| 13 mins read
The Pathways to Work Green Paper published in March 2025 was a meaty document, but the government’s presentation of its content was limited to two soundbites: the reforms would save £4.7 billion by the end of this Parliament and more disabled people would enter employment. Labour backbenchers had no difficulty computing what the changes would mean: the reforms would take money away from people with disabilities. These people are concentrated in the poorest socioeconomic groups and the most deprived parts of the country. The main argument put forward by the government—that the disability benefits bill is growing too rapidly and savings had to be made—was totally unconvincing. Many indicators of long-term sickness and disability are going in the wrong direction. Furthermore, there are profound and long-standing inequalities in the health and wellbeing of the population, which seem to be expanding. If expenditure on benefits is being driven by higher needs, it is perverse to say that cuts to entitlements are called for. Cuts will just mean more poverty and inequality.
The Labour government has made a habit of talking about policies in numbers since it entered office. Abolishing the Winter Fuel Payment would save £1.5 billion, a figure later revised downward as the government urged the poorest pensioners to apply for Pension Credit for which they are eligible. Nothing about the substance of the allowance was mentioned: that it went to many well-off people, or that it was a symbolic amount that did not really grapple with the problem of health-sapping cold housing that affects some old people very badly. A thought-out policy would replace the allowance with more effective measures. But, no, there was no time: balancing the books meant that billions of pounds of savings had to be found immediately. Eventually, the government was forced into more considered reforms, although the retreat was too disorderly for any positive account to be given.
The first half of 2025 saw more measures that were apparently entirely driven by fiscal targets. Revisions to forecasts put the government off course and a mad scramble ensued to find immediate savings. The crazy thing is that the margins of error in the forecasts easily swamp these amounts, but, no, this did not stop another round of ill-conceived measures to make the numbers balance. Commentators were unimpressed: even the IMF urged refinements to the fiscal rules to promote policy stability and avoid ad hoc ‘corrective fiscal action outside of the single fiscal event’ (known to the rest of us as the Budget).
And now we come to the Universal Credit and Personal Independence Payment Bill, supposedly a flagship measure to implement the proposals in the Pathways to Work Green Paper. Writing this commentary just after the government got the measure through its second reading on 1 July with the aid of multiple concessions, the headlines are universally damning. One of the oft-repeated claims is that there is now nothing left of the bill because the claimed savings are not going to materialise for years, if at all. Since the government chose to frame its measures almost entirely in fiscal terms, this criticism lands heavily. Yet, there is actually an idea in the reform proposals which is worth discussing and even defending. Furthermore, that idea has survived the concessions and has attracted little criticism. Perhaps the idea is too complex and technical to explain to the general public, but the organisations that have led the charge against the bill understand it perfectly well and have refrained from attacking it. The remarkable achievement of the hapless secretary of state is that she will get no credit for carrying it forward.
Stated simply, the idea is that difficulty in holding down paid work owing to health issues should not in itself be a reason for the award of extra benefits relative to a person who is not working for reasons other than poor health or impairment. Instead, extra benefits should be awarded for the extra needs created by disability: needs for care and support and higher costs in everyday activities, notably in getting around (‘mobility’). In the current system, these extra needs are assessed in claims for the Personal Independence Payment (PIP).
When protagonists in this debate speak of ‘disabled people’, it is easy to forget that they are talking about a broad concept which is defined differently in different administrative contexts. There used to be different words for different usages. The term ‘incapacity’ took over from ‘invalidity’ when Incapacity Benefit replaced Invalidity Benefit in 1995. Since the abolition of Incapacity Benefit, more linguistic uncertainty has crept in. Claimants are designated as having ‘limited capability’, but no new noun was adopted. Under Universal Credit, the extra payment available to those who were deemed to be unable to work owing to their poor health or impairment became the ‘health’ or ‘work capability’ premium. Eligibility for this premium depends on a ‘Work Capability Assessment’.
Reaching for a term to describe those receiving this payment, ‘disabled’ has become favoured. Meanwhile, recipients of PIP are also called disabled people, although there is only partial overlap between the two groups because the assessments are quite different. Eligibility for PIP is assessed by looking at a person’s ability to perform various activities of daily life (ADLs), whereas eligibility for the Universal Credit health element supposedly depends on a person’s ability to perform activities connected with employment. Of course, there are also many people with disabilities who receive neither PIP nor the health element of Universal Credit, although their disability could trigger other rights and entitlements, for example, related to disability discrimination.
Long ago, there was no premium in the income support system for those deemed to be unable to work. Rather, receipt of invalidity benefit (instead of unemployment benefit) had administrative consequences: it meant being exempted from requirements to be seeking work. The premium on being able to establish invalidity or incapacity to work came with Thatcherism as unemployment benefits were curtailed, supposedly to increase incentives to look for work. Since incentives were not in play for those unable to work, they enjoyed a degree of protection from this line of attack.
Then administrative practices moved on. In the 2000s, unemployment fell to low levels, but non-employment owing to ‘invalidity’ or ‘incapacity’ grew (pretty much everywhere, not just in the UK). These out-of-work benefits were out of tune with disability rights discourses which proposed that disabilities do not have to render people ‘incapable’. They also conflicted with government policies to raise employment rates. Casework became a fashionable notion: instead of imposing standard obligations on jobseekers, caseworkers would look closely at their individual barriers to employment and devise support to overcome these barriers. While there were never enough resources to make casework a reality for most, the idea of personalised support took hold. In principle, personalised employment services do not require service users to be categorised, whether as unemployed (or ‘jobseekers’, as they are now known, the word ‘unemployed’ having been deleted from the lexicon), lone parents or disabled. All can be conceived as being a certain ‘distance’ from employment and facing a range of obstacles which employment services might overcome.
This is the background to the government’s plan to eliminate the Work Capability Assessment, the gateway to the health premium in Universal Credit. The green paper gives the strong impression that the government would like to abolish the premium, but instead it set out steps to reduce its value by raising the basic amount of Universal Credit while freezing the premium and halving it for new claims from 2026–27. Concessions were made to Labour rebels on these proposals and the premium in any case survives, but it will have a new rationale to do with meeting the extra costs of disability. It will rely on the PIP assessment, which does not designate people as unable to work; indeed, PIP is payable to people in employment. The existing PIP is not means-tested so, in effect, the reforms will create a new, means-tested PIP top-up.
Even without the cuts to PIP that were bracketed with this reform, there will be financial losers. Government statistics from 2024 suggest that, of the roughly 4 million people receiving PIP or the health-related elements of income support (Universal Credit or Employment and Support Allowance), about half receive both kinds of benefit and would, other things being equal, be unaffected. About 1.1 million people receive benefits for which the Work Capability Assessment is the gateway, but do not receive PIP. The government has had to accept the preservation of rights for existing claimants—this has been the usual practice throughout decades of social security reform—but there are likely to be fewer recipients of the health premium in the future. With time, some savings will be realised and, importantly, there will be a better system which does not build a barrier to employment into its very design and is based on more robust principles for providing financial support.
With the benefit of hindsight, we can see that the government should have sequenced its plans and focussed first on getting this important reform through Parliament before turning its attention to PIP. In effect, that is the position it has been forced into by rebel MPs. The rebellion and concessions have left most people believing that there is nothing left in the bill, that it is an empty shell. This is not true. Furthermore, if the government had not tried to cut PIP, it might have had a positive story to tell of eliminating the unloved Work Capacity Assessment and adopting an approach to recognising disability in the social security system that is widely supported in principle, if not in practice, among disability advocacy groups. The government snatched negative publicity from the jaws of gaining support for an important policy reform because it insisted on prioritising financial savings.
The government’s communication strategy has emphasised ‘hard choices’ and tried to gain credit for a steely-eyed focus on the country’s fragile fiscal position. This fragility is not going away anytime soon, but it turns out that focussing comms on it is exactly the wrong thing to do. Talking as if the financial markets are the only audience will not only lose the next election, but has lost the government control of Parliament in the meantime. Anyway, talking to the markets is a mug’s game. Investors have plenty to listen to across the pond: the government should take advantage of Trump and say as little as possible. It should follow the IMF’s recommendation (!) and talk about the numbers just once a year—and in the meantime get on with the substance of making better policies.
