Our welfare system needs reform, not arbitrary cuts

Telegraph

19 hours ago

As the smoke settles from yet another astonishing tyre-screeching U-turn by Kier Starmer on his welfare proposals, the stark reality is that instead of significant savings, we will all now face an extra tax bill of £3bn in the autumn.
This U-turn isn't surprising to me because their proposal was a classic panicky short-term Treasury driven cut but in no way genuine reform. I even doubt that the savings would in the longer term have materialised. This is because I believe they were going at it the wrong way.
The Covid lockdowns blasted a hole in our welfare system. Since 2020, the number of households where no one has ever worked has doubled. Economic inactivity due to long-term sickness has risen by 800,000. And taxpayers today are shelling out an extra £30 billion every year on sickness and disability benefits, on top of an already bulging bill.
Lockdown reversed much of the progress we had made under the transformations of Universal Credit, in part relaxing eligibility rules and assessments for benefits, a leniency that astonishingly continues to this day.
But also expanding the 'claim culture', albeit inadvertently, through schemes like furlough. It is easy to forget that by 2019 we had the lowest rate of workless households on record. Clearly, we have to get a grip. But solving this problem will take thought, courage and time.
The Government's proposals are rushed in order to be 'scored' by the OBR in time for the Spring Statement. In a panic, the Treasury opted to simply top-slice spending by raising the threshold for disability benefits across the board.
This leads to some deeply concerning outcomes. According to the Department for Work and Pensions (DWP), three in four Personal Independence Payment (PIP) claimants with arthritis, two in three with cardiovascular disease, and even a third with cancer could lose support.
Yet there is another way, one which focuses on the root causes of the crisis. But that must start with a grown-up conversation about mental health.
Monthly PIP claims have more than doubled, driven in large part by a threefold increase in people citing mental health conditions. Meanwhile the majority of people on Universal Credit receiving health-related top-ups now also report poor mental health.
Tragically, it is disproportionately young people fuelling this rise, those most likely to suffer the mental and emotional consequences of being out of work. And yet it is the system itself that is driving worklessness and dependency. Of course, PIP eligibility does not require someone to be out of work. Yet five in six recipients are. Taken in the round, once you tot up all the various benefits, the system has tilted towards incentivising ill health rather than supporting recovery.
There is another way. New research from the Centre for Social Justice (CSJ) shows that better targeting of mental health benefits – focusing help to those with more serious conditions – could save the Government up to £9 billion. A more humane and sustainable approach to reform would recognise that, for many people with anxiety or depression, ensuring proper treatment is much more compassionate than parking them on benefits and slamming the door to an independent life.
First, the government could use the savings to fund a £1 billion investment in NHS Talking Therapies, expanding 1.5 million additional treatment courses. CSJ polling also finds that nearly half the public believe people with less severe conditions should be supported through programmes and services, compared to one in five saying cash.
Second, the Government should accelerate the rollout of Universal Support, originally launched by the last Conservative government and now rebranded as Connect to Work. This scheme works with the local charities and community organisations best placed to help people who are furthest from the workforce.
These inspirational people are already on the ground, collaborating with employers to tackle the most difficult barriers to work, whether family breakdown, debt, addiction, and poor health.
Finally, for the first time, sickness benefit is being brought into Universal Credit as I had designed originally. The DWP now has powerful tools Universal Credit provides. The NHS has made it clear that for depression and anxiety, the largest new claimant group, work is a health treatment. Yet far too many people were left on sickness benefit with no meaningful contact. Many who were off work for health reasons received no time with a work coach at all. Now under Universal credit that can change. The system should be doing more – using AI to free up work coach time – to increase the contact time with claimants and not leaving them parked on the sidelines.
Our welfare system needs reform, not arbitrary cuts. I understand the pressure Liz Kendall is under. But short-term fixes risk doing lasting damage. We need a system that treats people with compassion while actively supporting them to recover and return to work. That's how to reduce dependency, control costs, and rebuild lives.