UK Welfare Reforms to Drive 250,000 More People Into Poverty

(Bloomberg) -- A quarter of a million people, including 50,000 children, will be pushed into relative poverty in the UK by 2030 as a result of Chancellor of the Exchequer Rachel Reeves’ planned cuts to the country’s benefits system, according to a government assessment of the policy that risks stoking a rebellion within the governing Labour Party.  

Overall, some 3.2 million families will be worse off to the tune of an average £1,720 ($2,218) a year as a result of the welfare reforms, the Department for Work and Pensions said in the document published on Wednesday after Reeves delivered an economic update to the House of Commons. That includes current and projected future recipients, it said.

The assessment raises the prospect of a damaging rebellion within Labour when some of the changes to disability benefits come to a vote in the House of Commons at some point later in the year. That’s because many backbenchers see the policy as running counter to Labour’s tradition of supporting the most vulnerable in society. 

“Making cuts instead of taxing wealth is a political choice, and taking away the personal independence payments from so many disabled people is an especially cruel choice,” one Labour left-winger, Richard Burgon, told the Commons after Reeves’ statement.

Burgon was far from alone, with Labour Members of Parliament including Rebecca Long-Bailey, Nadia Whittome and Andy McDonald also voicing concerns. When the cuts were first detailed last week by Work and Pensions Secretary Liz Kendall, the Labour Chair of the House of Commons Work and Pensions Committee, Debbie Abrahams, accused her party of “balancing the books on the backs of sick and disabled people.” 

Kendall said last week that her plans centered on tightening the criteria for so-called personal independence payments (PIPs) that are paid to cover additional living costs, regardless of income or employment status of a claimant. But while she said the package, including some spending rises, would save about £5 billion a year by 2030, the government’s fiscal adviser, the Office for Budget Responsibility, estimated they would save only £3.4 billion in the tax year ending April 2029, and £4.5 billion the following year — even after Reeves found an extra £500 million of cuts.

While Kendall’s statement had sparked some public complaints by unions, think tanks and some Labour lawmakers, many other MPs have been waiting for Wednesday’s impact assessment to understand the full effect of the reforms. The government is usually obliged to publish an impact assessment alongside an announcement like last week’s, but it argued that the report contained market-sensitive information, holding publication until Reeves’ spring statement. 

The impact assessment didn’t factor in the effect of a £1 billion investment to support people back into employment, according to the DWP document. It also found that while millions of families would lose out, some 3.8 million families would benefit from the changes by an average of £420 a year. Nevertheless, it was the the poverty figures that Labour lawmakers seized on, with several highlighting them in the chamber on Wednesday.

Rebecca Long-Bailey, who Prime Minister Keir Starmer beat to the party leadership in 2020, told Reeves that a constituent of hers is already “having thoughts of suicide” at the prospect of the disability cuts. She cited the assessment that poverty will increase, and asked: “What will the chancellor do to stop this from happening?”

But the government argues that as well as helping plug a hole in the public finances, its welfare reforms will serve to encourage people back into the workforce.  Currently, “the system is actively incentivizing people toward higher incapacity benefits and away from work,” Starmer wrote in London’s Times newspaper last week, defending the plans. “This is not just unfair to taxpayers, either. It is also a bad long-term outcome for many of those people.”

More stories like this are available on bloomberg.com

©2025 Bloomberg L.P.