Pathways to Work: £4.8bn Welfare Savings by 2029-30
Commitment: Reform the welfare system (“Pathways to Work”) to achieve £4.8 billion in welfare savings by 2029-30, alongside £1 billion per year in employment support and health-linked work support from 2026-27.
Owner: DWP / HMT
Target date: 2029-30
Metric: Welfare expenditure reduction against baseline; employment rate of previously inactive groups.
Status: active
Context
The Pathways to Work welfare reforms are the government’s primary response to rising economic inactivity — particularly among working-age people claiming health-related benefits. The reforms aim to:
- Reduce the welfare bill by £4.8bn by 2029-30 relative to the OBR forecast baseline
- Support more people into employment with targeted employment and health support
Key reforms (as of Spring Statement and Spending Review 2025)
- Changes to Personal Independence Payment (PIP) assessment criteria
- Universal Credit standard allowance rising from £92 to £106 weekly for single adults (25+) by 2029-30
- £1bn/year employment and health support from 2026-27 (targeted at health-related inactivity)
- Changes to the Work Capability Assessment
Relationship to fiscal framework
The £4.8bn welfare savings are a critical component of the OBR’s assessment of whether the stability rule (current budget surplus by 2029-30) can be met. The Spring Statement narrowed the fiscal headroom to £9.9bn — welfare reform savings are material to this figure.
Key risk
Welfare reform savings projections are inherently uncertain — they depend on how many people move off benefits and into work, which is sensitive to labour market conditions and health outcomes. If actual savings fall short, the fiscal headroom narrows further.
Connection to growth
Reducing economic inactivity through Pathways to Work is also a supply-side growth strategy: more people in employment increases output capacity and reduces demand for welfare spending simultaneously.