The UK’s welfare system is facing increasing scrutiny amid warnings that the Department for Work and Pensions (DWP) could become a major source of fiscal strain by the end of the decade. A report by the think tank Onward forecasts that benefits spending could increase by a fifth (20%) by 2030, raising the annual cost per taxpayer to £3,000, up from £2,650 today.
According to BirminghamMail, concerns have been raised over how inflation-linked uprating of payments such as Universal Credit and PIP may impact long-term public finances. The DWP has acknowledged the need for reform but offered limited detail so far.
Think Tank Warns of Fiscal Crisis and Unsustainable Trajectory
Writing in The Telegraph, Sir Simon Clarke, director of Onward and former Chief Secretary to the Treasury, warned:
Britain is sliding towards a fiscal crisis of historic proportions. A country that once prided itself on fiscal rectitude now risks becoming the sick man of the G7.
The report identifies inflation-linked increases to Universal Credit, Personal Independence Payment (PIP), and other benefits as a major driver of the projected surge in welfare spending. According to Onward, these policies risk making the welfare system fiscally unsustainable, especially in the context of an ageing population.
Sir Simon also raised political concerns:
We now have a Parliament dominated by Labour MPs who are apparently totally unable to countenance any reductions in public spending.
Inflation Uprating and Disability Benefit Growth Under Fire
A central focus of the report is the government’s practice of uprating benefits in line with inflation. While intended to protect recipients from rising living costs, Onward argues that this mechanism has escalated public spending beyond manageable levels. If this trend continues, welfare spending alone could consume a disproportionate share of future budgets.
The think tank singles out PIP, highlighting its “relative generosity” as a key reason behind increased disability claims. This, they argue, creates incentives for claimants and further strains the system.
The report also criticizes the state pension triple lock, calling it “disastrous for the long-term sustainability of the public finances.”
Failed Reform Attempts Highlight Political Tension
Onward notes that earlier this year, the government attempted to implement welfare reforms, but the effort collapsed under political pressure. Sir Simon described it as a “humiliating retreat” that left ministers in the “ludicrous position of actually increasing the total cost to the taxpayer.”
The report suggests that the Labour-led Parliament is unlikely to pursue meaningful cost-saving measures, further complicating long-term fiscal planning.
DWP Defends Current Strategy
In response, a DWP spokesperson said:
We inherited a broken welfare system and spiralling benefits bill. That’s why we’re taking action and reforming the system so it genuinely supports those who can work into employment, while ensuring there is always a safety net for the most vulnerable, and putting the welfare bill on a sustainable footing.
The department emphasised its ongoing reform plans, aimed at reducing disincentives to work and helping those with health conditions find employment. These efforts are supported by £3.8 billion in employment support across the current Parliament.
The spokesperson added:
Our reforms will rebalance Universal Credit rates to reduce the perverse incentives that discourage work and fuel inactivity, alongside genuinely helping sick or disabled people into good, secure work.
