‘Perverse' benefits system is unsustainable, warns Liz Kendall
Liz Kendall has said 'perverse incentives' in the benefits system must be tackled as she resists pressure from Labour rebels to water down her welfare reforms.
The Work and Pensions Secretary said the Government needed to take 'urgent action' to get people into work and warned that the rise in claims for personal independence payment (Pip) was 'not sustainable'.
In a letter to Debbie Abrahams, the chairman of the Commons work and pensions select committee, Ms Kendall said: 'Reforms are needed now to make the system sustainable, while supporting those people with the greatest needs.
'Our plan to rebalance the rates in Universal Credit will remove perverse incentives that trap people in benefit dependency.'
The comments come as Ms Kendall's plans to cut personal independence payment (Pip) and the health element of universal credit face mounting criticism from Labour MPs.
Last month the MPs' committee urged Ms Kendall to delay the implementation of her reforms, citing concerns about 'the impact of the proposed cuts in universal credit health support on employment, poverty and health outcomes'. Backbenchers have also been calling for the proposals to be dropped.
Dismissing their concerns, Ms Kendall wrote: 'We urgently need welfare reform to give people a better future – to stop people from falling into inactivity, restore trust and fairness in the system.'
As it stands, those who are permanently signed off work because of sickness and claim universal credit health top up receive more than twice as much as those on the basic level of universal credit. Those signed off sick do not need to look for work, while those on basic universal credit do.
Ms Kendall and others argue that this encourages people to claim sickness benefits and puts them off trying to find work.
A report from the Resolution Foundation found that 'changes to the benefits system over the last decade have strengthened the incentive to claim incapacity and disability benefits'.
The changes to the welfare system include stricter eligibility for claiming Pip and reducing payments for new claimants of the health element of Universal Credit. They are forecast to save £5bn by 2030.
The Work and Pensions Secretary said the reforms were necessary as the current rise in Pip cases was outpacing the increase in disability prevalence.
Even after changes to disability benefits, the number of people on Pip is still forecast to grow by 750,000 by the end of the parliament, according to government estimates.
The cost of Pip is poised to rise from £15bn before the pandemic to £37bn in real terms by the end of the decade, while the overall cost of sickness and disability benefits is expected to climb to £100bn.
Pip is the main non-means-tested benefit for those with health conditions or disabilities, with payments of up to £9,500 a year to help people with living costs and getting around.
'With Pip caseload and costs forecast to continue rising, reforms are needed now to make the system sustainable, while supporting those people with the greatest needs,' said Ms Kendall.
Under plans announced in March, the Government will tighten the eligibility criteria for people to claim Pip.
A separate but linked concern are worries about the high level of unemployed young people.
The latest figures from the Office for National Statistics show that 923,000 people aged between 18 and 24 were not in employment, education or training (Neet) in between January and March 2025. There are concerns that many will find themselves stuck on benefits without help.
Alison McGovern, the employment minister, told the work and pensions committee on Wednesday: 'The situation for young people – well, it's a big worry for me at the moment.'
Ms McGovern added that the high number of Neets meant there were 'nearly one million young people effectively on the scrapheap. They need a start, they need a chance for a career'.
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