Tens of thousands of people across the UK are set to lose nearly two-thirds of their income under major welfare reforms introduced by Sir Keir Starmer’s Government, according to new calculations.
The planned cuts, part of a shake-up of the benefits system, could see annual incomes fall from £15,000 to just £5,400 — a staggering 64 per cent drop.
At the heart of the changes are stricter eligibility criteria for Personal Independence Payments (PIP) and incapacity benefits, which will significantly impact people who are out of work and rely on benefits for essential living costs.
Ministers argue the reforms are needed to encourage people “trapped on benefits” back into work. The Government also says the £5bn in projected savings will help Chancellor Rachel Reeves meet her fiscal rules ahead of next week’s Spring Statement.
Last week, Work and Pensions Secretary Liz Kendall announced new rules for PIP, which provide support to those with long-term disabilities or health conditions.
The Resolution Foundation estimates that up to 1.2 million people could lose around £4,300 a year as a result.
Under the proposed system, PIP’s daily living component will only be available to those facing major barriers
GETTYThe new figures, from the Financial Times point to the dramatic impact of government reforms to the benefits system.
Under the proposed system, PIP’s daily living component will only be available to those facing major barriers to carrying out everyday tasks. This means that people who currently qualify for help with activities like washing or being prompted to go to the toilet could lose their entitlement.
The Government is also changing access to incapacity benefits — known as Universal Credit health — which provides around £5,300 a year. Going forward, this benefit will only be available to those who also receive the PIP daily living payment.
This combination of cuts could leave some individuals up to £9,600 worse off per year if they no longer qualify for either payment. While they would still receive the basic rate of Universal Credit, this is expected to amount to just £5,400 per year by 2029, even after inflation adjustments.
Analysis is calling into question the success of the Government's DWP crackdown GETTY The Government has not released an estimate of how many people will be affected. However, around half of the 3.7 million people on PIP also receive Universal Credit health, indicating that hundreds of thousands could face severe income reductions.
Ayla Ozmen, policy director at welfare charity Z2K, said: "Three-quarters of people on Universal Credit and disability support already struggle to afford the essentials.
“Evidence from our advice services shows that those who will lose out include people with psychosis and double amputees."
Under the new PIP rules, claimants must score at least four points in one assessment category to qualify for any support. Yet, government data shows that 48 per cent of current claimants score below 12 points in total, meaning many could lose eligibility.
The DWP is reporting many PIP claims rejectedGETTY Even individuals who score highly overall but fail to meet the four-point threshold in any single category could also lose support.
The reforms have sparked growing unrest within Labour. Over 70 MPs attended a recent meeting with Liz Kendall, where one moderate MP reported visible “anger and dismay” about the impact on constituents. Much of the rise in health-related benefit claims in recent years has been driven by young people, with over half of new claims since 2019 linked to mental health or behavioural conditions.
The Department for Work and Pensions defended the changes, pointing to a £1bn support package aimed at helping people back into work. It also said the basic rate of Universal Credit would be increased above inflation for the first time.
A DWP spokesperson said: "Our reforms will ensure the most vulnerable and severely disabled people are supported to live with dignity, whilst making sure that everyone who can realise the benefits of work is expected and supported to do so."
However, the timing has drawn further concern, as job numbers in key sectors like hospitality and retail — often entry points into employment — continue to decline.
