One way to judge the viciousness of the backroom fights over a policy is by how much its announcement gets dragged out. On March 18th Liz Kendall, the welfare secretary, set out reforms to health-related benefits, designed to save £5bn ($6.5bn, 0.2% of GDP) a year and tackle a rise in worklessness. That was about as late as she could leave it, just a week before the Office for Budget Responsibility (OBR), the fiscal watchdog, updates its forecasts. Without those cuts, the government would have strayed close to the edge of its own fiscal rules.
Were the reforms worth the ruckus? Two changes were most consequential. First, Ms Kendall sharply cut the generosity of incapacity benefits—paid to people deemed unable to work—while slightly padding conventional unemployment benefits (see chart). For decades, unemployment benefits have been kept near-flat in real terms whereas incapacity benefits have risen, giving a strong reason for claimants to try to register themselves as sick.
Second, she has tightened eligibility for Personal Independence Payments (PIP), disability benefits paid regardless of work status. Incapacity benefits, previously assessed separately, will now be based on the same test as PIP. Those screenings shifted from face-to-face to largely over-the-phone during the pandemic, and have stayed that way since. The government plans to reverse that shift and also pick up the pace of reassessments, which were switched off during covid and have hardly resumed.
Alongside the cuts, Ms Kendall was keen to emphasise, comes £1bn more to help support people back into work, and a legal “right to try”, as reassurance that unsuccessful attempts to start working won’t result in benefits being removed.
For now, focus in Westminster is squarely on the OBR’s verdict, due on March 26th. But the more important yardstick will be how Britain’s jobs market evolves over the next few years, and whether more people start trickling back into work.■
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