Welfare reforms risk damaging health and efforts to boost employment
About 4 mins
The Health Foundation has produced a rapid health impact assessment of the government’s welfare reforms. This blog shares an overview of our assessment.
In March, the government set out its intention to reform the UK welfare system to make it more financially sustainable and incentivise people into work. But to what extent might these changes impact health – the underlying cause of under-employment – and how might this affect ambitions for economic growth?
Why reform welfare?
Spend on disability and health-related benefits has grown steadily over the past decade, with a substantial increase in the number of people claiming since the pandemic. On current trends, more than 1 in 10 working-age people could be receiving disability and health-related benefits by 2028/29, with spend exceeding £60bn per year. The reasons behind this rise are not fully understood but contributors include worsening working-age health, benefit system structures and processes, and the cost-of-living crisis. Even without currently strained public finances, it is entirely understandable that the government would be concerned by these trends.
The government’s Pathways to Work Green Paper sets out its plans for welfare reform and comes in two parts. First, it seeks to tackle issues with the existing welfare system that leave people with long-term health conditions little support to move back into work. Second, it sets out a substantial cut to disability benefits, apparently driven by reaching a specific level of savings rather than tackling the underlying drivers of rising spend.
The government has produced an impact assessment of some of these reforms but not how they may affect health. Our health impact assessment considers how these reforms will affect people’s health directly and through changes in income or employment.
Reforms will lead to significant income loss for many and increase poverty
There are four key reforms considered in the government’s impact assessment (see Box 1) that are collectively expected to lead to 3.2 million families losing an average £1,720 of income per year by 2029/30, with some families gaining and some losing.
This is predominantly driven by changes to personal independence payments (PIP) where 800,000 people will lose an average £4,500 a year – and the health element of universal credit (UC health) – where 2.3 million people will lose an average £500 per year, and 730,000 will lose an average £3,000 per year. As such, nearly all households losing out financially from the reforms include someone who is disabled or living with a long-term condition.
By contrast, almost 4 million families stand to gain financially from the reforms through increases to the standard allocation of UC, but only by about an average of £420 per year (compared to inflation). Around 370,000 families are estimated to gain £50 a week from the reversal of the previous government’s plans to restrict eligibility to the UC health element. However, this ‘gain’ reflects a reversal of plans that had not been implemented and a halving of the current rate of UC health due to the newly proposed reforms.
Taken together these changes have been estimated to leave an additional 250,000 people, including 50,000 children, in relative poverty. For many people already in poverty, that will be deepened.
Box 1: Summary of the changes to welfare
PIP is a non-means tested benefit for disabled people and/or those with a long-term health condition. It is not related to employment but rather is intended to reflect the additional costs associated with living with long-term illness or being disabled.
Under the current policy, claimants are assessed whether they can undertake different activities related to their daily living or mobility, with more 'points' assigned for more significant impairments. A standard or enhanced rate of PIP is awarded depending whether a person scores over 8 or 12 points respectively in either the daily living or mobility component of the assessment. Under the reforms, from 2026/27 new claimants and existing recipients undergoing a reassessment must score at least 4 points in at least 1 daily living activity to be eligible for the daily living component of PIP. The mobility component of PIP is unchanged.
UC is a benefit for those who are on a low income or out of work.
Under the reforms, the standard (non-health-related) allocation of UC (currently equivalent of up to £92 a week for a single person) is being increased to provide additional financial support to people looking for employment. The value will gradually increase between 2026/27 and 2028/29 to be 5% (or just over £5 a week) higher than it would have been under default indexation, for new and existing claimants.
If the UC recipient has a health condition or disability that restricts their ability to work, they may additionally be eligible for UC health.
Under the reforms the value of UC health is being reduced. For existing recipients, UC health will be frozen in cash terms at its current rate of £97 a week for the rest of the parliament (expected to reach £107 per week by 2029/30 were it not frozen). From April 2026, it will drop to £50 for new claimants and then be frozen.
Eligibility is currently assessed through the Work Capability Assessment (WCA). Changes to the descriptors used in the WCA proposed by the previous government would have restricted entitlement. Under the reforms, this will no longer happen, increasing the number of people who will be entitled to UC health. The impact of this change is included in the impact assessment. There are also plans to base eligibility for UC health on PIP (which is being restricted), scrapping the WCA. These are not included in the published impact assessment.
Mental and physical health are likely to worsen as a direct result
Losing income from PIP and UC health is likely to have significant direct impacts on the health and wellbeing of people who are already disabled or living with a long-term illness.
About 85% of all disability and health-related recipients report having a mental health condition and the prevalence of musculoskeletal disease is high (the primary condition for about 30% of PIP recipients and one of potentially several conditions for over 45% of those receiving UC health). Yet under the reforms, over three-quarters of people receiving the daily living component of PIP, with arthritis, back or chronic pain, and almost half of those with anxiety and depression, are at risk of losing their PIP. This may make it harder for people to manage their disability or health condition, affecting the ability to engage with work and participate in society – critical determinants of wellbeing.
Uncertainty over the potential loss of future income can cause stress and anxiety, worsening existing conditions. Research has shown that previous reforms to health-related eligibility assessments were associated with significant increases in psychological distress and adverse mental health outcomes.
Loss of income will make it harder for many to afford daily essentials
Having less money is a well-recognised contributor to poor mental and physical health through the stress of trying to make ends meet. There are also direct health effects from being unable to afford essentials, such as nutritious food or adequately heating your home.
The reforms are most likely to affect the living standards of disabled people – who already experience higher levels of poverty and poorer health outcomes – and people from low-to-middle income groups. For households with the lowest fifth of incomes, the value of PIP loss is equivalent to nearly a third of total weekly expenditure – almost all their current spend on housing, fuel and power.
People will need to decide how to spend their reduced resources. Households with lower incomes or with disabled family members already spend more of their disposable income on food than the general population, and three times as many people who claim PIP report food insecurity compared to those who do not. Concessionary public transport passes are linked to PIP, making it easier for disabled people to get to work, access public services and socialise.
Employment outcomes are unlikely to offset worsening health
The government is yet to publish an assessment of the expected employment boost from the reforms to UC health designed to incentivise people into employment, or details of the additional £1bn a year by 2029/30 for employment support. Increasing employment could lead to better health given the link between good health and good work. However, they are unlikely to sufficiently offset the negative impacts of restricting PIP.
Restricting PIP eligibility risks reducing people’s ability to work. Although just over a quarter of PIP recipients say they could return to work if their health improved, estimates suggest additional spend on employment programmes would support only 70,000 people into work over the next 4 years – substantially fewer than the 800,000 estimated to lose PIP entitlement. Given existing geographic concentrations of people claiming disability benefits, higher rates of major illness and fewer economic opportunities, the reforms are likely to reinforce existing inequalities.
A sustainable approach needs to protect health
Good health is essential to the population’s wellbeing and economic productivity. Yet our health impact assessment suggests that rather than supporting people into work, these reforms could mean a backward step – potentially worsening the health of millions of already vulnerable adults. Previous efforts to reduce spend on disability benefits have not been successful. Making short-term cuts before reviewing the design of PIP risks repeating history.
Instead, government should focus on tackling the underlying drivers of higher disability and health-related benefit spend, including supporting the building blocks of health and delivering a preventative and coordinated approach to keep people well and in work. Only by doing this will government see the sustainable, long-term improvements to the work and health system needed to unlock growth.