Eight DWP and benefit changes coming in wake of Budget

Labour's Budget impacts benefits in a number of ways - amid a planned crackdown and more. The Department for Work and Pensions ( DWP ) is set to rollout a major change with Chancellor Ms Reeves announcing a clampdown on benefits and pensions.

Rachel Reeves announced many benefits would rise by 1.7 per cent - the level of consumer price index (CPI) inflation in September 2024. This means more money for people who get benefits such as Pension Credit, Universal Credit, Personal Independence Payment (PIP) and Child Benefit - but the rises are not as generous as they are for those who receive state pension.

The Government is also creating a new Fair Repayment Rate, which caps debt repayments made with Universal Credit at 15 per cent of the standard allowance. It claims this will allow 1.2 million households to keep more of their Universal Credit award.

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Benefits will go up by 1.7% in April 2025

Working-age benefits and the Additional State Pension will rise by 1.7% in April 2025, in line with inflation. This increase will see around 5.7 million families on Universal Credit gain an average of £150 annually.

Crackdown on ‘benefit fraud’

The Fraud, Error and Debt Bill will require banks and other financial institutions to share data that may help identify benefit fraud. Reeves told the Commons: “Today, I am also taking three steps to ensure that welfare spending is more sustainable.

“First, we inherited the last government’s plans to reform the work capability assessment. We will deliver those savings as part of fundamental reforms to the health and disability benefits system that the Work and Pensions Secretary [Liz Kendall, below] will bring forward. Second, I can today announce a crackdown on fraud in our welfare system often the work of criminal gangs. We will expand DWP’s counter-fraud teams using innovative new methods to prevent illegal activity and provide new legal powers to crackdown on fraudsters, including direct access to bank accounts to recover debt. This package saves £4.3bn a year by the end of the forecast.

“Third, the Government will shortly be publishing the 'Get Britain Working' white paper tackling the root causes of inactivity with an integrated approach across health, education and welfare. And we will provide £240 million for 16 new trailblazer projects targeted at those who are economically inactive and most at risk of being out of education, employment or training to get people into work and reduce the benefits bill.”

Reforms to work capability assessment

Richard Kramer, chief executive at Sense, said: “The government’s decision today is deeply disturbing for disabled people. They have chosen to continue the previous government’s harmful plans to reduce access to benefits. This risks undermining the wellbeing of disabled people, and the consequences could be devastating.

“Disabled households are living in crisis, their current welfare benefits barely cover the essentials and spiralling food and energy costs have pushed many into debt and despair. But instead of choosing to give disabled people proper financial support and beginning to transform lives, the government has played into the dangerous narrative that disabled people should be forced to work.”

People with long-term health conditions to be driven into work

In her speech, the chancellor confirmed that the DWP will be able to access claimants’ bank accounts. Reeves said: “I can today announce a crackdown on fraud in our welfare system, often the work of criminal gangs. We will expand DWP’s counter fraud teams using innovative new methods to prevent illegal activity and provide new legal powers to crackdown on fraudsters, including direct access to bank accounts to recover debt.”

The budget document confirms that:“The government is expanding DWP’s fraud and error staff by 3,000, as part of its £110 million investment in 2025-26 to tackle fraud and error. This is expected to deliver gross savings of £705 million in 2029-30. “

“The government will increase DWP’s powers to recover debt as part of the forthcoming Fraud, Error and Debt Bill. This is expected to save £260 million in 2029-30." It adds: “The government will invest in DWP to carry out additional checks on Universal Credit claimants who have changes in their circumstances, as part of a £110 million investment in 2025-26 to tackle fraud and error. This is expected to save £250 million in 2029-30.”

Carer’s allowance earnings threshold has increased

Chancellor Rachel Reeves is expected to announce the change will come into force from April 2025, as part of the 'painful' autumn budget. Money Saving Expert founder Martin Lewis confirmed the change on social media platform X (formerly Twitter) saying: "CONFIRMED: Good news. The Carers Allowance earnings threshold will be increased from £151 to at least £183 in the #Budget tomorrow, starting April 2025.

"So carers can earn more and still receive the allowance." There have also been calls for the allowance itself to increase, and for the current "cliff-edge" to be replaced with a taper so that recipients don’t lose all their benefits for earning just 1p over the limit.

Universal credit debt deductions will be capped

The government is creating a new Fair Repayment Rate which caps deductions made through Universal Credit at 15% of the standard allowance. Before this Budget, it was 25%. This means approximately 1.2 million households will keep more of their Universal Credit payment each month, with households expected to be better off by an average of over £420 a year.

Two-child limit on benefits remains in place

Tens of thousands of children affected by the two-child benefit limit may not be lifted out of poverty unless the overall benefit cap is reformed, official figures show. Introduced by the Conservatives, the two-child limit stops households with a third or subsequent child born from 6 April 2017 receiving additional universal credit or child tax credits for these members of the family. Labour is under pressure to scrap the policy – a key cause of child poverty in larger families. Last month it suspended the whip from seven MPs who voted for an amendment to the king’s speech backing its abolition.

No U-turn on the winter fuel payment cuts

MPs have called on the Labour Party government to “think again” about means-testing the Winter Fuel Payment in a move that could see as many as 10 million pensioners lose the support. Tory MPs gathered in Westminster on Tuesday morning, ahead of handing in a petition to the Treasury, a day before Chancellor Rachel Reeves delivers her first Budget.

Shadow work and pensions secretary Mel Stride told the PA news agency that the petition has collected “over a quarter of a million signatures”.