A dangerous road? Examining the ‘Pathways to Work' Green Paper

20th March 2025

Yesterday's Green Paper marks a serious attempt by the Government to tackle two major concerns: the growing spend on disability benefits, and the large number of people who are not working through ill-health.

The proposals to tackle the former go much further than reforms suggested by the previous Government; between 800,000 and 1.2 million people are set to lose entitlement to PIP (worth at least £4,000 a year by 2029-30) - as well as any benefits that they (or others) receive that are linked to PIP eligibility.

This is a straightforward cut to the generosity of the disability benefit system, with the state saying, in effect, that it will support people with a narrower range of health problems than it did before.

Announced reforms to incapacity benefits are more complex, with winners and losers. The Government will be hoping that reducing the financial incentive to be in the UC LCWRA group (by freezing the rate for existing claimants and halving the level of support for new claimants, a cut of £2,800 a year to new claimants after April 2026 (in 2029-30 prices)) will get more people who are ill or have disabilities into work.

The 2.6 million families projected to be in receipt of the UC LCWRA element by 2029-30 will lose from this change. The winners will be the other 4 million families receiving UC, who will gain from a small above-inflation increase to the standard allowance in April 2026, worth £165 a year to a single adult.

The Government has suggested more radical proposals for the medium-run, such as preventing those aged under 22 from receiving incapacity benefits at all, and replacing the WCA test with the PIP assessment, such that (with a handful of exceptions) only those who have long-term health issues that limit their daily lives will get extra support through UC. Some claimants will therefore be hit with a ‘double whammy', no longer qualifying for PIP or for the health element of UC: these people will be severely affected, losing at least £9,600 a year.

The risk to the Government is that any benefits from the changes in the Green Paper could be completely over-shadowed by the scale of income losses faced by those who will receive reduced or no support at all. Ironically, the main beneficiaries of yesterday's proposals are those without health problems or a disability. On average, households with at least one disabled member are estimated to lose out by £400 a year by 2029-30, while households with no disabled members will gain slightly, by £35 a year. Although some reforms are sensible, it is hard to escape the conclusion that many of the proposals have been driven by the need for short-term savings to meet fiscal rules, rather than a desire to implement long-term improvements to the system, with some of the suggested giveaways or transitional protection being unconfirmed and subject to further consultation. The result risks being a major income shock for millions of low-income households.

The context behind the Green Paper is clear: health-related benefit spending is rising fast
After months of speculation, yesterday the Government released its Pathways to Work Green Paper, setting out its vision for the health-related benefits system with a wide-ranging set of changes which it estimates will cut spending by £5 billion by 2029-30. The backdrop to this is clear: real-terms spending on health-related benefits has risen sharply in recent years, and this rise is set to continue. Total spending on working-age disability and incapacity benefits has increased in real terms by £19 billion since 2019-20 and is set to rise by a further £13 billion between 2024-25 and 2029-30. Figure 1, which breaks down total disability and incapacity benefit spending for all age groups, shows that two benefits account for the majority of health-related benefit spending: Personal Independence Payment (PIP), a benefit that is paid regardless of whether someone is in work, to compensate for the additional costs of being disabled; and Universal Credit for people with health conditions (UC-health), a benefit paid to people whose health or disability affects their ability to work (and is sometimes called an incapacity benefit). In 2024-25, we are spending £26 billion on PIP and £17 billion on UC-health (referred to as UC-H from hereon). It is these two working-age benefits that are the subject of yesterday's Green Paper; disability and incapacity benefits directed at children and pensioners are unaffected.

The Green Paper is a mixture of definite plans, and some proposals that are being consulted on
Unusually for a Green Paper, yesterday's announcements included changes that the Government will definitely be going ahead with, as well as proposals on which it will now consult, or undertake further work. The speed of definite policy decisions is likely driven, at least in part, by a desire for them to be counted by the OBR in next week’s Spring Statement, and so help the Chancellor meet her fiscal rules.

The Government has announced changes to all of the drivers of the ultimate bill - who qualifies (eligibility), how much is paid (entitlements), and how long people stay on (exits). The definite changes that the Government is not consulting on are:

Eligibility

Reducing the number of people who will qualify for PIP from 2026-27 onwards. The eligibility criteria for the daily living part of PIP will be narrowed (the mobility part of PIP is unaffected).[2] Previously, claimants needed to score at least eight points from the 10 daily living headings to qualify for the standard rate of this element. Under the new system, claimants will also need to score at least four points in any single heading, so claimants who previously scored (say) two points in four or more elements would no longer be entitled. The changes will affect any new claim or reassessment of an existing claim from 2026-27 onwards.

From 2028-29, the Work Capability Assessment (WCA) will be scrapped, and eligibility to UC-H will be limited to those receiving a Daily Living award in PIP. Currently, the WCA plays a key role in determining how much a person’s illness or disability affects their capability for work, therefore impacting the level of UC that they receive. By scrapping the WCA, those who qualify for UC-H under the current system but do not qualify for the Daily Living element of PIP will lose out. In particular, this will affect those with temporary conditions (those expected to last less than a year) which can impact their ability to work but do not qualify for PIP.

Entitlement

Reducing the value of the limited capability for work and work-related activity (LCWRA) element paid to UC claimants who are deemed unable to work, which the DWP currently projects will be claimed by 2.6 million families by 2029-30. The additional amount received by claimants in the LCWRA group is £97 a week; for existing claimants, this will be frozen in cash terms for the rest of the Parliament. Based on current inflation projections, we would have expected the LCWRA element to reach £107 per week by 2029-30 were it not frozen. From April 2026, it will drop to £50 for new claimants (a cut of over £50 a week compared to the previous projected value by 2029-30). A new premium will be introduced to protect the income of those with (in the DWP’s words) "the most severe, life-long health conditions, who have no prospect of improvement and will never be able to work" – but there are no details about how this group will be defined and what the value of this premium will be.

Increasing the value of the UC standard allowance for all recipients. The Government said this change would be worth £7 a week by April 2026, or £775 a year by April 2029, but these are comparisons between the nominal value now and in those years. In reality, the Government is proposing a one-off increase in the standard allowance by about £3 a week more than the usual inflation uprating for a single claimant in April 2026 (and a proportionally equivalent increase for couples).
Exits

There will be various changes to the business of conducting WCA and PIP assessments, including increasing the number of WCA reassessments carried out (when capacity allows) and increasing the number of face-to-face PIP and WCA assessments.
A new ‘Pathways to Work’ support offer: this will include employment, health and skills support for out-of-work benefit claimants with a health condition or disability, costing £1bn a year in 2029-30.

Read the full report HERE