What does welfare reform bill mean for families?

4 mins read

Thursday 3 July 2025

In the second reading of the Universal Credit and Personal Independence Payment Bill on Tuesday, the government made further last minute concessions to get the bill through. The Bill will now go forward for a third reading in Parliament.

Changes the government made to the Bill included removing altogether its proposed changes to Personal Independence Payment (PIP) rules. While this will come as a relief to many families, the Bill still includes plans to cut Universal Credit payments for many new claimants.

Below, we explain what impact families can expect the Bill to have.

What did the government remove from the Bill?

The government had planned to introduce a new “4 point rule” to the daily living component of PIP for new claimants. It has now scrapped this proposal – at least for the time being.

Instead, the government will carry out a wide-ranging review of PIP assessments before deciding what changes to make. It has committed to do this in collaboration with disabled people.

This review is not expected to finish until Autumn 2026. We will not know how PIP may change until after that.

What changes to Universal Credit are still going ahead?

The Bill still includes proposals to cut the amount of the Universal Credit health element (also known as the limited capability for work and work-related activity element or LCWRA element) for many new claimants. This change will come in from April 2026.

For some new claimants, this payment will be cut from £423 to £217 per month. This lower payment is also being frozen and will not increase with inflation for a four-year period.

Who will be protected from cuts to the Universal Credit health element?

The cuts will not affect disabled people who before 6 April 2026 have a Universal Credit award that includes an entitlement to the health element.

New claimants will also be protected if they either are terminally ill or meet severe conditions criteria. Claimants in these protected groups will continue to receive a health element of £423.27. This will increase with inflation as normal.

However, any new claimants who are not terminally ill and who do not meet the severe conditions criteria will receive a much lower health element payment of £217.26 per month. This payment will not increase with inflation between tax years 2026/27 and 2029/30.  

Which new claimants are likely to meet the severe conditions criteria?

In order to fall under the severe conditions criteria, a new claimant needs to both:

  • Be assessed as having a limited capability for work and work-related activity (LCWRA)

And meet the following extra tests:

  • They have been diagnosed by an appropriately qualified healthcare professional in the course of the provision of NHS services.
  • Their condition will last for the rest of their life.
  • There is no realistic prospect of recovery of function.
  • Their level of function must mean they would “constantly” meet the tests to be treated as having LCWRA “on all occasions on which the claimant undertakes or attempts to undertake an activity.”

At this point in time, it‘s difficult to know exactly how Department for Work and Pensions (DWP) decision-makers interpreted this. But new claimants at risk of receiving lower payments will include anyone with a condition that could improve over time and many with fluctuating conditions. 

What about the government’s proposal to scrap the Universal Credit health element for under 22s?

The cuts to the Universal Credit health element set out in the Bill will apply to new claimants who do not meet the severe conditions criteria, regardless of their age.

However, there is also a possibility that the government could scrap the Universal Credit health element altogether for under 22s. Whether this is likely to happen is not clear yet. This proposal to scrap the health element for under 22s is not part of the Bill currently going through Parliament.

Instead, the government is consulting on it separately. Responses to that consultation only closed on 30th June. It is likely to be weeks, if not months, before it becomes clear whether the government intends to proceed with this or scrap its proposal to target under 22s.