IFS: Changes to benefit reforms reduce saving from bill by £3bn in 2029-30 but create huge difference in support between claimants

The government have announced changes to their planned reforms to the benefit system. As well as changes to employment support – details of which are yet to be clarified – the new package slows the speed at which the benefit reforms are implemented. The initial benefit reforms would have saved the government £5.5billion by 2029–30. The revised package of reforms will save only £2.5 billion, so will cost the government £3.0 billion relative to their previous plans. 

• The first change is to not apply the new, tighter assessment for existing claimants of personal independence payment (PIP) at the point of being reassessed. This is set to affect 370,000 current claimants in 2029–30, benefiting them to the tune of around £4,150 per year on average (in today's prices). It will also indirectly benefit around 50,000 claimants of carer's allowance who look after a PIP claimant, by £4,340 per year. 

• The second change is to the universal credit (UC) health element, paid to those who have a condition that prevents them working. The previous plan had been to freeze this element for existing claimants and roughly halve, then freeze, it for most new claimants. The precise detail here is slightly ambiguous, but the new policy seems to be to no longer freeze the element for existing claimants (the halving and freezing for new claimants will continue). This will benefit 2.2 million claimants of the benefit in 2029–30 by £450 per year. Some will gain from both this and the PIP policy. 

Together these two changes mean that the cuts are only on new claimants. This creates a large difference in treatment depending on the timing of disability onset. Take two people who develop the exact same health problems, but one develops them just early enough (before November 2026) to qualify as an ‘existing claimant' and one just too late. The first is assessed for PIP and UC health element under the current rules and receives £8,930 in total – £3,850 from PIP and £5,080 from UC health element. The second is assessed under the new rules – because of the tighter criteria they do not qualify for PIP, and they receive the new lower UC health element, which after the freeze will be worth £2,370 (in today's prices). If the government go ahead with their proposed plans to scrap the work capability assessment, the second claimant would receive no specific support for health conditions at all. These differences would persist indefinitely, in some cases for many years. 

Had these new changes been announced ahead of the Spring Statement, instead of maintaining her “headroom” against her main fiscal rule at £9.9 billion she would have seen it drop to less than £7 billion. These changes make further tax rises in the Autumn budget, which will mainly be dependent on how economic forecasts change, even more likely.  

Tom Waters, an Associate Director at IFS, said: 

“These changes more than halve the saving of the package of reforms as a whole, making the Chancellor's already difficult Budget balancing act that much harder. The decision is to protect existing health-related benefit claimants from the reforms, thereby making the savings entirely from new claimants to these benefits. This will create big differences – thousands of pounds a year, for many years in some cases – between similar people with similar health conditions who happen to have applied at a slightly different time.” 

ENDS

Notes to Editor

• The £5.5 billion figure here includes £4.6 billion of savings from disability and incapacity benefit claimants, a £0.5 billion saving from knock-on impacts of proposed reforms on carer's allowance and a £0.4 billion saving from reduced funding to Scottish government where disability benefits are devolved.
• Not all figures sum, due to rounding. 
• All figures in this press release are in 2025–26 prices. All claimant numbers exclude disability benefit claimants in Scotland, where they are devolved.  
• The government have also decided to not freeze the additional premium to UC health element they plan to introduce. We have not included this in the above figures. 
• The government have also decided to bring forward the employment support package, but precise details are yet to be specified. The above numbers do not include this.
• There are some slight inconsistencies between different sources for costings of original reforms. We use figures from OBR Economic and Fiscal Outlook March 2025, wherever possible.