The UK Labour Government has been advised that it could make even bigger savings—up to £13 billion—if it takes a more radical approach to welfare reform. A new report from the Centre for Social Justice (CSJ) criticises the Department for Work and Pensions (DWP) for “just tinkering with the edges” of the welfare system and calls for broader social changes to fix long-term economic inactivity.
CSJ Report: A Call for Deeper Welfare Reforms
The CSJ think tank argues that the current plans in the Health and Disability Green Paper fail to fully address the welfare crisis. While a short-term £5 billion saving is expected to help fund defence spending, the CSJ states that this is “a paltry amount” compared to the overall growing cost of welfare.
The report proposes several key changes to the UK’s welfare system:
- Extending Work Requirements – More benefit claimants should be encouraged to look for jobs rather than being permanently written off from employment.
- Risk-Free Job Trials – A guarantee should be introduced, allowing people to try out jobs without losing their benefits.
- Reducing ESA Dependency – The Employment and Support Allowance (ESA) support group includes 700,000 people who say they want to work. Helping them find employment could save £10 billion in benefit payments and generate £3.3 billion in tax revenue by 2029/2030.
- Reforming Fit Notes – People with mild to moderate mental health issues should not be signed off for more than 28 days but instead referred to the WorkWell service to receive Statutory Sick Pay instead of long-term benefits.
- Redefining Mental Health Diagnoses – The NHS should clearly define mental health conditions to prevent the “normal ups and downs of life” from being classified as medical problems.
Tackling Economic Inactivity and Worklessness
The CSJ report highlights that over 3 million people claim Universal Credit without any obligation to look for work—double the number in 2022. Furthermore, 650,000 more people are out of work due to long-term sickness compared to pre-pandemic levels. The cost of disability and incapacity benefits is set to rise by £18 billion to reach £70 billion over the next five years.
To tackle this crisis, the CSJ proposes the following measures:
- Separating PIP for Physical and Mental Conditions – The Personal Independence Payment (PIP) should only provide financial support (up to £737 per month) for those with proven additional living costs. Others should receive therapy or community services instead.
- Tax Incentives for Businesses – Employers should receive tax benefits for hiring young people aged 16-24 and offering training.
- Jobcentre Staff in Schools – Careers advisers should visit students as young as 12 or 13 to highlight local job opportunities.
- Reforming Education for Employment – Schools should better prepare teenagers for the job market, while employment support and adult education funding should be decentralised and distributed locally.
- Targeting Workless Areas – Special intervention is needed in regions like Grimsby and Birkenhead, where over 50% of people rely on out-of-work benefits.
“Britain Is Sick – But Being Sick Pays”
The CSJ warns that many people are turning to welfare instead of wages to increase their income. Sir Iain Duncan Smith, former Work and Pensions Secretary (2010-2016) and CSJ chairman, called on the government to seize this “once-in-a-lifetime opportunity” to reform welfare.
He criticised minor policy changes, stating:
“Simply tinkering with the welfare state will fail Brits and Britain.”
The Pathways to Work Commission estimates that up to 2.6 million people are ready to enter the workforce, while ONS data suggests a slightly lower figure of 1.78 million. The CSJ urges the DWP to act swiftly to address long-term economic inactivity, ensuring more people are in work, welfare costs are reduced, and tax revenues increase.
FAQ’s
How could the UK Labour Government save £13 billion in welfare costs?
The Centre for Social Justice (CSJ) suggests extending work requirements, reforming benefits, and encouraging more people to enter employment. These measures could reduce benefits payments by £10 billion and generate £3.3 billion in tax revenue by 2029/2030.
What changes are being proposed for Employment and Support Allowance (ESA)?
The CSJ recommends that ESA should encourage work participation for those able to do so. Around 700,000 claimants who say they want to work could be supported into employment, reducing dependency on benefits.
What reforms are suggested for mental health-related benefits?
The CSJ proposes that fit notes for mild to moderate mental health conditions should be limited to 28 days. Instead of moving onto incapacity benefits, claimants would receive Statutory Sick Pay and be referred to the WorkWell service for support.
What changes are being proposed for Personal Independence Payment (PIP)?
The CSJ suggests separating PIP for physical and mental conditions. Financial support (up to £737 per month) would be provided only for those with proven additional living costs, while others would receive therapy or community services instead.
How does the CSJ propose tackling economic inactivity?
The CSJ suggests tax incentives for businesses to hire young people, jobcentre advisers in schools, improved work-focused education, decentralised employment support, and targeted interventions in workless regions like Grimsby and Birkenhead.
