Designing better incapacity benefits: How should government improve benefits policy making for people out of work due to ill health

Andy Burnham’s government must seize the opportunity to reform an incapacity benefits system that fails to support people’s needs in today’s world of work. 

This report sets out how Burnham can reform benefits and support, while avoiding a repeat of the rushed and crude cuts to health and disability benefits that led to Keir Starmer’s embarrassing 2025 U-turn and wiped out his planned savings.

Spending on incapacity benefits has increased by almost 50% in real terms – to £31bn last year – since the Covid pandemic, and the percentage of completed assessments that decided people are eligible for incapacity benefits has risen from 47% in 2011 to 80% in 2025.

This new IfG report sets out how to overhaul the existing system’s focus on crudely categorising people and providing incapacity benefits but relatively little personalised support to help move people into work.

Previous governments’ initial plans for a new combined assessment for Personal Independence Payment (PIP) and Universal Credit health are an opportunity for Burnham’s government to take a different approach, with the report’s key recommendations including:

• Reforming assessments for health and disability benefits to better personalise support to people’s needs and circumstances, replacing the current approach which favours simplification over personalisation. To do this, DWP should consider creating a new 'personalised support plan' for every claimant
• Bringing health and disability benefit assessments back in-house from private providers to give DWP more flexibility in how assessments are delivered
• Regularly reviewing the assessment criteria and process to ensure they reflect the changing nature of work and disability, and are operating as intended
• Making the DWP and DHSC jointly responsible for tackling health-related inactivity - with clear outcomes they are held accountable for delivering on
• Abolishing, or reforming, the welfare cap

To deliver reform, political leadership on this issue is crucial. The Burnham government should clearly set out what the health and disability benefits system is aiming to achieve for different groups of people – and build a consensus to reform an incapacity benefits system not well designed for the workforce and nature of work today.