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Do Tory plans to save £12bn in welfare payments add up?

The Conservatives are promising to make more cuts to National Insurance if they win the election. Part of the plan to pay for it is a significant reduction in welfare spending.

The Tories say they will save £12bn a year from the welfare budget within five years – but Labour say their proposals will save nothing at all.

The argument centres on what proposed savings have already been accounted for by the government’s official forecaster – the Office for Budget Responsibility (OBR).

Its job is to work out what the government’s plans will cost and how much they will save. It then publishes its figures at the Budget and Autumn Statement.

Labour argue the Conservatives have already announced their plans, which means any potential savings have already been accounted for and will not save more money.

Prime Minister Rishi Sunak has rejected Labour’s assertion as “untrue”.

So who’s right?

The reality is both sides are exaggerating.

Some of the welfare measures in the Tory manifesto do seem to have been previously announced in the autumn of 2023 including:

  • Strengthening benefit sanctions
  • Work Capability Assessment reforms
  • Investment in mental health treatments to help people back to work

And these measures were factored into the OBR’s spending calculations at the time of the Autumn Statement – or to use the jargon, the baseline.

The measures were projected to increase employment over the next parliament.

However, Mr Sunak is correct that not all of the welfare measures in the manifesto were previously announced or scored by the OBR including:

  • Accelerating the roll out of Universal Credit

So the next question – can the Conservatives find enough new reforms to save £12bn a year?

The Institute for Fiscal Studies says one potentially significant saving that has not been factored into the numbers already is the Tories’ pledge to “reform disability benefits”.

Disability benefit payments are projected to rise sharply over the coming parliament – from £39bn in 2023-24 to £58bn in 2028-29.

Around £14bn of the £19bn increase is due to rising Personal Independence Payment (PIP) payouts.

These are paid to people aged over 16 who have a long-term physical or mental health condition or disability and face difficulty doing everyday tasks. Recipients can be in work.

If the Conservative pledge to “reform disability benefits” could stop this projected rise in PIP payouts then they would achieve around £12bn in welfare savings.

But the manifesto does not give details of what changes it will bring in beyond pledging a “more objective” assessment of an individual’s needs and implying some level of restriction on PIP claims from people with mental health problems.

However, Tom Waters of the Institute for Fiscal Studies think tank warns that cutting the disability bill will be “far easier said than done”.

He notes that the number of people getting disability benefit awards each month has doubled since the pandemic – up from 20,000 a month to 40,000.

Research also suggests the health of working age people in the UK is getting worse, with the Health Foundation think tank saying this is a trend which “is not going away”.

It is worth looking at the political context too.

At the 2015 general election the Conservative manifesto promised to cut a further £12bn from the annual welfare budget – the same amount being pledged now.

It was after the election that then-Chancellor George Osborne said he had found where to make cuts, including reducing the benefits cap for families and making the BBC fund TV licences for the over-75s.

While some significant savings were found ministers were forced into a rethink after a political backlash over some of the measures.

The Office for Budget Responsibility later concluded £4bn from the £12bn a year had not been found.

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