IDS benefits warning as universal credit set to be cut for those unable to work

Benefits are set to be cut for people judged unfit to work but increased for those either in or searching for a job in the Government’s controversial welfare reforms, The i Paper understands.

Work and Pensions Secretary Liz Kendall is looking at raising the basic rate of universal credit for those deemed fit to work, currently between £311.68 and £393.45 a month, while cutting payments to those judged to have limited capability for work and work-related activity (LCWRA), which sees awards increased by £416.19 a month.

As a result, someone over the age of 25 could be receiving more than £800 a month with no requirement to look for work, while those seeking employment get less than half the amount.

Ministers are also looking to tighten the eligibility for personal independence payments (PIP) and freeze the benefit so it does not rise with inflation as Chancellor Rachel Reeves seeks £6bn of welfare savings as she scrambles to balance the books ahead of her Spring Statement on 26 March.

But they were warned by Sir Iain Duncan Smith, who quit as work and pensions secretary in 2016 over George Osborne’s abandoned plans to crackdown on PIP, that the plans are doomed to fail because they will require primary legislation, meaning they are likely to trigger multiple bruising Labour rebellions in the Commons and Lords.

Labour support

Sir Keir Starmer told Labour MPs at a Monday night meeting of the Parliamentary Labour Party that the welfare crackdown is required or taxpayers will be left “funding a spiralling bill [of] £70bn a year by 2030” as he warned of a “wasted generation” of young people not in work, education or training.

A Labour MP who supports the Government’s plans said there was support and understanding across the the party about having to change the way incapacity benefits operate for those who are not working after the number of people receiving disability benefits soared by almost half a million in a year, to 4.8 million as of August.

They backed moves to reform universal credit to reduce the incentive for claimants to remain in the not-fit-for-work category, rather than looking for a job if they can, as well as improving the level of tailored support on offer for those who might need more help to get work.

“If I went on universal credit now I would get about £390 but if I was assessed as having a health issue I would be eligible for £810 – more than double. And you are often totally ruled out of having to look for work,” they said.

IDS warning

But Smith, the former Conservative leader, said the Government would struggle to get separate changes to PIP through Parliament as ministers will need to bring forward a bill which would trigger “big rebellions” in the Commons and Lords.

“That is one of the big downsides of benefits on disability – you can’t do them overnight.

“You have to have votes in the Commons on it, votes in the Lords, and the problem is, once you go down that road it takes ages and if you’re lucky you get it through, but there’s a very good chance it doesn’t come through at the end of the day and that’s your problem.

“So getting money out of PIP by freezing it is going to be a longer process than you think.”

He went on: “Any change to the eligibility criteria has got to go through the House, I know this because we went through it in 2016 and I did say to the government then: you are not going to get it through.”

Smith, who rolled out universal credit as pensions minister, recalls saying: “You will be attacked by everyone for doing it, but you won’t get it through, so it’ll be a wasted effort.”

Budget will hamper back-to-work efforts, IDS claims

Smith also warned that last year’s Autumn Budget would make the Government’s mission to get people back into work more difficult because a cut in the threshold at which national insurance is paid from £9,000 to £5,000 would hit part-time jobs which are “critical for starting the process of getting people back into work”.

At the same time the Government had increased the minimum wage which means businesses are “not going to employ so many people”, so “job opportunities will shrink”.

Smith also argued the Government was effectively scrapping zero-hour contracts in its workers’ rights reforms which are often used by those with mental health problems or caring responsibilities.

“The pressure on that means a lot of those jobs that you start people on, [moving] from welfare, are not going to be available.”

The former cabinet minister also warned that the time it is likely to take to make the changes would allow some claimants to find ways of gaming the system and meeting the new eligibility criteria for PIP.

“The internet makes it very difficult to tighten up disability and sickness benefits because people find ways around the rules.

“If you look an insurance company, they will change their eligibility criteria overnight and don’t have to go through the House of Commons and House of Lords.”

It comes after John McTernan, an ally of Sir Tony Blair who was special adviser to then-social security secretary Harriet Harman when she cut lone-parent benefits in 1997, warned that the Government could be forced to abandon the changes to PIP.

“The one lobby that defeated Tony Blair’s welfare reforms wasn’t lone parents – their cut went through despite a massive rebellion.

“It was disability cuts which were ditched once they were floated. The disability lobby is massive and influential because disability itself is distributed widely across the country.”

Helen Whately, the shadow Secretary of State for Work and Pensions, said: “Labour came into office with no plan to get the welfare bill down, and taxpayers have spent £2.5bn so far waiting for them to come up with one.

“Sickness benefits are forecast to cost £100bn by 2030. We can’t afford that – nor is it right for so many people to be relying on the state. The country needs everyone who can work, to work.

“But instead of tackling this problem, Labour are talking about freezing benefits for disabled people instead. That is no substitute for proper welfare reform and does nothing to get people off benefits into work.