Factsheet: Health-related benefit cuts

After months of speculation on the nature of a range of potential cuts to health-related benefits, the publication of the Government’s green paper is expected soon. Liz Kendall is expected to set out the detail of these spending cuts in a speech in the coming days.  

New analysis from NEF and JRF examines the consequences of potential cuts and reveals the elevated levels of hardship that those receiving health-related benefits face compared with those who do not: 

• 50% of people receiving the health-related element of Universal Credit (LCWRA) are either unable to heat their home, behind on bills, or have low or very low food security, compared to 11% in households not receiving any UC or Personal Independence Payments (PIP). 

• There are 900,000 children living in a household where someone receives LCWRA, the main health-related benefit for those receiving UC. 

Recipients of health-related benefits are disproportionately at risk of food insecurity: 

• Almost a quarter (24%) of working-age adults in a family receiving health-related UC have had to use a foodbank in the last year, compared to 3% of all working-age adults and 17% of working-age adults receiving non-health-related UC. 

• Almost half (48%) of adults in a household where someone claims health-related UC are also in a household without reliable access to enough affordable, nutritious, healthy food, compared to 11% of all working-age adults. 

 
JRF Senior Policy Adviser Iain Porter said:  
 
"Many people will be waiting anxiously to hear what the government is planning in their upcoming green paper but talk of cutting billions is causing deep fear among people with serious and ongoing health problems. Almost a quarter of working-age adults in a family receiving these benefits have had to use a foodbank in the last year, and further hardship will do nothing to improve the nation’s health. 

“The green paper needs to address the underlying causes of poor health, support people to stay in work where they can, and make moving into work a safer option for people who feel unable to take the risk of losing their benefits if a job doesn’t work out. 

“The Chancellor has an unenviable task but she does have choices, and in an increasingly uncertain world, the financial pain and risk shouldn’t be passed on to those who can least afford it in the form of cuts”.  

Consequences of government’s options for cuts  

People receiving health-related benefits already face some of the highest rates of material deprivation in the population, meaning these cuts are set to damage the living standards of some of the poorest people in our society.  

The new analysis carried out by NEF and JRF shows that 72% of people receiving LCWRA or PIP are in the lower half of the income distribution, rising to 89% for those only receiving the LCWRA component of UC. 

These cuts would damage the financial security of these low- and medium-income families the most. There are several possible ways the government might be able to achieve their desired level of cuts: 

• If the Government wants to achieve the previous Government’s annual £2 billion cuts, either 448,000 fewer people would be awarded the LCWRA because of restricted eligibility, or the LCWRA would need to be cut by around a third (34%) for new claimants from mid-2025. This means new claimants in 2025/26 would miss out on around £1,700 per year. 

• If the Government pursues double the previous Government’s annual cuts by 2029/30 (£4 billion), we estimate that would see either around 1.1 million fewer people receiving LCWRA in 2029/30, or LCWRA element being cut for new claimants by two-thirds (67%, or £3,400 in 2025/26). 

The Government may instead decide to focus on PIP for the cuts they have proposed:  

• Reducing PIP expenditure by £2.0 billion in 2029/30 would require at least 310,000 fewer people to be receiving PIP in that year, or for the average PIP award in 2029/30 to be 7% lower in value than planned.  

• The government may decide to do this by freezing the value of PIP awards, in contrast with benefits uprating which is projected to be around 9.4% over the course of this parliament.  

• Reducing PIP expenditure by £4 billion would mean at least 630,000 fewer people receiving PIP, or a 15% cut in real terms to projected PIP values for 2029/30. 

Which health-related benefits are at risk? 

Incapacity (or ‘sickness’) benefits including the Limited Capability for Work and Work-related Activity (LCWRA) and Limited Capability for Work (LCW) elements of UC and the older Employment and Support Allowance (ESA), and disability benefits including PIP are touted to be those that are most likely to be subject to cuts or reforms. 

The current Government has committed to at least the same level of savings - £2 billion a year from 2029/30 - from health-related benefits as those that would have been made by the previous Government’s proposed changes to the Work Capability Assessment (WCA).  

These changes proposed restricting eligibility through the ‘activities and descriptors’ criteria of the WCA for new claimants, meaning an estimated 448,000 fewer people would be eligible for LCWRA in 2029/30. 

Why the rationale for these cuts must be questioned  

Overall spending on benefits for working age adults and children is currently 5.0% of GDP, which is similar to twenty years ago (4.7% in 2005/06), and is forecast to remain roughly at this level until 2029/30 (5.1%).  

• While spending on health-related benefits for children and working-age people increased from 1.2% of GDP in 2005/06 to 2.2% in 2025/26, this has largely been offset by falling spending on other benefits for this age group, from 3.5% of GDP in 2005/06 to 2.8% in 2025/26. 

• Spending on benefits for pensioners has risen from 5.3% of GDP to 6.0% over the same period. 

The latest analysis from the Department for Work and Pensions itself, published in January 2025, showed that 30% of the growth in incapacity benefit caseload between 2018 and 2023 is explained by the rise in State Pension Age, demographic changes and structural differences between Universal Credit and its legacy benefit equivalents. This would go against the idea that this increase is solely down to people now claiming benefits as a lifestyle choice. 

• The growth in PIP applications accounted for 90% of increased onflows between 2018/19 and 2022/23, with the approval rate for PIP actually falling from 55% to 51% during this period. 

• The OBR also forecasted that the previous Government’s announced WCA criteria restrictions would result in 424,000 fewer people receiving LCWRA by 2028/29, yet only 15,400 more people (or 3% of those affected) moving into work. 

A range of evidence sources, including NHS data, suggest that there has been an increase in working-age poor health and disability that is broadly consistent with the scale of growth in the number of people receiving these benefits. This runs contrary to the idea that more people are receiving these benefits than should be and that spending is ‘spiralling’ out of control. 

Additionally, in a survey by JRF and Scope conducted last year, 78% of people on incapacity benefits who feared their benefits being affected if they engaged with support said it was because of the risk of being sanctioned. This suggests that further restrictions on eligibility for benefit payments would have a limited impact on people’s willingness to engage with employment support. 

What is the alternative?  

Any redesign of the system of health-related benefits should be co-produced with the people who rely on this support, to harness their expertise and build trust in a reformed system. It cannot be based on achieving a specific arbitrary cost saving. 

The Government should give its ‘Get Britain Working’ white paper, published in November 2024, the best chance of success by focusing on addressing the underlying causes of increasing poor health, helping more people to stay in work when they are struggling with their health, rebuilding trust with benefits recipients by ‘de-risking’ their journey back into work and ensuring that suitable job opportunities and support are available to those able to take them. 

A ‘work transition guarantee’ that prevents people being reassessed for at least 18 months if they take steps towards work should be implemented. This should also put in place a guarantee of returning to their previous benefits status if they move into work but need to reclaim. The Government should also increase Universal Credit’s work allowance for disabled people. 

What are the main health-related benefits? 

Health-related benefits in the UK generally fall into two categories - 'incapacity’ (or ‘sickness’) benefits and disability benefits.  

Incapacity benefits supplement incomes for people whose health is judged to limit their ability to work. They are mostly means-tested, with new claimants receiving additional support through Universal Credit (UC). Recipients of UC that are assessed to have ‘limited capability for work-related activity’ (LCWRA) receives an additional £5,000 a year on top the rest of their UC award and are exempted from requirements to look for a job. Those assessed as having a ‘limited capability for work’ (LCW) are judged to have a less severe incapacity. They are exempted from certain job-search requirements and used to receive some additional financial support but this was removed in 2017. 

Disability benefits are intended to help cover additional living costs faced by people with disabilities. SCOPE calculates that on average, disabled households need an additional £1,010 a month to have the same standard of living as non-disabled households. Personal independence payment (PIP) is the main disability benefit for working-age adults in the UK. It is not means-tested and provides support of £1,500 to £9,610 a year. Eligibility and the level of support depend on an assessment of the applicant’s ability or inability to do a range of tasks. Over the last 11 years, PIP has gradually replaced disability living allowance (DLA) for adults, although 6% of disability benefit claimants aged 16–64 still receive DLA. Scotland has also recently begun to replace PIP with its own benefit called the Adult Disability Payment.