Warning Labour’s profit adjustments will create two-tier system lasting ‘a long time’

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Your help makes all of the distinction. Learn extra Labour’s deliberate welfare reforms might create a two-tier advantages system, the impacts of which can final for “a long time”, the Institute for Fiscal Research (IFS) has warned.

Main adjustments to common credit score (UC) will see the entitlement lower by nearly half from £423.27 to £217.26 for all new claimants from April 2026 and frozen till 2029.

Anybody who applies for the profit after 6 April subsequent 12 months will solely be entitled to the decrease fee, which means they are going to be paid round £2,500 lower than a claimant who utilized earlier than this date, who will proceed to obtain the upper fee.

This threatens to create a two-tier system that lasts into the 2040s and past, evaluation from the IFS has discovered.

The influential suppose tank stated that round 500,000 folks presently claiming an incapacity profit, equivalent to UC well being, have been in receipt of it for 15 years or longer. Primarily based on this pattern, the 2 ranges of entitlement nonetheless received’t be phased out by 2040.

<img src="https://static.independent.co.uk/2025/07/21/9/44/Liz-Kendall-speech-dxgiy9qm.jpeg" srcset="https://static.independent.co.uk/2025/07/21/9/44/Liz-Kendall-speech-dxgiy9qm.jpeg?quality=75&width=320&crop=3%3A2%2Csmart&trim=12%2C889%2C581%2C0&auto=webp 320w, https://static.independent.co.uk/2025/07/21/9/44/Liz-Kendall-speech-dxgiy9qm.jpeg?quality=75&width=640&crop=3%3A2%2Csmart&trim=12%2C889%2C581%2C0&auto=webp 640w" loading="lazy" alt="Work and pensions secretary Liz Kendall first announced the government’s welfare plans in March" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

Work and pensions secretary Liz Kendall first introduced the federal government’s welfare plans in March (Jordan Pettitt/PA Wire) Matthew Oulton, analysis economist on the IFS, stated: “Decreasing a family’s advantages will all the time be tough for these affected. As well as, although, it may be arduous for some folks to regulate rapidly to giant falls in earnings, so there's a case for presidency to supply transitional help for present claimants affected by profit cuts.

“Nevertheless, it's tough to justify completely treating claimants in another way primarily based on the exact date they began their declare. The present common credit score well being proposals suggest that one particular person might obtain much less help than one other within the 2040s as a result of exact date they began their declare in 2026.”

Responding to the IFS evaluation, shadow work and pensions secretary Helen Whately stated: “Labour’s welfare reforms are a sham. The IFS exhibits their so-called reforms to Common Credit score well being funds are ring-fenced by provisions so beneficiant they'll final for many years, costing the taxpayer billions and locking folks into the system.”

“These everlasting protections embed inequality, discourage work, and destroy the very financial savings Labour promised. The result's a welfare system that entrenches dependency and drives the black gap within the public funds ever deeper.”

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<img src="https://static.independent.co.uk/2025/05/14/17/f296fe45ca3007f1259bab586a08d903Y29udGVudHNlYXJjaGFwaSwxNzQ3MzI2NTU5-2.78773286.jpg" srcset="https://static.independent.co.uk/2025/05/14/17/f296fe45ca3007f1259bab586a08d903Y29udGVudHNlYXJjaGFwaSwxNzQ3MzI2NTU5-2.78773286.jpg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2025/05/14/17/f296fe45ca3007f1259bab586a08d903Y29udGVudHNlYXJjaGFwaSwxNzQ3MzI2NTU5-2.78773286.jpg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="Anyone who applies for the health element of Universal Credit after 6 April next year will only be entitled to a lower rate (PA)" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

Anybody who applies for the well being ingredient of Common Credit score after 6 April subsequent 12 months will solely be entitled to a decrease fee (PA) (PA Wire) James Taylor, director of technique at incapacity equality charity Scope, stated a system that has two disabled folks in the identical state of affairs getting completely different ranges of help “merely doesn’t make sense”.

He stated: “The well being ingredient of Common Credit score exists as a result of disabled folks typically face a double hit on prices. Day-to-day life prices extra in case you are disabled, and that’s on high of lowered earnings and better incapacity associated obstacles and prices to get into work.

“We’d like the federal government to pause this transfer, and begin with a real assessment of Common Credit score that includes disabled folks, conduct an affect evaluation and co-produce any reforms with disabled folks.

The adjustments come alongside yearly above-inflation will increase to the usual fee of UC till 2029, starting with a 2.3 per cent rise in April.

Whereas the reforms to the advantages’ health-related ingredient are anticipated to avoid wasting round £1.7bn in 2029/30, the financial savings shall be nearly solely offset by the rise.

Labour says the intention of the speed adjustments was to “scale back the perverse incentives that lure folks out of labor” whereas serving to disabled folks and people with long-term well being situations into good, safe work.

<img src="https://static.independent.co.uk/2025/06/30/12/98dd2309c67bac56ca8373f0d06d9caeY29udGVudHNlYXJjaGFwaSwxNzUxMzY4MzAy-2.80132787.jpg" srcset="https://static.independent.co.uk/2025/06/30/12/98dd2309c67bac56ca8373f0d06d9caeY29udGVudHNlYXJjaGFwaSwxNzUxMzY4MzAy-2.80132787.jpg?quality=75&width=320&auto=webp 320w, https://static.independent.co.uk/2025/06/30/12/98dd2309c67bac56ca8373f0d06d9caeY29udGVudHNlYXJjaGFwaSwxNzUxMzY4MzAy-2.80132787.jpg?quality=75&width=640&auto=webp 640w" loading="lazy" alt="Only UC health will be changing in April after Labour backtracked on changes to PIP (John Stillwell/PA)" class="sc-1mc30lb-0 ggpMaE inline-gallery-btn"/> open picture in gallery

Solely UC well being shall be altering in April after Labour backtracked on adjustments to PIP (John Stillwell/PA) (PA Wire) The federal government had initially additionally deliberate to limit eligibility for Private Impartial Funds (PIP), a health-related profit claimed by 3.7 million folks.

This was set to ship the majority of the financial savings, at £4.8bn, however ministers modified course after over 100 Labour MPs threatened to vote in opposition to the federal government on the measures.

Liberal Democrat work and pensions spokesperson Steve Darling stated: “The federal government’s ham-fisted method to welfare reform has seen funding for disabled folks and their carers slashed and very important help for hard-working households stripped away.

“The brand new two-tier system for the common credit score well being ingredient makes use of an Orwellian method, the place some people who find themselves unwell or disabled are extra equal than others, and that's perverse within the excessive. It punishes present disabled kids and anybody who will turn into disabled sooner or later.

“Furthermore, because the IFS has warned, folks shall be disincentivised from attempting work for worry of getting to return to advantages and receiving a decrease fee. That is the other of what the Authorities needs to be pushing for.

The Division for Work and Pensions (DWP) was approached for remark.

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