The UK government is preparing to reduce its welfare spending, with Chancellor Rachel Reeves expected to announce “several billion pounds” in cuts during the Spring Statement.
The move comes amid concerns over the sustainability of the welfare budget, which has grown significantly in recent years, particularly in support for working-age adults.
Justice Secretary Shabana Mahmood has highlighted the urgency of the issue, describing the current welfare spending levels as “unsustainable”.
The Office for Budget Responsibility (OBR) has forecasted a sharp rise in health and disability benefits, with a projected increase from £64.7 billion in 2023-24 to £100.7 billion by 2029-30, according to the BBC. With spending set to climb further, the government is expected to target specific areas for cuts.
Rising Welfare Costs Driven by Health-Related Claims
One of the main drivers of the welfare budget increase is the surge in claims for incapacity and disability benefits. The OBR reports that the share of the working-age population receiving incapacity benefits is expected to rise from 7% in 2024 to 7.9% by 2029.
This reflects a trend where more people have been entering the system than leaving it, particularly since the Covid-19 pandemic, according to the BBC.
Health factors have played a significant role in this rise. Some analysts link the increase to the long-term effects of the pandemic, including physical health complications and a sharp rise in mental health conditions, particularly among younger people.
Figures from the Office for National Statistics (ONS) show that the number of people aged 18 to 24 classified as “Not in Education, Employment, or Training” (NEET) rose to 907,000 at the end of 2023, marking a 30% increase since 2020.
There is no clear consensus on the root cause of the rising claims. While some experts emphasise health-related issues, others point to financial incentives within the welfare system.
Under Universal Credit, a single claimant receives £311.68 per month, but if classified as having “limited capacity for work-related activity”, they can receive an additional £416.19 per month. Some argue this could be influencing claimants’ decisions.
Where the Cuts Might Fall
While the government has not specified which benefits will face reductions, the largest expenditure on working-age welfare is incapacity and long-term sickness benefits. If ministers aim for substantial savings, this is likely to be a primary target.
Another area under scrutiny is Personal Independence Payment (PIP), a benefit for those with long-term illnesses or disabilities, which does not require recipients to be out of work. Spending on PIP reached £18 billion in 2023-24 and is projected to rise significantly in the coming years, according to the OBR.
The previous Conservative government had already considered tightening eligibility for younger claimants with mental health conditions, a move that could now be revisited.
Experts from institutions such as the Resolution Foundation and the Institute for Employment Studies have warned that reducing the welfare budget is historically difficult.
Past attempts, including the £12 billion welfare cuts promised in 2015, faced significant political and public resistance, with only £8 billion of the proposed savings realised, according to the OBR.
Some analysts argue that meaningful reductions will require investment in employment support programmes, which help people transition back into work.
