Employment gains from welfare reforms dwarfed by poverty surge

Welfare reforms could boost employment by over 100,000 by the end of Parliament, but poverty-inducing income losses will dwarf the gains, according to a new report.

Analysis from the Resolution Foundation found that the Government’s plans to reform health and disability-related benefits will lead to more people in work. Still, the scale of gains will not be sufficient to avoid millions of losers and hundreds of thousands of additional people falling into poverty.

The Government’s impact analysis shows that cuts to sickness and disability benefits will push 250,000 people into poverty, including at least 50,000 children.

What are the welfare reforms?

In March, the Department for Work and Pensions (DWP) announced a package of reforms to sickness and disability benefits, including tightening eligibility for Personal Independence Payments (PIP), scrapping the Work Capability Assessment, and making PIP the gateway to receiving the Universal Credit (UC) health element.

The Pathways to Work: Reforming Benefits and Support to Get Britain Working Green Paper unveiled the most significant cuts to disability benefits on record.

The paper claims to open up employment opportunities for future generations with £1 billion worth of employment support measures to help disabled and long-term sick people return to work. It also says the overhaul will unlock economic growth by saving £5 billion by 2030.

Could employment grow?

The Foundation’s analysis examined the government’s rationale for the welfare reforms. It looked at whether losing PIP creates a positive ‘income effect’ of finding work, whether cuts to the health element of UC strengthen work incentives, and whether increased funding for employment support (worth a cumulative £1.9 billion between 2026-27 and 2029-30) helps more people into work.

It found that all three aspects of these reforms will lead to more people in work. The Foundation estimates that employment gains in 2029-30 range from around 60,000 in a worst-case scenario to around 105,000 in a best-case scenario.

The report also found that the full package of welfare reforms, which includes boosting the standard rate of UC and abolishing reforms to Work Capability Assessment, creates many small net winners but nearly as many large net losers.

The Government’s assessment says that 3.8 million net cash winners will gain £420 per year on average, while the 3.2 million cash losers miss out on £1,720 on average.

Recommendations from the report

The report recommends that employment support that is due to be ramped up at the back end of the Parliament, boosting employment by up to 48,000 in 2029-30, should be brought forward so that more people are helped into work at the point at which they lose benefit income, rather than years later

Second, changes to the PIP eligibility should come with transitional protection, with existing recipients who fail the new, tougher test given six months’ notice before any cuts to their benefits take effect. This would prevent disabled people from being hit by sharp, immediate income losses and offer them more time to find work if they can. The government should also complete its planned review of the PIP assessment ahead of the cuts coming into place, to ensure the changes are being made to a system that is fit for purpose.

Third, the welcome proposal in the Green Paper that moving into work will not trigger a reassessment of health-related UC should be implemented by 2026-27. Failure to do this will create a strong disincentive for existing claimants to find work.

Greg Thwaites, Research Director at the Resolution Foundation, said: “The Government’s welfare reforms are hugely controversial, with its own assessment suggesting that the plans will push a quarter of a million people into poverty.

“Ministers dispute this and claim that, instead of pushing people into poverty, the reforms will help people into work. But while up to 105,000 people could find work as a result of these reforms, these gains are dwarfed by the income losses that millions of families will face.

“The reforms as they stand will increase poverty, but sensible tweaks can do more to support families through the changes. The Government should front-load employment support to give people more help finding work and offer transitional protections to prevent disabled people from suffering sharp immediate income shocks if they lose eligibility for PIP.”

Alison Bloomer

Alison Bloomer is Editor of Learning Disability Today. She has over 25 years of experience writing for medical journals and trade publications. Subjects include healthcare, pharmaceuticals, disability, insurance, stock market and emerging technologies. She is also a mother to a gorgeous 13-year-old boy who has a learning disability.

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