Prosper UK has published a major new report setting out key reforms to the UK's welfare system, warning that spending is on an unsustainable trajectory and the government must urgently address the issue to prioritise intergenerational fairness.

The new report, A Fairer Welfare System: Incentivising Work and Driving Prosperity, reveals that total welfare spending is forecast to reach £406 billion by 2030-31, with more than a quarter of working-age adults now receiving financial support. As a share of GDP, total welfare spending is forecast to increase to over 11% by 2030.

Polling conducted for Prosper UK found that 7 in 10 people think someone in full-time work should always receive more than someone on benefits, a view shared by majorities of voters across every main party.

The report’s main recommendations for welfare reform are:

• Reforming the triple lock to a smoothed earnings link, where the pension rises with earnings over time but is protected against inflation in lean years, saving around £20.6 billion a year by 2050.
• Tightening and extending Universal Credit health-related reforms to existing claimants, worth around £7.4 billion a year.
• PIP and health assessments to be done in person, not remotely; face-to-face assessments were dropped in March 2020 as a Covid measure and never restored, leaving barely 1 in 20 PIP assessments done in person. Working-age disability benefit claims have risen from 2.4 million in 2020 to over 3.7 million, forecast to reach 4.2 million by 2029-30.

Prosper UK’s Vice Chair David Gauke said:

When we launched Prosper UK, we said we would be honest about the trade-offs and led by the evidence — the evidence here is hard to argue with. The triple lock is unaffordable. Over time, it adds to a pension bill that working-age taxpayers are left to fund and at some point that becomes untenable. A smoothed earnings link would keep pensioners' incomes rising broadly in line with everyone else's and protect them when prices climb. This is a fairer and more sustainable basis for increasing the state pension in the long term.

Other suggestions include:

Reconnecting people with work

• Guaranteeing a work-focused conversation and assessment before anyone moves onto a health-related benefit, backed by an interim jobseeking supplement, with sanctions where a claimant declines to engage without good reason.
• Conducting benefit assessments face-to-face as a rule, with remote assessment reserved for exceptional cases.
• Tightening the criteria for the health elements of Universal Credit and Personal Independence Payment so that they are focused on more substantial and enduring conditions, with lower-level needs met through treatment and employment support.
• Maintaining proportionate, ongoing work-related requirements, with periodic review of awards, for all but those with the most severe conditions.
• Attaching participation support, and a reasonable participation requirement, to the benefits spent on 16- to 24-year-olds and expanding the apprenticeships and training that open routes into the jobs of a changing economy.

Making work pay

• Integrating council tax support into Universal Credit to end the double withdrawal that blunts the reward from extra work.
• Standardising the means tests and earnings thresholds across schemes, giving claimants certainty as they move into work.

A fairer, more balanced welfare settlement

• Reintroducing the two-child benefit cap, tied more closely to typical earnings and uprated regularly.
• Removing or substantially raising the Universal Credit capital limit and restoring the long-frozen savings thresholds to today’s values, so that low earners are no longer penalised for saving.

Targeting support where it is needed

• Adopting a more honest measure of poverty under the Social Metrics Commission’s ‘Below Average Resources’ approach to direct help towards those in the most need.
• Sharing Universal Credit and HMRC data across government so that support can be directed effectively, and the public can see which programmes are moving people into work.
• Making full use of data analytics and artificial intelligence to reduce fraud and error, cut administrative cost and personalise support, while freeing staff for the face-to-face contact that is at the heart of the welfare system.

David Gauke added:

Having run the Department for Work and Pensions, I know reform on this scale is difficult and that the temptation in government is always to postpone it. But the numbers no longer allow for delay. Welfare spending is heading towards £406 billion a year by the end of the decade, and a system on that trajectory is neither fair to taxpayers nor sustainable for those who depend on it.

Our welfare system must support people back into work, protect those who genuinely cannot provide for themselves and be financially sustainable. This requires politicians to face up to tough choices and it is an issue that the country can no longer afford to dodge.