Money Wellness
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calendar icon10 Jul 2024

Labour’s ‘big benefits changes’

Keir Starmer has pledged to reform employment support and restore hope in Britain after 14 years of “Conservative chaos”. But how will the new Labour government achieve this?

The party’s manifesto promises a review of the benefits system, although, admittedly, details are vague at this stage.

For now, there won’t be any changes to your benefits, but here’s what changes could be made to work capability assessments, universal credit, personal independence payment (PIP) and the two-child benefit cap.

Work capability assessment for universal credit and employment & support allowance (ESA)

The Conservatives wanted to make the work capability assessment (WCA) stricter from 2025, with the overall aim of reducing the number of people claiming benefits without needing to look for work.

In 2023, the then-shadow minister for disabled people said Labour wouldn’t follow through on the Tory policy – but Keir Starmer hasn’t yet said anything about the planned changes other than “it needs to be reformed or replaced”.

Universal credit

Labour say they’ll review universal credit so “it makes work pay and tackles poverty” but haven’t said how they’ll do this.

It’s a big difference from the 2019 Labour manifesto, where a whole page promised to immediately scrap the “catastrophic” system and replace it.

The 2024 manifesto says their system “will be underpinned by rights and responsibilities – people who can work, should work – and there will be consequences for those who do not fulfil their obligations”.

How Keir Starmer and Labour plan to meet their promise remains to be seen, though the above wording implies there could be new eligibility criteria and conditions.

Alison McGovern, now the minister of state for the department for work and pensions, said in May 2024 that “big changes” were needed to the welfare system while changes to PIP needed to support more accurate assessment decisions.

Personal independence payment (PIP)

The previous Conservative government had planned to crackdown on PIP claims as part of a massive £12bn cut to benefits.

Labour have so far remained silent on the proposals, which included replacing regular PIP cash payments with:

  • a catalogue or shop scheme
  • vouchers
  • a receipt-based system
  • one-off grants

Labour’s manifesto doesn’t specifically mention PIP, though they do say “a proper plan” is needed to support disabled people to work.

A consultation about the PIP changes started under the Tories will continue before the government decides what to do.

It’s unclear at this stage if Labour will press ahead with the changes, alter them or abandon them.

You can have your say on the consultation until 22 July.

Two-child benefit cap

The two-child cap limits child tax credit and universal credit to the first two children in most households, meaning families miss out on more than £3,000 a year for their third and any additional kids.

Although Labour have opposed the two-child benefit cap in the past, Keir Starmer said last year he’d keep the controversial policy if his party was elected.

Labour made no reference to scrapping it in their manifesto, instead promising a vague “ambitious strategy to reduce child poverty”.

We don’t know exactly what this means yet but scrapping this unfair cap and providing free school meals for every child in primary school would be a step in the right direction.

As many as 250,000 additional children are expected to be affected by the limit over the next year, rising to 670,000 before the end of the next parliament. It’ll impact one in five children, rising to 38% in the poorest households.

What the charities say

Ten leading anti-poverty, health and disability charities have called on Liz Kendall, the new secretary of state for work and pensions, to drop the “misguided and dangerous” plans for the WCA and PIP.

The proposals could force millions into poverty if the eligibility criteria change, as people with milder conditions would lose out on their payments.

Anela Awar, chief executive of anti-poverty charity Z2K, says the new government should “remove the barriers to economic activity” and “address the inadequacy and risk built into the social security system”.

The charities say any proposals to reform PIP should be “redesigned with disabled people at the centre”.

Access to work

One thing that is clear is Labour’s vow to clear the backlog of access to work claims – cash grants to help disabled people start a new job or stay in work – and make sure people can try a job without the fear of an immediate benefit reassessment if it doesn’t work out.

What else Labour could do

While we wait to see what changes will be made to the benefits system under Keir Starmer’s government, there’s still more that could be done to help people with money worries. 

We want to see the new government bring in a minister for financial equality to assess all new policy proposals and make sure they don’t disproportionately affect the economic wellbeing of certain sectors of society, such as single-parent families.

We also want to see a cut to the maximum level of deductions the Department for Work and Pensions can make from people’s benefits - from 25% to 15%.

Money worries

If money is tight right now, you might benefit from free and impartial debt advice or need a helping hand with budgeting.

We can check you’re getting all the benefits you’re entitled to as well as advise you on debt solutions (some are free, for others there’s a fee).

You can get our help online 24/7 or over the phone during our office hours - 0161 518 8285.

Michelle Kight

Michelle is a qualified journalist who spent over seven years writing for her local online newspaper. Having grown up in some of the North West’s most deprived areas, she has a first-hand and empathetic understanding of what it means to face serious money worries. With a strong interest in mental health issues, she is a keen advocate of boosting the accessibility of financial wellness services.

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