questions. The existing bill is one approach to those challenges – to slow, though not stop, growth in spending on health-related benefits, and to shift support away from recipients of those benefits towards other claimants. Scaling these measures back somewhat would boost support for claimants with health conditions but naturally would require the government to raise taxes or find other savings elsewhere. In any case, if it passes in anything like its current form, the bill will imply larger cuts as we enter the 2030s and more and more claimants are assessed under the new rules.” 

Table 1. Winners and costs from selected adjustments to existing bill

ENDS

Notes to Editor

• Not all figures in this press release sum, due to rounding.  
• All figures in this press release are in 2025–26 prices. All figures reflect spending in Great Britain excluding spending on disability benefits in Scotland, where they are devolved. 
• Adjustments to PIP to make more eligible would also, compared to the current bill, increase eligibility to carer's allowance. We have not included this in our analysis.