Thousands of Britons to have welfare income cut by more than 60%

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Tens of thousands of Britons are set to lose almost two-thirds of their income as a result of welfare cuts announced by Sir Keir Starmer’s government, according to Financial Times calculations.

Tougher eligibility for personal independence payments (Pips) and incapacity benefits will mean some people now in line to receive £15,000 a year, excluding housing support, will instead receive just £5,400 — a drop of 64 per cent.

The figures highlight the dramatic impact that the government’s cuts will have on people who are out of work and rely on benefits to cover the costs of basic essentials.

Ministers have argued the reforms are needed to get people “trapped on benefits” back into work. The government also needs the £5bn-a-year savings to ensure chancellor Rachel Reeves stays within her fiscal rules at next week’s Spring Statement.

Work and pensions secretary Liz Kendall last week unveiled changes to the eligibility criteria for Pips that the Resolution Foundation think-tank estimated would leave as many as 1.2mn people worse off by £4,300 a year by 2029, because they would not receive “daily living” payments.

Changes to the assessment for Pips will mean people qualify for the daily living payment only if they face major barriers to performing everyday tasks. Many who require assistance washing, or supervision or prompting to go the toilet, would no longer be eligible.

The government also made changes to incapacity benefits, known as universal credit health, so that the £5,300 a year benefit will be paid only to people who receive the Pip daily living payment.

The changes together mean that a person who is unable to work and is made ineligible for daily living payments by Kendall’s tougher criteria would lose out on £9,600 a year in total because they no longer received universal credit health either.

They would, however, still receive the basic rate of universal credit which, when uprated for expected inflation, would entitle them to £5,400 a year by 2029.

Ayla Ozmen, director of policy and campaigns at welfare charity Z2K, said three-quarters of people on universal credit and disability support already struggled to afford the essentials.

“Evidence from our advice services shows that those who will lose out include people with psychosis and double amputees,” she added.

It is unclear exactly how many people will be affected by the changes because the government has not so far provided estimates.

However, about half of the 3.7mn people on Pips also receive universal credit health. If up to 1.2mn people stand to lose their entitlement to the Pip daily living, the upper limit of people who could lose out on both forms of benefit could reach hundreds of thousands.

Those who lose Pips are expected to be required to look for work, as a condition of receiving jobseekers’ benefits, despite a very difficult jobs market for low earners.

Official data on Thursday showed payroll employment has barely grown in the past year, while redundancies and claims for jobless benefits have edged up.

The figures also showed a sharp drop in the number of jobs in the hospitality and retail sectors. These are often a first port of call for people finding their way into work but are set to be especially hard-hit by increases in payroll taxes that will take effect in April.

The scale of the impact has caused ructions inside government, with scores of Labour MPs voicing frustration about the impact of the reforms on their constituents ahead of surgeries this weekend.

One moderate MP said there was visible “anger and dismay” at a meeting of about 70 parliamentarians convened by Kendall on Wednesday.

Pip recipients are given a score of up to 12 in 10 different categories and need to score at least eight points across all of the categories to receive the “standard rate” of Pip and at least 12 points for the “enhanced rate”.

Under new rules, a claimant will need to score at least four points in any one category to receive any form of Pip.

About 48 per cent of claimants receive under 12 points, according to government data. Experts have said this group is most likely to be hit by the reforms, although there will also be some individuals who score highly in overall points, but with no category exceeding four.

The largest increases in claims for health-related benefits in recent years have been driven by rising claims from young people, and more than half of the rise since 2019 stems from an increase in claims relating to mental health or behavioural conditions.

The Department for Work and Pensions said it was delivering a £1bn support package to get people into work and increasing the basic rate of universal credit above inflation for the first time.

“Our reforms will ensure the most vulnerable and severely disabled people are supported to live with dignity, whilst making sure that everyone who can realise the benefits of work is expected and supported to do so,” it said.