Shelved welfare reforms to cost every taxpayer £700 a year, analysis by think tank reveals

• Ministers rule welfare savings not in scope of Timms Review
• Disability and sickness benefits spending now set for £27 billion increase by 2030, equal to a 3p cut in income tax, as Chancellor weighs tax rises
• Think-tank calls for benefits overhaul at Budget to prevent a “lost generation” of workers

Analysis today lays bare the true cost of the Government's decision to abandon welfare savings, as the Chancellor lays the ground for tax increases at the Autumn Budget.

The Centre for Social Justice (CSJ) warns that the decision by ministers to rule out identifying savings in the Timms Review will sharply increase welfare spending and see millions consigned to a life on benefits.

Analysis by the think-tank shows spending on benefits including Personal Independence Payment (PIP) and Universal Credit Health will now rise from £49.6 billion in 2024 to an estimated £76.8 billion by 2030.

Terms of reference published this week admitted that the Timms Review of disability benefits “will operate within the OBR's projections for future PIP expenditure to ensure it is there to support generations to come”.

Concerns are growing that the welfare system is spiralling out of control. The PIP caseload alone has increased by 1.3 million since the pandemic, with over 800,000 expected to join the benefit by 2030. Claims for anxiety and depression are up over threefold since 2019.

With 39.1 million people paying income tax, the £27.2 billion increase will cost each taxpayer £700 more on average every year by the end of the decade. With the same amount of money, the Chancellor could slash 3p off income tax – with £5 billion left over.

The PIP caseload, currently at 3.8 million, was projected to exceed 4.6 million in 2030. Britain is an outlier among comparable nations in rising sickness and disability claims, according to research by the IFS, with other countries' caseloads staying flat or falling.

The CSJ has repeatedly warned that the current disability and health benefits model traps people out of work, pushes up long-term sickness, and delivers worse outcomes at higher cost.

The CSJ is calling for ministers to act urgently to close the gap between work and welfare and reform mental health benefits, while protecting those unable to work due to a disability.
Its recommendations include:

• Reform mental health benefits: Withdraw UC Health and PIP from those with milder anxiety, depression or ADHD – equivalent to around 1.1 million people – and reset remaining awards to £103 per week. This would save £7.4bn by 2029/30, of which at least £1bn should be reinvested in radically expanded NHS Talking Therapies, social prescribing and employment support.
   
• Support young people into work: Introduce a Future Workforce Credit, an effective tax cut for employers hiring NEETs, funded by removing the UC health element for under-22s. This would get 120,000 young people into jobs while netting £765m in tax and welfare savings.
   
• Build a new Work and Health Service: Funded by £300 million in savings, this would expand the ongoing WorkWell pilots to help more people with workplace adjustments, shifting the responsibility for fit notes away from overstretched GPs.
   
• Reinstate domestic job advertising rules: Require employers to advertise roles to UK workers before recruiting under the visa system.

Joe Shalam, Policy Director at the Centre for Social Justice, said:

“Everyone can see the system is failing.

"Abandoning proper welfare reform while costs surge is a political choice with a £27 billion bill attached.

"That bill lands on every taxpayer, and even worse, a lost generation will be stuck on benefits with no route back to work or independence. It is time for change this Budget.”