The Institute for Fiscal Studies (IFS) has recommended that means-testing Personal Independence Payment (PIP) could save the Department for Work and Pensions (DWP) around £8 billion, assuming claimant behaviour remains unchanged.
In a comprehensive report published on Thursday, the IFS highlights the importance of the Labour government having a clear vision for PIP’s purpose. The report analyses seven possible reforms, emphasising the need to define the specific outcomes the government aims to achieve through the benefit.
The report states, “When designing reforms to PIP, the government needs to decide what it is trying to achieve. Is the primary objective to support those whose living standards are diminished by additional disability-related costs? If so, a financial support benefit like PIP is justified. Alternatively, if improving overall well-being is the goal, direct subsidies for specific goods and services via vouchers or in-kind support might be more effective.”
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The IFS further stresses the importance of determining desired distributional outcomes. If reducing inequalities caused by disability is the priority, even providing additional sums to high-income individuals could be warranted, thus supporting the current non-means-tested nature of PIP. However, if focusing resources on those more likely to face poor outcomes is preferred, means-testing would concentrate support on disabled people with lower incomes, who typically report difficulty affording essentials and lower life satisfaction.
Notably, the IFS points out that PIP’s lack of means-testing sets it apart from many other benefits, allowing high-income households to claim it. If the aim is primarily to reduce disability-based inequalities, keeping PIP non-means-tested makes sense. Conversely, to ensure disabled people achieve a minimum standard of living, means-testing becomes a stronger proposition. This approach has recently been suggested by Reform UK, although a government-led review chaired by Stephen Timms has indicated a preference to maintain the current system.
The IFS estimates that integrating PIP into Universal Credit and implementing means-testing could yield savings of approximately £8.2 billion, equating to about one-third of total PIP expenditure, assuming claimant behaviour remains static. However, the report acknowledges actual savings may be lower due to changes in claimant behaviour following such reforms.