The government’s plans to slash spending on disability and sickness benefits could see some of the UK’s most vulnerable lose up to £1,200 a year, according to a leading think tank.
£5bn in Cuts Coming for Disability Benefits
Rachel Reeves, the chancellor, is under pressure to balance the books. To achieve that, the government is looking to save around £5bn from working-age welfare — with disability and incapacity benefits in the firing line.
The Institute for Fiscal Studies (IFS) warned that this could mean a 16% cut in the value of benefits for the 4.3 million people expected to claim them by 2029.
IFS director Paul Johnson said:
“To save £5bn through cuts alone would mean reducing benefit values by £1,150 per year for the average claimant.”
Meanwhile, the cost of disability and sickness benefits is expected to hit £70bn a year by 2030 — a major driver behind the cuts.
Government Faces Internal Backlash
The government recently hinted it would drop plans to freeze Personal Independence Payments (PIP) after facing pushback from within Labour. However, the broader policy of reducing the benefits bill remains firmly in place.
Ministers are particularly alarmed by the rise in people claiming sickness and disability benefits. The number is set to increase from 2.8 million today to 4 million by 2030.
Johnson warned that Reeves has little room to manoeuvre:
“It’s a funny kind of good news… in the sense that things are so bad they can only get better.”
“No Room to Breathe” – The IFS Verdict
The IFS highlighted that the UK is already spending £20bn more on disability and incapacity benefits than it was five years ago.
Johnson added:
“We’re spending so much on disability benefits that surely there must be a way to cut back. Our public services are so inefficient that surely there’s room to improve.”
However, cutting benefits is politically risky. Johnson said:
“If things improve even slightly, maybe Reeves will have a bit more room to manoeuvre.”
Centre for Social Justice Backs the Move
The Centre for Social Justice (CSJ) — the think tank behind previous welfare reforms — supports the government’s plan.
CSJ policy director Ed Davies argued that “too many people are being written off.” He welcomed plans to introduce an “into work guarantee”, which would let claimants try work without immediately losing benefits.
Davies claimed this could get 700,000 people into work, saving £10bn in benefits and generating £3.3bn in tax revenue — a £13.3bn boost for the taxpayer.
Growth Forecasts Take a Hit
The cuts come as the Organisation for Economic Cooperation and Development (OECD) downgraded the UK’s already weak growth forecasts.
UK growth is now expected to hit:
- 1.4% in 2025 (down from 1.7%)
- 1.2% in 2026 (down from 1.3%)
Global growth is also set to slow, thanks to trade tensions sparked by Donald Trump’s tariffs. The US recently imposed a 25% tariff on steel and aluminium and doubled tariffs on Chinese imports to 20%.
Reeves admitted the outlook is challenging:
“A changing world means Britain must change too.”
However, the Liberal Democrats slammed Labour’s economic strategy, calling it “an anchor on meaningful growth.”
What Happens Next?
Reeves will outline her spending plans in the spring statement on 26 March. If the cuts go ahead, millions of disabled and sick people could face a tough financial hit.
The government is hoping the proposed reforms will boost employment and improve the benefits system’s efficiency. Whether that gamble pays off remains to be seen.
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