What next for UK welfare reform after Starmer’s U-turn?

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UK prime minister Sir Keir Starmer has been forced to make several concessions to his controversial welfare reforms in an attempt to head off a major rebellion by Labour MPs.

But the longer term issue of how the state can afford Britain’s ballooning welfare bill remains, with the number of disability benefits claimants set to rise significantly over the next 10 years.

How big is the problem?

Without reform, spending on working-age health and disability benefits is expected to hit £66bn by 2029-30, according to the Institute for Fiscal Studies.

These costs have risen exponentially since the pandemic, with a £16bn increase between 2019 and last year.

Without reforms, the think-tank estimates a similar size increase is expected by the end of the parliament.

At the same time, the Office for National Statistics estimates that the UK has 2.8mn people with a long-term health condition that prevents them from working.

The changes to the welfare bill were designed to save almost £5.5bn by 2029-30, but the concessions on Friday could ultimately shave £3bn off this total.

What has Starmer conceded?

In March, Starmer unveiled plans to tighten eligibility for disability benefits known as “personal independence payments”.

On Friday, the government said it would not implement tighter assessment rules for current claimants, only claimants from November 2026.

This is a substantial concession, leading to an estimated 370,000 extra people receiving the benefit, at a cost of £1.9bn in 2029-30, according to the IFS.

It will avoid an income shock to any household relying on the benefit, but could be seen as unfair to equally deserving claimants who fall ill after the cut-off date. Campaigners accused ministers on Friday of creating a two tier system.

The government had also pledged to freeze the health element of universal credit — paid to claimants assessed as too sick to work — until 2029-30.

MPs have now been told this will now be paid in line with inflation for existing claimants. The payment will be halved and then frozen for new claimants.

Concessions have also now been made in the tightening of the criteria to qualify for Pip.

Ministers had said that from November 2026, claimants would need to score at least four points in at least one category of need to receive any rate of Pip. MPs have been told this will now be subject to a review.

Starmer also brought forward a £1bn package of employment support to this year to persuade MPs to support the welfare reforms.

What happens next?

This week’s U-turn means the government is “now really only making a small dent” in its welfare bill, according to Tom Waters, associate director at the IFS.

“The package even as it stood a couple of days ago was only slowing, not stopping and certainly not reversing, these trends in spending”.

He added: “Of course none of the available options here are easy. Making very big savings in the next few years would entail taking very large sums away from huge numbers of people, often in a vulnerable situation, over a relatively short space of time.”

Given the concessions have been made to current claimants, experts point out the government has still managed to at least start reining in the future welfare bill.

“The concessions they have made today don’t change the long run policy, said Mike Brewer, deputy chief executive and chief economist at the Resolution Foundation think-tank. “At some point, everyone will be a new claimant . . . They’re just fixing it a bit more slowly than was the case when they first published the green paper.”

He added that the most important long-term change, which is not going to be in next week’s bill, would be redesigning the eligibility test for Pip. “The measures next week will slow the growth of spending on disability benefits, but redesigning the test could have a much greater impact.”