Major welfare reforms are expected to be pushed back another year until 2027 – raising the prospect of tax rises or further spending cuts as ministers find themselves increasingly boxed in ahead of October’s Budget.
The i Paper has learned that significant changes to benefits such as PIP and Universal Credit are not expected until a new Welfare Bill is tabled in Parliament, which is unlikely to come in this session.
It means the earliest opportunity wll to be the next King’s Speech, which could take place in spring 2027.
The legislation is expected to set out the Government’s response to two major reviews of the welfare system: the review of disability benefits led by Stephen Timms and Alan Milburn’s review of young people who are economically inactive or Neets – Not in Employment, Training or Eduation.
Changes to Universal Credit and PIP would come after the Budget
Taken together, the reviews are intended to shape the Government’s longer-term approach to welfare, including how the system can better support people with health conditions and disabilities into work, while addressing the rising cost of benefits.
That would mean the biggest changes to Universal Credit (UC) and disability benefits, including Personal Independence Payment (PIP), would come after Chancellor John Healey’s 28 October Budget, rather than forming a major part of it.
A Government source familiar with the discussions said “any big changes” would require primary legislation that would come in a welfare bill, likely to be brought forward in the next Parliamentary session.
Instead, the Government is expected to continue with measures already under way, including tackling fraud and error, reducing notability spending and tightening restrictions on new claims for health-related benefits.
Minister not just looking at cuts
The source said ministers were looking at “refocusing” welfare spending rather than simply cutting benefits.
That leaves Healey facing a narrower range of options for finding savings in October if the Government wants to create room for other spending commitments while sticking to its fiscal rules.
While Downing Street will deny this amounts to a delay, welfare reform had been a priority for Keir Starmer’s government for much of its time in office.
Ministers spent months trying to get a grip on a benefits bill they warned was spiralling, only to see their first major package of reforms watered down after a Labour rebellion.
The Government is already under pressure to find savings across public spending, while several of the biggest areas of expenditure are politically difficult to reduce.
The state pension is one of the largest elements of welfare spending at £146.1bn, but ministers have repeatedly faced political pressure over any suggestion of reducing pensioner support or changing the triple lock.
The Office for Budget Responsibility forecasts UK welfare spending to rise from £332.9 billion in 2025–26 to £406.9 billion by 2030–31 – an increase of £74 billion, or around 22%. By 2030–31, that is equivalent to roughly 11 per cent of the UK’s annual economic output, with rising pension and health and disability spending accounting for a significant share of the increase
Supporting young people into work
The Government has also committed to increasing defence spending, while ministers are facing pressure over the cost of delivering other existing commitments.
In his first statement to Parliament as Prime Minister on Tuesday, Andy Burnham confirmed that Milburn’s review into young people and work will be published after the Government’s 10-year plan, which is not expected until the Budget, or even later this autumn.
A source close to Pat McFadden, the work and pensions secretary, refused to be drawn on the timing of any legislation that may follow its publication and said they were “unaware” of any decision made to delay it to the next Parliamentary session.
The Milburn review is expected to focus particularly on young people who are not in education, employment or training, with the aim of shifting the balance of spending towards employment support.
Reports have suggested that Milburn could recommend changes to the way UC is used to support young people, potentially including stronger expectations around engaging with employment support.
One proposal exclusively revealed by The i Paper is to restrict access to some elements of UC for young people who are not engaging with support.
The thinking behind the review is that the Government should spend more on helping people into work rather than simply supporting them through benefits.
The Timms review is taking a separate look at disability benefits. Its recommendations are likely to have implications for both PIP and the health-related element of UC. The Government has already introduced changes to the UC health element for new claimants, with the higher rate now subject to stricter eligibility requirements.
Timms has previously stressed that his review is not intended simply as a cost-cutting exercise. Nevertheless, its interim findings have concluded that PIP is “not fit for purpose”, leaving open the possibility of significant changes to the way disability support is assessed and delivered.
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