The next government will be reforming welfare

Voters are telling us that this is a living standards election, with concerns about the cost of living at the forefront of their minds. There are 2 ways of tackling the cost of living: raising people’s incomes or bringing down costs, with welfare part of the former.

There are competing visions for the future of welfare on offer at the general election:

• The Conservative Party has outlined plans to reduce welfare spending by £12 billion per year and had already launched an extensive consultation with a range of new initiatives before calling the election. At the heart of this agenda is a plan to reform Personal Independence Payment (PIP), with a particular focus on those with mental health problems, and reform the Work Capability Assessment (WCA) so that more people are assessed as potentially able to work
• So far, Labour hasn’t set out the same degree of detail, but their manifesto does put forward the ambition to reduce child poverty, end homelessness, and end mass dependence on food parcels. They also want to support disabled people into work, as well as review both Universal Credit and the WCA
• The Liberal Democrats want to bring the WCA in-house as well as make changes to how PIP assessments are carried out. The Green Party has committed to an immediate uplift in disability payments of 5% alongside a £40 weekly uplift in Universal Credit and legacy benefits. Plaid Cymru have called for the Essentials Guarantee to be embedded in Universal Credit
• The SNP have called for the scrapping of the 2 child limit — the Liberal Democrats, Plaid Cymru, and the Green Party have also made this commitment

It’s clear that the next government will be embarking on a further period of welfare reform. While announcements and news coverage might often focus on headline figures or attention-grabbing claims, much of the real change people on benefits need will come through attention to the details. As a frontline organisation advising nearly 3,000 people per working day with welfare issues, we know that it’s some of the more technical, less glamorous reforms that have the greatest potential to deliver meaningful change for those households on the lowest incomes.

Here’s some of the policies that need to be addressed if we’re going to see progress on solving problems like child poverty, homelessness, food insecurity or supporting disabled people into work.

Deductions

2.3 million children live in households affected by Universal Credit deductions. Deductions are mainly due to the repayment of advance loans, which are necessary due to the 5 week waiting period most new claimants experience before receiving a first payment. 6 in 10 of the people we helped with advance loan repayments in the past year also needed a food bank referral. Deductions often happen because of previous benefit overpayments. The next government should act to prevent deductions being necessary, including reducing the 5 week wait for Universal Credit, and adopting a more humane approach to overpayment recovery that minimises hardship and reduces the amount taken off people’s monthly payments.

Local Housing Allowance

We support 6,000 people a month with homelessness. Any effort to end homelessness will need to include increasing the Local Housing Allowance (LHA), which is due to be frozen again from April 2025. Among young people, LHA’s shared accommodation rate is contributing to rising levels of homelessness. It’s in urgent need of reform.

Household Support Fund

We helped 90,000 people with localised social welfare over the past year, a big part of which is the Household Support Fund (HSF) which is currently due to end this autumn. This plays a vital role in providing a source of emergency support for households who literally find themselves unable to turn the heating on or buy food. The fund must be extended and placed on a long term footing.

Disability benefits

234,000 people came to us for help with PIP over the past 12 months. The most important thing the next government can do to support disabled people — including people who are able to move into employment — is to rethink the claims process for disability benefits. It should be a supportive rather than hostile process, aligned with wider NHS, care and employment support services. We need to remove the idea that narrowing eligibility for disability benefits is the best way to move disabled people into work, and recognise that previous reforms of this nature have often failed to deliver the savings expected.

Benefits uprating

There are also some straightforward administrative changes that could be made. While some benefits are required to rise in line with inflation each year, others aren’t. The election debate has highlighted the ‘fiscal drag’ caused by frozen tax bands, where people pay more in tax even when tax rates don’t change. But failing to increase benefits by inflation is also imposing a cut in people’s incomes, and among households the least able to afford it. Benefit uprating both needs to be guaranteed to happen each year, but also draw on a measure of inflation that accurately measures how price rises are experienced by those on the lowest incomes.

Managed migration

The ‘managed migration’ of people from legacy benefits to Universal Credit is due to ramp up a gear this autumn, with households on Employment and Support Allowance (ESA) to be brought over to the new system. However, more work is needed to understand why so many people asked to complete the move to Universal Credit so far are choosing not to claim. And if the right support isn’t in place as the more complex ESA cohort moves over, the impact on disabled adults or those living with long term health conditions could be disastrous.

The elephant in the room…

Finally, the next government will need to decide what to do about the 2 child limit and the benefit cap. For those coming to us for help with the 2 child limit, 16% needed help getting charitable support, and 14% needed access to local social welfare. Among those coming to us subject to the benefit cap, 30% needed a food bank referral. Both policies break the link between assessed need and the benefits paid, and both are key drivers of child poverty.

Removing these will come with a price tag, but compared to other election commitments, not a huge one. Perhaps the bigger question any incoming government should be asking is: what is the cost of not removing these policies, like the long-term impact on children growing up in poverty?