Downing Street has held talks with Labour MPs about a “guarantee” for people who try to move from disability benefits into employment to ensure they are not financially penalised if things do not work out.
The guarantee – which was likened by one MP to “try before you buy” – is aimed at addressing backbench discontent about a multibillion pound package of welfare cuts which the Government is preparing to unveil next week.
The Government is under pressure to rein in the benefits bill because a forecast from the Office for Budget Responsibility due later this month is expected to show that the “fiscal headroom” which Chancellor Rachel Reeves set herself in last year’s Budget has been wiped out.
Official figures on Friday showing that the UK economy contracted in January have only added to the pressure on Reeves.
In a package of reforms next week, Work and Pensions Secretary Liz Kendall is expected to tighten up eligibility for the personal independence payment disability benefit and freeze its value for a year.
Universal credit is also set to be overhauled to provide a greater incentive to look for work.
But the measures have alarmed some Labour backbenchers and ministers all the way up to the Cabinet.
The Financial Times reported that the Energy Secretary Ed Miliband and the Leader of the Commons Lucy Powell voiced concerns in a Cabinet meeting this week.
One minister told The i Paper: “Personally, I would be very worried [about] any changes to PIP. This does concern me.”
An MP who described themselves as a “pretty loyal backbencher” said: “It’s the PIP freeze that is the most concerning, really.”
To help win waverers over, No 10 is understood to be working on plans for a safety net for people on disability benefits who try to move into work.
One Labour MP said: “We are seeing some suggestion from conversations people are having with ministers and No 10 that there will be a compromise to guarantee help for people frightened of coming off their disability benefit in case they can’t get back on it.
Try before you buy
“There is talk about a kind of guarantee that you try before you buy or you go into work”. Under such a guarantee, if an individual did not find work “your benefits won’t be cut if you go back”, the MP said.
Several other Labour MPs confirmed that fear of losing eligibility for disability benefits is a major barrier stopping people from putting themselves forward to get back into work.
A Labour backbencher said: “I have seen young people who have been long-term unemployed, who are trying to get into work but who have spent years trying to secure a package of benefits and who are then worried they may lose that package if it doesn’t work out for them.
“So a key thing for me is how are we going to provide a security guarantee that they can take steps to get back into work but will keep that package if it doesn’t work out.”
Cabinet members Ed Miliband and Lucy Powell, left and centre, have reportedly expressed concern about benefits cuts, and Angela Rayner, right, about cuts to her departmentAnother backbencher said that people on incapacity benefits are “scared of losing their benefits, or losing eligibility to the higher rate if they try work and it doesn’t work out”. “We know that’s a huge barrier,” they added.
This week, Labour MPs were brought into Downing Street for briefings from the No 10 policy unit aimed at convincing them of the case for welfare reform.
One backbencher said the briefing focused on “the many flaws in the system”, including “incentives that are in the wrong direction”, as well as the “brutal fact” that on the current trajectory the UK is going to be spending £100bn on health and disability benefits by the end of the Parliament.
“Whatever specific reform that comes forward – there will always be some people who are upset by this or that – but I think there’s fairly widespread if not universal agreement among Labour MPs that this is a broken system which the government’s inherited and it needs to change,” the MP said.
Wider cuts
The welfare reforms are part of a wider package of spending cuts aimed at helping Reeves stay within her self-imposed fiscal rules which limit borrowing.
Deputy Prime Minister Angela Rayner, the Home Secretary Yvette Cooper, and the Justice Secretary Shabana Mahmood are all understood to have spoken out about cuts to their departments.
All three lead “unprotected” departments which are in the firing line for spending reductions.
A government source said it was natural for ministers to be “standing up for their departments”.
A second source said that collective support for the fiscal rules had been expressed at Cabinet, with some ministers merely pointing out the “tough choices” this would entail.
Asked about the disquiet in the Cabinet and among Labour ranks about the welfare proposals, a No 10 spokesman said he “wouldn’t get into details of Cabinet discussions”.
The spokesman added: “Left as it is, the system we’ve inherited would swallow more taxpayers’ money and leave more people trapped in a life of unemployment and inactivity.
“That’s not just bad for the economy, it’s bad for people too, and that’s why this Government will set out plans to overhaul the health and disability benefits system shortly, so it supports those who can work to do so, whilst protecting those who can’t, to put welfare spending on a more sustainable path so that we can unlock growth.”
The DWP were contacted for comment.
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