The Tory record on welfare: PIP changes, child poverty and pensioner protection

The Conservatives have squeezed working age benefits but boosted state pensions

With the polls showing defeat is likely for the Conservatives at the forthcoming general election, the party’s record in government is coming under scrutiny more than ever before.

During a period that came in the aftermath of the global financial crash, took in the Brexit referendum, a worldwide pandemic and the first war in Europe for a generation it has been a tumultuous period for the UK.

In the third of a series of pieces looking at the Conservatives’ record on since winning power in 2010, i examines how the benefits system and pensions have fared after 14 years of Tory rule.

Every Tory manifesto since 2010 has pledged to get people into work. Whether for the chronically unemployed, young people lacking in skills, or the disabled and long term sick – the Conservatives have said they believe in “making work pay”.

This has led the Conservative led governments of the last decade and a half to introduce significant changes to the welfare system. The flagship has been the introduction of universal credit from 2013 which aimed to both simplify benefits and provide a greater incentive for people to work.

Initially controversial and criticised by opposition parties it has now gained wider support and is accepted as being more modern and agile than its predecessor benefits. It came into its own during the pandemic when millions were forced to sign up for out of work support almost overnight and the system was able to cope.

In an interview with i marking the ten year anniversary of universal credit, its architect and former work and pensions secretary Sir Iain Duncan Smith said the benefit saved lives when Covid hit. But he, and host of other welfare experts, see the introduction of universal credit as just the first step in what should be a much wider change.

Ed Davies, of Duncan-Smith’s think tank the Centre for Social Justice, told i: “For all the bumps in the road universal credit has since won cross-party support and is seen as an improvement. It is interesting the feeling is we need to build on and adapt it rather than change it so I would say that is a hard-fought change that was for the better.”

Universal credit a ‘great success’

A former Conservative government official is even more effusive, saying “universal credit is one of the great successes of the Conservatives time in Government”.

“I think it will be an enduring reform to the welfare system, one that was tested hard during COVID-19 and which worked,” they said. “It successfully helps people back into work.”

They argued that the 2022 “Way to Work campaign” had also helped move hundreds of thousands of people into jobs and that adjustments to the Additional Earnings Threshold had helped people get support from Job Centres for some time after having moved into employment.

“Fundamentally, Labour no longer wants to remove universal credit – after much campaigning against,” the former official added. “They accept it as part of the government architecture.”

Alex Clegg from the Resolution Foundation – a think tank that aims to improve living standards for people on low-to-middle incomes – said: “There are elements in Universal Credit that have been very successful… It is more deliberate and less arbitrary which means work incentives are smoother as people move into work.”

But he said that the benefit cap (introduced alongside universal credit) that limits the amount in state benefits that an individual household can claim per year ha haven’t done what they were s not done what it was supposed to and pushed people into work “at any kind of sustainable level”.

Similarly the two child benefit cap that was designed to stop people having children they could not afford has ended up leaving more children living in poverty, he said.

Labour’s Stephen Timms, who has been chair of the Work and Pensions Committee of MPs since 2020, agrees that universal credit was successful during the pandemic, but warns that procedural problems remain.

“I think the fundamental problem with it is that you have to wait weeks before you get the first payment and that is a very serious problem and forces people to take out advances from the Department for Work and Pensions, which means they are in debt and people can’t get out of it,” he told i. “This is a very bad feature and really means it is not fit for purpose…

“Together with the fact the headline rate [of working-age benefits] is the lowest it been in real terms for forty years,” he added. “The select committee published a report a few weeks ago saying the government ought to establish a benchmark and then if it the level is above where benefits are at that moment the government needs to come forward with a plan to increase the headline rate to an adequate level.”

Economic inactivity

If universal credit has made some improvements, the benefit has not been able to prevent a rise in economic inactivity from dominating headlines for the last couple of years: the rise in economic inactivity.

Mr Timms sees the issue as a “massive challenge” but suggest the high numbers of people off work with sickness was due to “failures in the NHS”.

“I certainly agree that the current high rate of economic inactivity is a very serious problem and I am not sure there is a simple explanation for what has gone wrong,” he added.

Mr Clegg of the Resolution Foundation thinks universal credit may be partly to blame and that suggested by removing the middle rate of the “health benefit” from UC, the government may have inadvertently pushed people into a higher health-related benefit group.

“The standard rate of Universal Credit is now so low that claiming health-related benefits is one of the only ways that people can secure an adequate income if they are not working,” he said. “So this is likely to be driving up take-up of these benefits for people who are eligible but were not previously claiming.

“In addition, the middle tier of extra support for incapacity was abolished in 2017, which has had the opposite effect of what was intended: it is only rational that people try harder to be found in the highest tier where there is less expectation to move into work in the future, so as not to lose the additional element of support. These changes have likely had the effect of lowering the unemployment caseload while increasing the disability and incapacity caseload.”

Mr Davies from the Centre for Social Justice says that he first step to tackling this problem is continuing with the introduction of universal support – a tailored approach to helping those with complex needs find work. It was part of the original design of universal credit but has only recently been implemented.

“Universal credit is largely around payments rather than human support so the next evolution is what they have just started, called universal support, which is something both Labour and the Conservatives have talked about in their manifesto,” he said.

Overhauling PIP (personal independence payments)

The issue of those out of work due to sickness or a disability has been headline news since the pandemic. Ministers have scrambled to reform the way incapacity benefits are working – including overhauling personal independence payments (PIP).

PIP was introduced in 2013 but has been beset by problems around how the assessment works and who is eligible. Now both parties are looking to reform it again. There is a consensus that disabled people should receive the support they need but it comes alongside concerns over a rise in those classed as disabled.

“There are an enormous number of complexities around the rise in economic inactivity. There is the reality that a lot of people in this cohort want to work and they need the support, so that is the first step,” Mr Davies said. “The second step is that whilst it might pay a tiny bit more to go into work this is often insecure work. So improving the quality of work that needs addressing.

“The last thing is that a lot of the diagnosis of conditions [which mean people do not need work] is straightforward, but there is a grey area and you can find some leaning into a certain diagnoses.”

The main drivers of the rise in economic inactivity are those dropping out at the end of their working life and people dropping out at the beginning, he says.

“At the end you have a high level of musculoskeletal conditions of people in their 50s meaning they stop working,” Mr Davies said. “But in some ways it’s the early stuff that’s really concerning – this rise in very young people with mental health conditions. This can lead to long term scarring and hard to get back into employment.”

More child poverty

Alongside recent drives to push people into work have been Conservative promises to protect pensioners’ income and to “work to eliminate child poverty”.

But the record of the last 14 years suggests that doing both these things simultaneously would require more spending.

Between 2010 and 2015 the government implemented cuts to support those of working age including means-testing the Child Benefit and reducing the eligibility of the Child Tax Credit. Housing support was cut and benefit caps were introduced.

And from 2015 onward most non-pensioner benefits were also frozen before out of work benefits began to rise again in this decade. These measures impacted both poorer and middle class families.

But there has been significant success in tackling pensioner poverty with retiree households hundreds of pounds better off a year on average.

“There is no doubt pensioner poverty has massively decreased so in some senses that is a success,” Mr Davies said. “The question is whether it has gone too far now at the expense of other things.”

Mr Clegg also suggests there has been trade off: “Pensioner poverty is now much lower than work age poverty. But if you look at the material deprivation indicator measures of poverty, they have gone up for families with children, especially larger families.

“We found the two-child limit is keeping just under half a million children in poverty.”

Pressed on how much there is a direct correlation between welfare policies and rise in deprivation, Mr Clegg said that poverty for most groups has been “pretty much flat over the period” but it has been rising for children, and faster for households with more children.

“This does seem to suggest it is the policies,” he said.

Many Tory politicians would argue that pushing people into employment is a successful way to tackle this poverty, but Mr Clegg argues that belief “misunderstands the reality of poverty”.

“Being in poverty isn’t something that’s going to be effective at helping you find work,” he said. “A family living in poverty has its own stresses and problems to deal with which, I think, in a lot of cases, will be, will be something that pushes people away from work.”

Support for pensioners

And despite various cuts to out of work and child benefits, the rise in support for pensioners means the UK is not currently spending less overall on welfare.

This increase is fairly small – total spend this year is set to be 11.2 per cent of GDP compared with the ten per cent in 2008 – but, in a recent report, the Resolution Foundation argued these figures hide the huge changes in where that money has been spent.

Working age benefits have been squeezed – spending on children and working age adults fell from 2.8 per cent of GDP in 2007-08 to 1.9 per cent in 2024-25. But the state pension has been consistently increased, rising from 3.7 per cent to 5.0 per cent. And spending on disability benefits has almost doubled from 1.2 per cent to 2.1 per cent.

The “triple lock” introduced in 2010 – guaranteeing a pension increase equivalent to that of average earnings, inflation or 2.5 per cent, has seen the state pension rise by 16 per cent over the 14 years since 2010. Meanwhile the principle that working age benefits would be uprated with the cost of living has been hampered by the decision to freeze them or increase them at a rate below inflation for half of the last 14 years.

These are juggling acts which will have to be addressed by the next government, whether it is Labour or Tory led.

The ex-government official said they believed the triple lock had “successfully achieved its goals of ensuring the state pension pays a fair amount”.

“Whether it needs to be maintained in its current form is a difficult question but both parties are committed to it,” they added.

They pointed out that auto enrolment was another significant “success of this 14 years in Government that will help ensure future generations have a safe retirement”.

But they argued there was more to do in terms of getting the long-promised pensions dashboard up and running and extending auto enrolment to those aged 18 – which they said were “very important reforms”.

The former official also pushed back against the suggestion that there had been a decision taken to eradicate pensioner poverty at the expense of tackling deprivation for others.

“We pursued poverty by helping people into work, by raising the minimum wage and ensuring work pays,” he said. “Employment is at near record highs and the national living wage is £11.44 an hour, increased by 9.4 per cent this year.”

But for those who have retired from work there is a question mark about long future governments will be able to continue the current policy on state pensions.

“There is a question about the future poverty of pensioners simply because we will have more and more people on pensions with fewer people paying them,” Mr Davies said. “I suspect the pension age will have to creep up more and more in the years ahead, either that or we will have to have rising birth rates or mass immigration.”