The original reforms would restrict eligibility for personal independence payments (PIP), the main disability benefit, and the universal credit (UC) health top-up, aiming to save £5bn a year by 2029/30.
Starmer’s plans sparked widespread backlash, including from dozens of Labour backbenchers.
Respected MP Dame Meg Hillier, chair of the Treasury Select Committee, spearheaded the charge, which would have killed the bill if selected by the Speaker.
Here, The i Paper explores why the Government will still need to push through with the welfare reform bill – and the dangers posed by its latest U-turn.
Surging welfare bill
Meanwhile, the benefits bill is forecast to rise by an average of £2.9bn each year until 2028/29, meaning the savings may not be enough to cover the rising cost of welfare.
This has sparked concerns that tax rises to fill the financial gap created by the U-turn will be introduced in the autumn budget.
Downing Street declined to rule out tax rises in the autumn to pay for the welfare concessions, saying instead there will be “no permanent increase in borrowing”.
Asked whether the Government could say there would be no tax rises to pay for the changes, the spokesman said: “As ever, as is a long-standing principle, tax decisions are set out at fiscal events.”
Rise in PIP claims
The daily living component of PIP is intended to help people in England, Wales and Northern Ireland with the extra costs of daily tasks such as preparing food, washing and dressing, if they are disabled or in ill health.
The original reforms to PIP were forecast to save £4.5bn a year by the end of the decade
But following the government’s U-turn, the reforms will only apply to new PIP claimants from November 2026, meaning around 370,000 existing claimants will be exempt.
There will also be a knock-on impact for around 50,000 claimants of carer’s allowance who look after a PIP claimant, allowing them to receive £4,340 per year, the IFS said.
Rise in UC claims
The original reforms to the health element of UC would freeze it for existing claimants at £97 per week until 2029/30.
An estimated 2.25 million current recipients of UC would be impacted by the freeze, taking an average hit of £500 per year, Government figures show.
The reforms would have raised an estimated £3bn in 2029/30.
This is expected to cost up to £1bn.
Drop in economic activity due to long-term illness
One in 10 people of working age were claiming a sickness or disability benefit, according to figures released by the Department for Work and Pensions in the spring.
Economic inactivity due to long-term sickness has skyrocketed, rising from around 15,000 in the first three months of 2020 to more than 438,000 during the same period in 2023.
Since the pandemic, there has also been a surge in the claims for the 20 most common conditions people receive PIP for.
Meanwhile, claims for mixed anxiety and depression more than doubled, from 223,433 in October 2019 to 454,387 in October 2024.
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