DWP could scrap PIP for millions of high earners to save £8bn, Burnham told

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The government could save billions on welfare spending by making the personal independence payment (PIP) a means-tested benefit, an influential think tank has said.

Limiting the disability benefit to only those also in receipt of universal credit would deliver an immediate saving of up to £8.2bn, the Institute for Fiscal Studies (IFS) wrote, a 33 per cent reduction from current levels.

This would remove entitlement from 1.32 million claimants based on current figures, but researchers added behavioural impacts mean fewer people would lose out than this.

The think tank’s intervention comes ahead of the publication of a review into PIP by disability minister Sir Stephen Timms, with his interim report in July finding the benefit is “not fit for purpose”.

First introduced in 2013, PIP is a non-means-tested payment designed to offset the additional costs that arise from having a health condition or disability.

Early recommendations made by Sir Stephen’s review group indicate a move towards boosting face-to-face appointments, as well as reducing cash awards in favour of vouchers for specific costs.

But the IFS argued “there is a case” for also basing support on income levels, and doing so would “more closely target resources towards those with the lowest living standards”.

The work comes as the number of people claiming PIP hits a record high of 4.1 million, according to official figures released this week.

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Spending on the benefit stood at £16.3 billion in 2019-2020, and had increased to £27.3 billion by 2024-2025, DWP figures show. It is currently forecast to rise to £41.5 billion by 2030-2031.

Sir Stephen’s review was announced last year after more than 100 Labour MPs threatened to rebel against the government over plans to change the PIP criteria to make it effectively harder to claim. The wider plans would have slashed £4.8bn from the welfare bill.

Under current rules, PIP is paid in two parts – daily living and mobility – at two possible rates each. This means there are eight potential levels of payment, ranging from £1,575 to £10,119.

The IFS report also suggests these rates could be more closely linked to a claimant’s level of need. People with very different levels of severity currently receive the same amount, researchers wrote, with a claimant who scores 12 points being entitled to the same award as one who scores 31.

This could be replaced with a “pound-per-point system,” they add, linking awards more directly to the assessment process. Under this method, a person scoring 12 points in the daily living assessment would be awarded £4,240 per year (£1,720 less than now), while a person scoring 32 points would get £11,310 (£5,350 more).

Eduin Latimer, senior research economist at the Institute for Fiscal Studies, said: “Before making reforms to PIP, the government needs to decide what PIP is for. If it is to help disabled people in the greatest need, there is a case for targeting support on those with the most severe disabilities or on the lowest incomes.”

The possibility has been criticised by disability campaigners, who argue they risk repeating the defeated welfare cuts pursued by the government last year.

Ross Barrett, policy manager at the MS Society, says: “Parliament has already rejected damaging cuts to disability benefits and the ongoing Timms Review into PIP recognises the process is not fit for purpose. Sweeping and arbitrary restrictions, such as the ones being proposed by the IFS, would only push more people into poverty and worsen their health.”

A government spokesperson said: “The Timms Review interim report made clear that PIP is no longer fit for purpose. The recommendations from the final report, due in autumn, will pave the way for sustainable reform.

“This comes on top of action we are already taking action to fix the broken welfare system, including by increasing face-to-face assessments and extending award review periods to deliver savings of around £2bn while removing unnecessary pressure on disabled people.”