Election 2024: Conservative plans to reduce social security spending by £12 billion by end of next parliament look ‘extremely challenging’, says IFS

With the principal saving coming from proposed reforms to PIP, IFS highlights that this would mean a 'lot of people losing significant sums'

The Conservative Party's plans to reduce social security spending by £12 billion by the end of the next parliament look 'extremely challenging', the Institute for Fiscal Studies (IFS) has said.

With the Conservatives having announced that it plans to implement a package of reforms in the next parliament aimed at reducing growth in the number of people receiving health-related benefits, the IFS undertook analysis to assess where the proposed savings might come from. Pointing out that many of the policies put forward - including reform to the work capability assessment, expanding the provision of treatments for those with mental health conditions, and increasing sanctions - have already been incorporated by the Office for Budget Responsibility (OBR) into the Budget forecasts, the IFS suggests that the only other reform where a sizeable reduction in spending might be possible is the party's pledge - set out in its Green Paper - to reform personal independence payment (PIP).

However, the IFS observes that achieving the projected savings in the proposed timeframe is 'extremely challenging' for several reasons -

• spending on PIP (and DLA) in England and Wales is forecast to be £30 billion in 2028/2029, and cutting anything near £12 billion would be a huge proportion of the existing bill, meaning a lot of people losing significant sums;
• the lesson from previous reforms is that getting the disability benefit bill down is easier said than done and, in fact, although the introduction of PIP was intended to reduce spending, it actually increased it; and
• the reforms generally only apply to new claims and end-of-award reassessments and therefore any reductions in benefit spending can often take quite a while to realise.

IFS Associate Director Tom Waters said -

'The number of people receiving financial support from the Government for a health-related benefit has increased sharply since the pandemic and is forecast to continue growing. This is one of the big drivers of the large increase in public spending since 2019 and into the next parliament. So it is understandable that whoever is in office after the election should want to take a careful look at this. And reducing the scope of the state is one possible response to the broader public finance challenges that we face.

Most of the measures that the Conservatives have announced are confirming that they would go ahead with proposals that are existing government policy. Including these in their manifesto can make them easier to legislate. But they cannot be expected to deliver reductions in spending relative to the latest forecasts, since those forecasts are already predicated on most of these policies happening. The most substantial proposal that is not already baked into the forecast is one intended to reduce the numbers who are able to receive disability benefits on the basis of a mental health condition. Cuts are certainly possible. But history suggests that reductions in spending are often much harder to realise than is claimed. Delivering an additional £12 billion saving from this set of measures relative to what was forecast in the March Budget looks difficult in the extreme. That said, even if it was achieved, it would still only leave spending around its current level.'

For more information, see A response to the Conservatives’ proposals to reduce growth in the health-related benefits bill from ifs.org.uk

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