Gen Z with anxiety and depression to get universal credit cut

Young people will be blocked from claiming out of work sickness benefits under plans to tackle rising worklessness linked to mental health conditions.

Hundreds of thousands of disability benefit claimants are also set to lose their entitlement under the sweeping reforms, announced by the government today.

Work and Pensions Secretary Liz Kendall said she would “fix the broken benefits system” to ensure no one is locked out of employment as she revealed how she intends to make £5bn of savings by 2030.

But ministers faced a Labour backlash after unveiling the cuts with MPs accusing them of echoing “Tory austerity”.

The savings, announced by Kendall in the Commons, will largely come from restricting eligibility for the personal independence payment (Pip) – the disability benefit awarded regardless of work status – with hundreds of thousands due to lose entitlements.

And money will be saved by cutting the health element of universal credit, awarded to people who are on unemployment benefits and who are assessed as being unable to work due to sickness.

Ministers said they want to end the disparity between how much a person can claim on unemployment versus sickness benefits.

Currently a person can receive hundreds of pounds a month more if they are deemed to have a condition preventing them from working and the government believes this is incentivising a rise in claims.

Young people and universal credit

A plan to block those under the age of 22 from being able to claim the UC health element will be consulted on by ministers.

It is not clear how many people this would impact and whether it would mean those currently entitled to additional benefits losing out, although ministers said those with the most severe conditions would be protected.

Kendall said she wanted to ensure “every young person is earning or learning”, warning 1 in 8 of all young people in the country are not in employment, training or education.

The government said nearly 3 million people are not working due to ill health, an increase of nearly 800,000 since 2019, and the number of those aged 16 to 34 who are economically inactive specifically due to a mental health condition has increased by over a quarter in the last year alone, to 270,000.

An ONS work force survey in 2023 found mental health problems including depression and anxiety, affected more than a third of the 16- to 34-year-olds (36 per cent) who were out of work due to long-term illness.

While the Green Paper does not cite anxiety or depression specifically, DWP figures show that 454,000 people were claiming Pip for either anxiety or depression disorders in October 2024.

Pip reforms

The work capability assessment – which looks at whether someone can work or not – will be scrapped, ending the link between sickness and ability to work, the government said.

The Pip assessment process will be reformed and relied upon as a single way of considering whether someone should be receiving disability benefits.

Analysis by the Institute for Fiscal Studies (IFS) suggests some 600,000 people who currently qualify for the health element of universal credit could lose their additional income due to the change.

Kendall ruled out freezing Pip, making the benefit means-tested or replacing it with a voucher system

But she will be legislating to tighten the eligibility by introducing a higher threshold for someone to qualify.

People who only score the lowest points on each of the assessed daily living activities “will lose their entitlement in future”.

It is understood the legislation will be introduced in this parliamentary session.

Kendall announced an above-inflation rise in the standard allowance for universal credit by 2029/30 and a a new “right to try” work policy which will prevent people from immediately losing benefit entitlement if they move into employment.

As part of its reforms, the Government also said it will invest an additional £1 billion a year by 2029/2030 to help support people into work including through one-to-one help.

The IFS said the savings from the changes “would make it a bigger cut to welfare than seen in any fiscal event since 2015”.

Ministers are understood to be quietly pleased that many Labour MPs have signalled they are willing to support the new rules, with no sign of Cabinet unrest about the decision.

Backbench anger

But some backbenchers, trade unions and disability campaigners have lined up to attack the reforms – claiming they will harm the poorest in society who are unable to get a job.

Labour MP Brian Leishman told The i Paper: “Being disabled comes with extra costs and changing the eligibility for PIP will push even more people into poverty. £5bn of cuts coming from tightening eligibility for PIP and will mean that only the most disabled people will qualify. As always, it will be the most disadvantaged that suffer from austerity, and this is austerity on a devastating scale.”

Speaking in the House of Commons, his colleague Ian Byrne accused ministers of copying “the failed ideology of Tory austerity”.

While much of the criticism within Parliament came from the left of Labour, some backbenchers seen as more centrist also intervened.

Chris Webb, the MP for Blackpool South, said: “I represent the second most deprived constituency in the United Kingdom, where nearly one in two children are living in poverty, and I worry about the impact that these measures could have on child poverty numbers.”

Paul Nowak, head of the Trades Union Congress, called for the Government to water down its plans – saying: “We urge ministers to reconsider the scale of proposed cuts in disabled people’s incomes. Disabled people who are unable to work must not be pushed further into hardship.”

Christine McAnea of the Unison union, which is a major Labour backer, added: “Going after disabled people and vulnerable families is not the way to get the UK economy back on track, nor out-of-work individuals back into jobs… The Government must listen to concerns and row back on some of its plans.”

And Save the Children UK warned: “We fear child poverty levels will rise in families where someone has a disability as a direct result of these reforms.”

The Conservatives welcomed the push for reform but accused the Government of undermining the jobs market with its other policies.

Helen Whately, the shadow Work and Pensions Secretary, said: “The welfare bill is too high and our country needs the Government to bring it down. Labour opposed this time and again in opposition and their plans today are too little too late.”

A No 10 spokesman said the Government believed there was “currently a broken social security system which is holding people and our country back”.

He added: “The system needs to change, the alternative of doing nothing would be the wrong thing to do. So we appreciate these are difficult decisions, but it is the right thing to do.”

The Office for Budget Responsibility has forecast that spending on health and disability benefits for working-age adults will increase from £48.5 billion in 2023/24 to £75.7 billion in 2029/30.