Published On: Sun, Jul 7th, 2024
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Labour plans for State Pension, Universal Credit, PIP and cost of living payments | Personal Finance | Finance


Labour has vowed to “kickstart economic growth” after winning the General Election. But what does it mean for the benefits system including State Pensions?

The party’s manifesto outlines broad strategies for boosting employment, but currently lacks specific details regarding their plans for the proposed revamp of Personal Independence Payment, the expedited transition of legacy benefit claimants onto Universal Credit, or the requirements for individuals to repay their Carer’s Allowance when they unknowingly exceed the earnings limit.

However, Labour does emphasise its intention to get more disabled people into work, which will be partly achieved by reducing the vast number of Universal Credit claimants who are dismissed from job hunting, as reported by Birmingham Live.

It aims to reform or abolish the current assessment that determines if someone is unfit for work. The manifesto states that “too many people are out of work or not earning enough” and attributes NHS waiting lists for treatment as part of the problem.

Here’s what the party has said so far about its plans:

Universal Credit and PIP

Analysts are sounding the alarm over the rocketing costs of Personal Independence Payment (PIP), urging action from any future government, as was set out in a recent green paper on reform on PIP which outlined possible options including replacing cash payments with vouchers, although these were always suggestions and the consultation still hasn’t closed yet.

Tom Waters, Associate Director at the Institute for Fiscal Studies, highlighted the issue: “The number of people receiving financial support from the government for a health-related benefit has increased sharply since the pandemic and is forecast to continue growing. This is one of the big drivers of the large increase in public spending since 2019 and into the next parliament. So it is understandable that whoever is in office after the election should want to take a careful look at this.”

While the Labour manifesto remains silent on the Department for Work and Pensions’ (DWP) Conservative-led plans to curb the ballooning PIP expenditure through a radical overhaul, including potentially replacing cash payments with vouchers for specific equipment and treatment, Labour insiders have hinted they will review the responses to the proposals post-consultation, which concludes on July 22, a mere three weeks following the election. That shouldn’t be a shock: it’s a government consultation and it will finish after Labour takes charge. They have to look at it.

Labour has unveiled plans to tackle the high levels of economic inactivity and integrate more disabled individuals into the workforce, criticising the current Universal Credit system for sidelining many from employment. The party is calling for a revamp of the work capability assessment, which determines whether Universal Credit recipients are deemed fit for work or eligible for an additional incapacity benefit of £416 a month.

Approximately one-third of those on Universal Credit fall into this ‘limited capability for work and work-related activity’ category, with the majority also receiving Personal Independence Payment.

The Labour Party has pledged to protect the disabled and those with health conditions from having their benefits slashed or halted if they attempt to work.

Their manifesto outlines a vision for change: “Too many people are out of work or not earning enough. Long waits for treatment of health conditions, particularly mental health, are contributing to the rise in economic inactivity. Labour will reform employment support so it drives growth and opportunity. Our system will be underpinned by rights and responsibilities people who can work, should work and there will be consequences for those who do not fulfil their obligations.”

“Labour will collaborate with local areas to devise plans that aid more disabled individuals and those with health conditions into employment. We will devolve funding so local areas can shape a comprehensive work, health, and skills offer for local people. We will address the backlog of Access to Work claims and give disabled people the confidence to start working without the fear of an immediate benefit reassessment if it does not work out. We believe the Work Capability Assessment is not functioning as it should and needs reform or replacement, alongside a proper plan to support disabled people to work.”

State Pension:

Labour has pledged to maintain the triple lock system used to calculate the annual increase in the State Pension. This means pensions rise every April by the highest of three factors: the previous September’s Consumer Price Index measure of inflation, May-July earnings growth, or a default minimum of 2.5 per cent. It won’t however, install the Triple Lock Plus change, which would see the Personal Allowance thresholds adjusted only for state pensioners to avoid tax on their basic state pension income. However, there’s nothing to stop Labour looking at this in future, it just isn’t currently a pledge.

Despite concerns about the long-term sustainability of the triple lock, Labour has committed to keeping it for now. They stated: “We will keep the pension triple lock and give pensioners security in retirement. Labour will protect the triple lock on pensions and increase the State Pension each year in line with inflation, average earnings, or by 2.5 per cent, whichever is higher.”

Cost of living payments

Despite the spiralling cost of living, the Department for Work and Pensions under the Conservative Government has disclosed its plans not to provide any additional cost of living payments. However, they extended the Household Support Fund until September 30 and invested an additional £421 million.

This fund empowers local councils, such as Leeds, Wakefield and London councils, to initiate their own means of assistance including hardship grants of £200 to low-income families and individuals receiving specific benefits.

Labour hasn’t proposed further cost of living payments or made clear its plans regarding the Household Support Fund post-September. Yet, it has detailed measures to combat the escalating cost of living crisis.

Its manifesto reveals that Labour attributes “the eye-watering cost of living” to Rishi Sunak‘s financial practices and 14 years of Conservative governance, asserting that under such rule, annual living costs could inflate by £5,883 inclusive of increased expenses in energy, groceries, council tax, mortgages, motoring and personal tax sectors.

Delivering economic stability via stringent spending rules is at the heart of Labour’s agenda, promising to nurture economic growth while keeping taxes, inflation, and mortgages at a potentially lower rate. Their strategy also entails fighting “out of control bills” with a proposal to establish Great British Energy – a publicly-owned clean power company funded by windfall taxes on oil and gas titans aimed to reduce annual energy bills permanently, complemented by insulation for millions of homes.

Labour is also planning to “make work pay” by “banning exploitative zero hours contracts, ending fire and rehire, and delivering a genuine living wage that for the first time takes account of the cost of living.”

Labour states: “The New Deal is a core part of our mission to grow Britain’s economy and raise living standards in every part of the country. Labour will make Britain work for working people.”



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