Five major DWP benefit changes that could be announced in the Budget this week

Labour will deliver its first budget in over 14 years this Wednesday, October 30, and Chancellor Rachel Reeves will outline the government's plans for the country's finances going forward

There are set to be some major benefit announcements in the upcoming Budget this week.

Labour will deliver its first budget in over 14 years this Wednesday, October 30, and Chancellor Rachel Reeves will outline the government's plans for the country's finances going forward. At the beginning of September, Reeves cautioned that the budget could involve "difficult decisions" on tax, spending, and benefits.

This is due to the £22billion financial black hole that Labour claims was left behind by the former Tory government. Reports of potential changes to benefits have started to come out over the last few weeks and here we have collected several of them which look set to make it into this week's budget.

Benefit increases

Millions of people are set to see their benefits rise next April and this will be confirmed in this week's budget. The majority of benefits are normally uprated by the September level of inflation, which was confirmed to be 1.7% earlier this month. Chancellor Rachel Reeves said in 2023 that benefits would be uprated by September's inflation figure under a Labour government as it was "tradition".

There are nine benefits for which the Department for Work and Pensions (DWP) is legally required to increase in line with inflation each April, while other payments, including Universal Credit, are subject to parliamentary approval. The benefits that are legally required to increase with inflation are:

• Personal Independence Payment (PIP)
• Disability Living Allowance
• Attendance Allowance
• Incapacity Benefit
• Severe Disablement Allowance
• Industrial Injuries Benefit
• Carer's Allowance
• Additional State Pension
• Guardian's Allowance

Reforms to Work Capability Assessment

Labour looks set to pursue the Tory plan to reform Universal Credit's Work Capability Assessment (WCA). This month, the Financial Times reported that a Whitehall source said they had been "briefed on the plans."

Chancellor Rachel Reeves is looking to cut £3billion off of the government's benefits bill and the plans to do this are expected to be announced on Wednesday. Under the current benefits system, claimants who have health conditions or disabilities have to undergo a work capability assessment (WCA) to decide whether they're capable of working and if they're eligible for cash top-ups when they claim Universal Credit.

Labour has previously said that it is in favour of reforming the process but has remained tight-lipped about what that would mean in terms of eligibility. According to its manifesto, the party said the current system was “not working" and that it would "radically" shake up benefits for people whose health limits their ability to work.

If they scrap the assessment, it would effectively raise the bar for those who can be signed off work with sickness, removing incapacity benefits from thousands who would currently be eligible. Government sources told the i that the focus of the white papers would not be on "benefit cuts and savings" but on increasing the number of those employed. However, one source told the publication that there are savings that must be found that “are not going to go away”.

Crackdown on benefit fraud

A crackdown on benefit fraud could also be outlined at the upcoming Budget. The government has previously promised to crackdown on benefit fraudsters and get more people into work as part of a shakeup to the benefits system. Prime Minister Keir Starmer announced plans for its "Fraud, Error and Debt" bill in a speech at the Labour Party conference in September. In the speech, he said: "If we want to maintain support for the welfare state, then we will legislate to stop benefit fraud."

In the release explaining the new powers, the Government said the benefits department would be given new powers to "better investigate" suspected fraud and new powers of search and seizure. Alongside this, the DWP will also be given powers to recover debts from individuals who can pay money back but have "avoided doing so". This includes measures to make it easier for the DWP to take money directly from bank accounts. The DWP will also be able to order banks and financial institutions to share bank account data with the department. Further details on its plans could be highlighted in this week's budget.

Reform to disability benefits

As mentioned earlier in the reforms to the Work Capability Assessment, the Labour government has its sights set on drastically changing the UK's disability benefits system. Currently, spending is due to increase by around £30billion in the decade from 2020.

The primary areas of focus seem to be out-of-work sickness, incapacity benefits, and disability support. Over three million people in the UK claim Personal Independence Payment (PIP) and Disability Living Allowance (DLA). According to the latest DWP data, around 30,000 new PIP awards are granted each month. Spending on these benefits could cost the taxpayer around £28billion a year by 2028-29 – a 110% rise in spending since 2019.

According to reports, ministers are expected to review the eligibility criteria for PIP to reduce the pool of people eligible for the benefit. Although details on this have not been revealed, and any updates on this plan are expected to come in the spring of next year. Chancellor Rachel Reeves, however, could bring up the plans in the budget as part of her spending review.

Debt repayments for benefits

According to weekend reports, Labour Chancellor Rachel Reeves will lower the cap on the maximum deductions that can be taken from a claimant's benefit payments to repay debts in this week's budget.

Currently, the DWP and other third parties can deduct money from Universal Credit payments to recover any debts someone may have - this can be up to 25% of the standard allowance payment. The cap is reportedly set to drop to 15% and is expected to come into force from April 2025.

According to Whitehall sources, the measure - called the Fair Repayment Rate - is intended primarily to help the worst-off families and is a way the government can avoid further criticism for its decision to cut the Winter Fuel Payment and maintain the two-child benefit cap. The change is projected to benefit 1.2 million households, including 700,000 families with children, boosting their incomes by up to £420 a year.