Ministers have left the door open to a humiliating U-turn on their highly contentious plans to cut benefits for disabled people, amid mounting uproar over the proposals across the Labour party.
Both Downing Street and the Department for Work and Pensions did not deny they were about to backtrack on plans to impose a real-terms cut to the personal independence payment (Pip) for disabled people, including those who cannot work, by cancelling an inflation-linked rise due to come into force next spring.
The plans had been earmarked for inclusion in a green paper scheduled to be published on Tuesday and had been one of several elements of a wider package of welfare cuts designed to save between £5bn and £6bn on the ballooning benefits bill.
Ministers, who are facing the wrath of Labour MPs and peers over the plans, are understood to have taken fright after being accused in meetings with MPs of planning measures rejected as unfair even by former Tory chancellor George Osborne during the Conservative years of austerity.
In his Political Currency podcast last week with former Labour shadow chancellor Ed Balls, Osborne said: “I didn’t freeze Pip. I thought [it] would not be regarded as very fair. What I did try to do was reform Pip.”
Balls, who is married to the home secretary, Yvette Cooper, infuriated Downing Street by saying on the same podcast that the plan would not work if its aim was to get more people back into work, adding that “it’s not a Labour thing to do”.
At a tense cabinet meeting last Tuesday, several serving members raised their concerns about how the Labour government would be viewed if it froze Pip payments and made it more difficult to receive them.
Any plan to freeze Pip or change eligibility rules would require primary legislation, running the risk that they could become the focus of a sizeable Labour rebellion in the House of Commons and also the Lords.
Several Labour MPs have made clear to the Observer that they could not support the plans in any parliamentary vote.
Speaking to the Observer, Liz Kendall, the work and pensions secretary, insisted that Labour was sympathetic to those unable to work because of disability.
She said: “I know as a constituency MP for 14 long years under the Tories that there will always be some people who cannot work because of the severity of their disability or health condition. Protecting people in genuine need is a principle Labour will never compromise on.”
But she also insisted that the system badly needed reform to ensure that people did not spend a lifetime on benefits and to prevent the overall benefits bill from soaring even higher.
“Being trapped on benefits if you can work is terrible for people’s living standards, health and opportunities,” Kendall said.
She added: “It’s terrible for the country too as spending on the costs of failure soar. The sickness and disability bill for working age people has increased by £20bn since the pandemic, with a further £18bn rise to £70bn projected over the next five years.
We must fix this broken system for the people who depend on it and the country as a whole.”
In a further measure to placate furious Labour MPs, sources said Kendall would move to legislate to create “a right to try” guarantee to ensure sick and disabled people could take a job safe in the knowledge that they would not be forced to undergo a new re-assessment and the possibility of losing their benefits as a result.
One million people would see their benefits reduced under the government’s proposed reforms, according to the Times.
Ministers are said to be examining changing eligibility for Pip in such as way that it would not be available for people who need someone else to help them wash below the waist, or need to be reminded to go to the toilet to prevent them having an accident.
The new rules would, in effect, mean that only the most severely disabled would receive Pip, while those with mental health conditions would not.
Ministers are also planning to scrap the work capability assessment, which is used to decide if people receiving universal credit are fit for work.
It is separate from Pip, which is intended to help cover the extra costs of being disabled, whether or not they can work.
About 4.8 million people receive Pip or the benefit it was designed to replace, the disability living allowance.
Campaigners say the problem facing disabled people is that even those who are desperate to return to the workforce find they cannot cope, or employers are not willing to accommodate them.
A government programme that supported 286,000 disabled people over the past seven years who wanted to find work was only able to secure jobs for one in five.
Anna Stevenson, a benefits expert at the disability charity Turn2us, said: “These were people who, although they were unwell, thought they were probably well enough to work and really keen to work.”
Stevenson said that if the government was serious about helping more disabled people into work, it needed to change employment law.
“If you want very high employment among disabled people, one of the things you need to change is how easy it is for employers to fire people when they’re ill.
“But that has the potential to distort the labour market. There are always trade-offs.”
In the 1970s, employers would put workers on “light duties” if they were unable to do harder, physical jobs, but that practice has all but vanished, leaving disabled people to rely on the state instead.
