The benefit cuts that are now more likely

Ministers are gearing up to announce major changes to the benefits system in an effort to drive down reliance on Government handouts – and get more young people into work. Andy Burnham has said he does not was to see “anyone in their 20s on benefits” unless they cannot work due to a disability, suggesting a significant shift in policy is on the way. The Prime Minister has insisted he will not reduce the welfare bill via “crude cuts” – despite the Institute for Fiscal Studies (IFS) think-tank saying serious belt-tightening is needed to set the UK’s economy straight.

But welfare spending is forecast to balloon to over £400bn by the end of the decade, with costs largely driven up by inflationary increases to benefits, according to the Office for Budget Responsibility’s (OBR) latest financial outlook. The entire bill – which includes disability benefits, universal credit and the state pension – is expected to increase from £333bn in 2025/26 to £431bn in 2030/31. Health and disability benefits, including personal independence payments , are set to make up over £100bn of this by 2028/29, rising to over £120bn a year by 2031/32.

Next month, Labour grandee Alan Milburn’s report into youth joblessness and disability minister Stephen Timms’s review into disability benefits will be published. The Government will respond to their recommendations by the end of the year, with a White Paper and legislation to follow in 2027. Milburn has set out to reduce the “perverse incentives” to remaining on benefits rather than taking up work. While Labour wants to avoid restricting benefits for those who need them most, there will inevitably be some tightening of eligibility and the possible removal of welfare support for young people who don’t take up job offers.

Here are all the changes that could be made. Cutting the universal credit health element for under-25s One proposal being discussed is removing the health element of universal credit for all under 25s and replacing it with an intensive “Return to Work” scheme. New claimants already saw a monthly reduction from April 2026 – down from £429 to £217. The health element is an extra monthly payment added on top of the standard universal credit allowance for claimants who have a long-term health condition or disability.

It is understood the payment could be replaced with subsidised jobs for younger people, targeted “Back to Work” schemes and mental health support. Around 184,000 18- to 24-year-olds currently qualify for an additional monthly payment due to a health condition or disability that severely affects their ability to work, with no requirement for those who qualify to look for work. The OBR has predicted that the nation will spend £3bn more on this benefit in 2030/31.

Eduin Latimer, senior research economist at the IFS specialising in welfare, said cutting the UC health element or personal independence payments (PIP) – the main disability benefit – is a “natural” option for the Government. He told The i Paper that a cut to restrict access to the health element of UC for people aged 25 and under “could in theory make savings basically immediately”. Replacing the personal independence payment (PIP) Around four million under-25s currently qualify for PIP, a non-means-tested benefit that helps with extra living costs for those with a long-term physical or mental health condition or disability.

But the Timms Review – led by the disability minister – is now evaluating the system in England and Wales, and considering potential alternatives to help support people into work. Timms, who was commissioned after Sir Keir Starmer’s botched welfare reforms last summer, said the review is looking at whether the welfare system can direct people towards help “in addition to or, in some cases, perhaps instead of a cash payment”. It comes as Milburn, a former cabinet minister conducting a report into Neets – those not in education, employment or training – found that nearly half of PIP claims among young people are for autism and ADHD.

It is understood that while Milburn’s report is expected to make savings eventually under a decade-long plan, the Timms proposals have not been designed to make cuts. However, more than half of voters believe young people claiming disability benefits should be hit with sanctions if they turn down employment opportunities, polling shared with The i Paper suggests. ‘Tough’ approach to those who don’t take up jobs Chancellor John Healey did not specifically mention sanctions for young people who don’t take up job offers, but he did suggest a “tough” approach to those who refuse work and training.

He said: “We will expect, as we’ve done before, that (young people) take up the offers… and that’s the way that we can bring welfare bills down in the long term.” Pointing to previous Labour governments – when there were more conditions on welfare payments for young people – Healey said he would be “tough on those who weren’t prepared to take up the offer”, while offering “real support and advice”. Latimer said adding work-related sanctions to PIP is a “trade off” as while it would save money by decreasing the number of people who would meet the conditions, it could restrict people with severe disabilities.

“At the moment it’s only about one in five claimants work so if you did if you did say require people to work that would effectively be quite a big cut to PIP,” he said. Work-related support Ministers have been clear that the package to reduce reliance on benefits will come alongside intensive employment support for young people. Milburn is expected to propose a package of reforms to help under 25s find meaningful employment under a new “participation” system.

This is expected to start with career plans in school from the age of 14. Schools, local authorities and employers would then work together to help pupils turn their plans into reality. The report is expected to cut across multiple departments, including the Department for Work and Pensions, Education and the Business brief. Ministers are understood to be dovetailing Millburn’s requests against their departmental priorities and existing programmes that tackle youth joblessness.

Latimer said Milburn’s employment support package would require “upfront spending” but it “could pay off in the long run if it does succeed in getting more young people into work”. The Department for Work and Pensions has already invested £3.5bn in employment support to “end the culture of people being signed off and written off”. This is alongside £2.5bn investment in youth employment over the next three years to support almost one million young people and help deliver up to 500,000 opportunities to “earn and learn”.