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Tensions within the Labour party were growing on Monday as work and pensions secretary Liz Kendall prepared to unveil plans to slash about £5bn a year from government spending on health-related benefits.
Kendall will set out her plans in a welfare reform green paper on Tuesday, with Downing Street insisting there was a “moral and economic case for fixing our broken system”.
Dozens of Labour MPs have expressed concerns about withdrawing or cutting support for those in need, and several ministers raised objections with Prime Minister Sir Keir Starmer at last week’s cabinet meeting.
Andy Burnham, mayor of Greater Manchester, said he was concerned about changing support and eligibility to benefits, saying “it would trap too many people in poverty”.
Veteran Labour MP Diane Abbott said on Monday that “cutting the money for disabled people is not a Labour thing to do”.
But a spokesman for Starmer said the “system is not working as intended” and highlighted the recent explosion of mental health related claims for sickness and disability benefits.
“Many of the assessment systems were designed over a decade ago and have not been touched since,” he said. Labour officials said the reforms would save about £5bn a year by the end of the parliament.
The cuts will help chancellor Rachel Reeves fix a hole in the public finances caused by slow growth and rising borrowing costs.
The £9.9bn of headroom within Reeves’ fiscal rules at October’s Budget has been largely or completely wiped out, according to government officials. The rules say that current spending must be covered by tax revenues by 2029-30.
The government had floated the idea of freezing the level of disability benefits, referred to as Personal Independence Payments. But ministers backed away from the move after a fierce Labour backlash.
Louise Murphy, of the Resolution Foundation, said that a multiyear freeze in PIP rates would have saved £600mn in 2026-7, rising to £3.3bn by 2029-30 as the caseload of claimants increased.
However, some Labour MPs believe a benefits freeze — which would have hit disabled people in severe need — was never a serious idea. “It was a classic ‘bleeding stump’ tactic,” said one senior MP. “To make it look like they’ve made concessions and the actual cuts aren’t as bad.”
Government officials insist the idea was on the table, but was ditched. “Things weren’t properly thought through,” said one. “The original idea was to announce the plan last week, but we weren’t ready and cabinet ministers felt — correctly — that they were being bounced.”
Health secretary Wes Streeting said on Sunday the UK was “overdiagnosing” mental health conditions as he prepared the ground for reforms expected to slash support for people with psychiatric problems.
Streeting told the BBC: “Mental wellbeing, illness, it’s a spectrum and I think definitely there’s an overdiagnosis but there’s [also] too many people being written off.”
Downing Street held a series of briefings with Labour MPs last week to try to quell concern and frustration about the cuts, but many members are still deeply uncomfortable.
Kendall is also expected to slash the highest level of incapacity support — which provides an additional £416 per month — while increasing the basic rate of support for people who are out of work, known as universal credit, according to people briefed on the move.
Experts have long argued that the low level of unemployment benefit has driven more people with underlying health conditions to claim for additional incapacity and disability benefits.
However, to reach the kinds of savings the Treasury is targeting will also require big cuts to support for disabled and sick people, in order to boost payments to the larger number on the basic rate.
Much bigger savings could be achieved by restricting eligibility for PIP, a move that is expected to feature in Kendall’s plan. People claiming disability support for mental health conditions are likely to be most affected.
Payments are expected to be denied to about 1mn people, including those with mental health conditions and those who struggle with washing, eating and dressing themselves. People in need of a hearing aid are also expected to fall below the new threshold and could lose out on payments.
