Labour Abandons Disability Benefit Cuts Ahead of Budget Tax Hikes

Labour has abandoned urgently needed welfare cuts as it admits that its flagship review of disability benefits will not recommend reducing spending, despite a spiralling welfare bill and further tax hikes expected in the Budget. The Telegraph has more.

A review of the Personal Independence Payments (PIP) will not look at ways to bring down the ballooning cost of the benefit, official documents reveal. Instead, it will only ensure the system is “fair and fit”.

Sir Mel Stride, the Shadow Chancellor, said it showed “Labour has thrown in the towel on welfare reform”.

Paul Johnson, the former director of the Institute for Fiscal Studies, said the admission “confirms [the Government] has given up on any savings from PIP”, which is projected to cost taxpayers £30 billion a year by the end of the decade.

The revelation will fuel fears of significant tax increases in next month’s Budget as Rachel Reeves struggles to rein in runaway Government spending. Economists believe the Chancellor must find as much as £40 billion in either tax rises or spending cuts to fix her plans.

A document published on Thursday explicitly stated that the Timms Review, led by Sir Stephen Timms, the Disability Minister, would not “generate proposals for further savings”. The review will also “operate within the Office for Budget Responsibility’s (OBR) projections for future PIP expenditure, to ensure it is there to support generations to come”.

Those OBR projections show the cost of PIP benefits for working-age adults has doubled since 2020 to £22 billion a year and is on course to top £30 billion a year by the end of the decade.

The surging cost has been driven by a rapid rise in young people claiming the benefit for mental health problems.

Liz Kendall, the former work and pensions secretary, said earlier this year while still in that brief that the rise in PIP claims was “not sustainable”.

Ms Reeves sought to rein in the spiralling cost of disability benefits spending earlier in the year, with plans to save £5 billion per year announced in her Spring Statement. But rebellions by Labour MPs forced the Chancellor to abandon her plans. The Timms Review was launched in the wake of the failure to pass the reforms, billed as the first ever full review into PIP.

Sir Mel said: “Starmer and Reeves are letting the benefits bill spiral because they’re too weak to stand up to their own MPs. We offered to work together in the national interest to get welfare under control – they refused.

“Let’s be clear: more tax rises are coming because Labour have lost control of spending. Rachel Reeves can point fingers all she likes, but families are paying more because Labour have failed to get a grip.”

Worth reading in full.