benefit cuts, USA News (London): Ministers are gearing up to announce major changes to the benefits system in an effort to drive down reliance on Government handouts and get more young people into work. Andy Burnham has said he does not want to see anyone in their 20s on benefits unless they cannot work due to a disability, suggesting a significant shift in policy is on the way.
The Prime Minister has insisted he will not reduce the welfare bill via crude cuts, despite the Institute for Fiscal Studies think-tank saying serious belt-tightening is needed to set the UK economy straight. Welfare spending is forecast to balloon to over £400bn by the end of the decade, with costs largely driven up by inflationary increases to benefits, according to the Office for Budget Responsibility’s latest financial outlook. The entire bill is expected to increase from £333bn in 2025/26 to £431bn in 2030/31, with health and disability benefits set to make up over £100bn of this by 2028/29, rising to over £120bn a year by 2031/32.
Next month, Labour grandee Alan Milburn’s report into youth joblessness and disability minister Stephen Timms’s review into disability benefits will be published. The Government will respond to their recommendations by the end of the year, with a White Paper and legislation to follow in 2027. Milburn has set out to reduce perverse incentives to remaining on benefits rather than taking up work. While Labour wants to avoid restricting benefits for those who need them most, there will inevitably be some tightening of eligibility and the possible removal of welfare support for young people who don’t take up job offers.
Cutting the universal credit health element for under-25s
One proposal being discussed is removing the health element of universal credit for all under 25s and replacing it with an intensive Return to Work scheme. New claimants already saw a monthly reduction from April 2026, down from £429 to £217. The health element is an extra monthly payment added on top of the standard universal credit allowance for claimants with a long-term health condition or disability. Around 184,000 18- to 24-year-olds currently qualify for an additional monthly payment due to a health condition or disability, with no requirement to look for work. The OBR has predicted that the nation will spend £3bn more on this benefit in 2030/31.
Eduin Latimer, senior research economist at the IFS specialising in welfare, said cutting the UC health element or personal independence payments is a natural option for the Government. He told the press that a cut to restrict access to the health element of UC for people aged 25 and under could in theory make savings basically immediately.
Replacing the personal independence payment
Around four million under-25s currently qualify for PIP, a non-means-tested benefit that helps with extra living costs for those with a long-term physical or mental health condition or disability. But the Timms Review is now evaluating the system in England and Wales and considering potential alternatives to help support people into work. Timms said the review is looking at whether the welfare system can direct people towards help in addition to or, in some cases, perhaps instead of a cash payment.
It comes as Milburn found that nearly half of PIP claims among young people are for autism and ADHD. While Milburn’s report is expected to make savings eventually under a decade-long plan, the Timms proposals have not been designed to make cuts. However, more than half of voters believe young people claiming disability benefits should be hit with sanctions if they turn down employment opportunities, polling suggests.
Tough approach to those who don’t take up jobs
Chancellor John Healey did not specifically mention sanctions for young people who don’t take up job offers, but he did suggest a tough approach to those who refuse work and training. He stated they expect young people to take up offers, which is the way to bring welfare bills down in the long term.
Latimer noted that adding work-related sanctions to PIP is a trade-off, saving money by decreasing the number of people meeting conditions while potentially restricting people with severe disabilities. Ministers have been clear that the package will come alongside intensive employment support, with Milburn expected to propose reforms under a new participation system starting with career plans in school from age 14. The Department for Work and Pensions has already invested £3.5bn in employment support alongside a £2.5bn investment in youth employment over the next three years.
