The Conservatives' plan for welfare: IFS response

The Conservatives’ plan to save £36 billion per year from working-age benefits would, if realised, represent a significant saving – 21% of the expected £173 billion working-age benefit bill in 2029–30. For comparison, getting defence spending to 3% of GDP would cost £11 billion per year.

Two proposals make up more than half the proposed saving, and both come with significant uncertainties. 

• Cuts to working-age health-related benefits, scored at £14 billion, are based on a reform under which “claims for mild mental health conditions and routine back and joint pain will no longer be accepted”. Under the existing system, claims for Personal Independence Payment (PIP) are assessed based upon what the individual is unable to do (such as cooking, or getting around) and claims for the health element of universal credit are assessed based upon the individual’s capacity to work. Neither benefit’s assessment is linked to specific conditions. To cut benefits for people with particular conditions might imply adding a requirement to have a diagnosis from a specified list. But this could well save less than expected, as many health-related benefit claimants have multiple health problems. Previous IFS research found that two-thirds of those on disability benefits (PIP) with a mental health diagnosis also have a physical health diagnosis. Such a reform would also incentivise claimants to obtain a diagnosis to make them eligible.
• A further £9.5 billion per year saving is envisaged from ending access to the benefit system for foreign nationals (except those with EU settled status). Currently, 526,000 universal credit claimants are in this category, around 63% of whom are not in work (and often will get much of their income from benefits). The key uncertainty here is how many people would respond to the reform by applying for citizenship, and hence remain eligible for benefits. Many of those with indefinite leave to remain (who make up 233,000 of the above 526,000) are able to apply for citizenship. Making it harder to obtain citizenship if one has claimed benefits in the past (as some Conservative policies imply) would reduce the scope for this response.

There are also two proposals that represent improvements in benefit system design: 

• Currently, the maximum support private renters can get for housing is based upon the 30th percentile of rents in their local area as it stood in September 2023 – and, on current policy, will remain frozen at that level indefinitely. The Conservatives plan to instead link maximum support to the 10th percentile of rents and maintain that link going forward. Opinions will differ on the appropriate level of support the system provides for housing, but basing it on current rents, instead of increasingly outdated rents, is a clear improvement in design, and something the IFS has long called for.
• Claimants of PIP who reach state pension age continue to get the benefit with only light-touch reviews for the rest of their life. Conversely, someone who becomes disabled the day after reaching state pension age can only get the – less generous – attendance allowance. The Conservatives propose moving PIP claimants to attendance allowance (thereby on average cutting their entitlements) once they reach state pension age. Again, opinions will differ on the right level of support for disability at older ages, but there is a clear advantage in treating people similarly in retirement regardless of whether their disability started before or after state pension age. 

Tom Waters, an Associate Director at the IFS, said:

“Substantial savings from the benefit system are absolutely possible. But some savings are much more certain than others, and the Conservatives’ proposals are at the more uncertain end of the spectrum – though, if realised, they would undo all the growth in real working-age benefit spending since the pandemic. The cuts are also fairly narrowly targeted, implying large losses for a small number of people. In particular, some of the foreign nationals affected get most or all of their income from benefits, and under this plan would see a substantial increase in hardship.”