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The Labour government is backing higher welfare spending projections for the next five years, with plans to partially lift the two-child benefit cap set to add to the strain on public finances. An official statement from the government confirmed that the government would ditch planned savings to disability payments, which are formally known as personal independence payments (Pips). Welfare minister Stephen Timms is conducting a review of Pips, which had been expected to identify savings in the wider system and allow for the government to make extensive savings. Reducing the level of benefits offered to Brits could also adjust incentives for people to work, the government previously argued. The review was seen as being Labour’s main path towards limiting welfare expenditure after Keir Starmer and Rachel Reeves suffered a major rebellion where some 130 MPs opposed £5bn trimmings to disability payments. In a statement on Thursday, the government confirmed the review would have to operate within the Office for Budget Responsibility’s (OBR) forecast in March stating that Pips would nearly double from £ 18bn to £34bn. “The government is committed to making sure the system is sustainable and so the work of the Review will operate within the OBR projections for future PIP expenditure, to ensure it is there to support generations to come,” the government said. “We want to ensure public money is spent as effectively as possible in supporting disabled people to live independent and fulfilling lives. “We are therefore undertaking this wider Review with the aim of making sure that PIP fairly reflects the reality of the impact of people’s conditions in the modern world.” Labour’s welfare costs pile up Its statement came hours before a report emerged that the government would move ahead with scrapping the two-child benefit cap, which could cost £3.5bn. Labour’s Rachel Reeves is expected to announce the measures at the Budget as part of efforts to tackle child poverty but the limit would not be fully scrapped, according to the Financial Times. It could widen the shortfall Reeves faces at the Budget, with brutal OBR productivity downgrades to contribute to an estimated £30bn fiscal hole to be filled with spending cuts and tax hikes. Previous reports have suggested that the government could introduce a tapered system for child benefits whereby payments are reduced for every child. One anonymous Labour MPs told the Financial Times that hiking income tax and making new spending commitments would be “mad”. The Conservatives and Reform have pledged to make multi-billion pound cuts to disability payments, slashing benefits for people with non-serious health conditions. While the Conservatives have backed the two-child benefit cap and hit out at Labour for considering increasing spending, Reform’s Nigel Farage has said lifting the cap could help boost fertility rates in the UK.
