Possible Changes Coming in The budget for Jobseeker's allowance (JSA) and employment support allowance (ESA)

27th October 2025

The Institute for Fiscal Studies (IFS) says the proposed changes to scrap jobseeker's allowance (JSA) and employment support allowance (ESA). Instead, the DWP will create one unemployment insurance (UI) benefit could save between £2 billion and £3 billion a year.

How likely is this to happen?

It is plausible that the reform proposed by the Institute for Fiscal Studies (IFS) replacing the contributory out-of-work benefits New Style Jobseeker's Allowance (NS JSA) and New Style Employment and Support Allowance (NS ESA) with a single time-limited "Unemployment Insurance" (UI) benefit will happen.

But several caveats mean its timing, exact shape and savings are less certain. Below I walk through what we know, the major sticking points, and an assessment of likelihood.

What the proposal is and what the IFS says

The IFS has analysed the reform outlined by the Department for Work and Pensions (DWP) in its "Pathways to Work" Green Paper: the plan is to merge NS JSA (available for up to 6 months for jobseekers) and NS ESA (for those with health conditions, indefinite in many cases) into one contributory benefit called UI.

Under the proposed UI

It would be paid at the higher current NS ESA rate ( £140.55/week) rather than the lower JSA rate.

It would be time-limited rather than indefinite (as for many current ESA claimants). The IFS estimates that a 6-month UI might save £1.4 billion per year, a 12-month UI ~£0.6 billion per year, in the long run.

More broadly the IFS headline figure of "£2-3 billion a year" savings arises from combining the higher rate + time-limit and various modelling assumptions.

The Green Paper explicitly states the DWP is “consulting on establishing a new, simple and clear ‘Unemployment Insurance' benefit through the reform of contributory working-age benefits.”

What remains uncertain and what affects the likelihood

Duration of UI: The exact time-limit is not yet decided. If it is very short, savings are larger; if longer, savings fall. The IFS shows the scale of savings is sensitive to this.

Scope of claimants: Whether the reform applies only to new claimants or also transitions existing NS ESA claimants is unclear. If only new claimants are covered, savings take much longer to materialise.
Institute for Fiscal Studies

Political feasibility and stakeholder resistance

Reforming ESA (especially for people with longer-term health conditions) is politically sensitive. Some parts of the reform may meet strong opposition from disability rights groups and unions. For example, there are concerns about replacing indefinite support with a time-limited benefit for those with health conditions.

The fiscal and economic environment matters - if public finances tighten, reform is more likely to be pushed; conversely, if the government faces political headwinds it may water it down.

Timing / legislation: The Green Paper shows intent, but the transition to primary legislation is required. Implementation is not immediate.

Interaction with Universal Credit (UC) / means-tested benefits: The reform sits alongside wider welfare changes (including to UC and disability benefits). The complexity of interactions and unintended consequences may delay or change the shape of reform.

Likelihood that something like the reform will happen: High. The government has already signalled it, the IFS has mapped out credible savings, and it aligns with stated policy aims (simplification of contributory benefits, strengthening “something-for-something” principle).

Likelihood it will happen exactly as currently modelled: Moderate to low. Because of the major uncertainties (duration limit, treatment of existing claimants, political/back-bench resistance, disability rights group responses), the final parameters are likely to differ from the current IFS model.

Likelihood that the full savings of £2-3 billion/year will be achieved
Lower. The IFS itself shows savings depend heavily on the implementation details (e.g., 6-month limit gives larger savings; 12-month limit smaller). If the government opts for a more generous duration (for political or fairness reasons) then savings will drop. Also, transitional protections may reduce near-term savings.

Timing
Medium. The policy is under consultation now (2025/26), but major reforms of this magnitude typically take some years to legislate and implement fully. I would expect rollout phases rather than overnight change.

Yes — the proposed merge of JSA/ESA into a UI benefit is likely, but not guaranteed in the exact form modelled by the IFS. Some key caveats:

The final benefit duration, eligibility rules and transition arrangements will matter a lot.

If the government opts for a more generous version (for fairness or political reasons) the savings will be lower.

Political and stakeholder resistance (especially concerning people with health conditions/disability) may force amendments or slow-down.

The “£2-3 billion a year” savings figure is an upper estimate under favourable design; actual savings may be lower and will take time.

Budget Day is 26 November 2025