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Labour are being urged to introduce drastic reforms to PIP and the wider disability benefit regime

The Labour Government is understood to be considering major reforms to how Personal Independence Payments (PIP) under wider Department for Work and Pensions (DWP) reforms.

Prime Minister Andy Burnham has conceded "challenging" decisions will have to be made to balance the books ahead of Chancellor John Healey's Budget.

While the Government is not expected to announce further benefit cuts, Labour ministers are being urged to consider changes how to disability payments are assessed.

A final decision on broader PIP reform is anticipated in November with the Institute of Fiscal Studies (IFS) floating multiple policy proposals to address the issue.

Under the think tank's proposed model, an initial screening would sort applicants by severity, placing those with the most severe disabilities or terminal illnesses on an accelerated pathway to receive payments without delay.

Claimants whose conditions fluctuate, particularly those with mental health difficulties, would undergo more thorough in-person assessments.

These individuals would then be directed towards a wider range of support than the current system provides. For some, support could take the shape of equipment, practical aids, transport provision, or therapeutic services.

PIP is currently paid regardless of whether someone is in work, designed to offset the additional costs associated with living with ill health.

Sir Stephen, the disability minister, is developing these proposals as part of a wider rethink of the benefit's purpose and structure.

Spending on PIP for working-age adults has surged from £14billion annually in 2019 to £25billion, with projections suggesting it will reach £34billion in current prices by the end of the decade.

The share of 16-to-64-year-olds in England and Wales receiving the payment rose from 5.5 per cent in 2019 to 8.2 per cent last year, a rise across all age groups.

Mental health conditions and learning difficulties now drive 45 per cent of all awards, with back and joint complaints making up the other principal category.

The IFS has calculated that introducing means-testing for PIP would yield savings of £8.2billion per year, while limiting eligibility among under-30s to only the most severely disabled would trim £2.2billion from the bill.

Stripping out mental health claims entirely, a measure the Conservatives have argued would save £9billion — would in practice deliver only "low billions" in savings, according to IFS economist Eduin Latimer.

Another suggested approach involves linking awards to points scored will increase payments for conditions such as cerebral palsy while reducing them for arthritis, back pain and depression.

Mr Latimer cautioned that genuine savings would require tighter eligibility rules, adding that "precedent suggests [ministers] are more likely to overestimate than underestimate savings".

A DWP spokesperson said: "The increase in the PIP caseload has slowed under this government, falling from 400,000 in the 12 months to July 2024, to 260,000 in the 12 months to July 2026.

"But as the Timms Review report made clear, PIP is no longer fit for purpose and the recommendations from its final report, due in Autumn, will lay the foundation for sustainable reform.

"We are also delivering on our commitment to increase face-to-face assessments, which have more than doubled for PIP from seven per cent in June 2024 to 15 per cent in July 2026."