A report released today by the Office For Budget Responsibility (OBR) reveals that far from cutting the cost of disability benefits by 20 per cent as the DWP intended, personal independence payment (PIP) has resulted in an increase in costs of 15 to 20 per cent.

When PIP was introduced, the DWP openly admitted that the aim was to cut the cost of disability benefits by 20%, by supposedly targeting payments on the most severely disabled.

PIP was introduced in April 2013. The full rollout was intended to be completed by 2015-16, with the savings in place by then.

In reality, by 2017-18 the rollout was only two thirds completed and the cost had increased by 15-20 per cent compared to what disability living allowance for working age claimants was projected to have cost.

PIP versus DLA spending

The OBR has listed some of the reasons for the unexpected cost of PIP as:

Volumes of new claims to PIP being higher than for DLA. DLA claims had been falling prior to PIP introduction, so we did not expect an increase in claims. But they have continued to increase over the past five years.

Success rates for new claims being higher than expected. Success rates for ‘normal rules’ claims were initially between 50 and 60 per cent, but as administrative processes stabilised they fell less than expected, to around 45 per cent. That was substantially higher than the 35 per cent assumed in the December 2012 forecast on the basis of the results from the 900-person sample of DLA claimants.

Reassessment volumes being lower than expected, initially from fewer natural migrations, but later from the successive delays to managed migration. Since PIP was originally expected to cost less than DLA, this increased forecast spending.

Success rates at reassessments being higher than expected. Natural migration success rates averaged 78 per cent in 2015-16, after reconsiderations and appeals. They have since fallen to just below the 74 per cent assumed in December 2012 for all reassessments. For managed reassessments, they have settled at around 82 per cent.

Outflows initially being lower than expected, despite PIP having a higher proportion of short-term awards than DLA. Greater use of fixed-term awards may have discouraged claimants from reporting changes of condition, instead awaiting their next renewal date. Outflows caught up once award review outcomes started to come through.

Average awards being significantly higher than expected, for both new claims (by

around £10 a week) and reassessments (by around £14 a week).

The OBR also notes that legal challenges have led to an increase in the cost of PIP, with just one case leading to an increase in awards of around £400 million a year, in addition to backdating.

This was a reference to the attempts by the DWP to make it much harder for claimants who have difficulty going out because of overwhelming psychological distress to successfully claim the PIP mobility component.

Those attempts were defeated by one brave claimant, supported by funds raised largely by Benefits and Work readers.

Once again a cost cutting reform has proved to simply be an expensive exercise in creating avoidable misery.

It happened with employment and support allowance, it has now happened with personal independence payment and it will happen with universal credit too.

You can download the full OBR Welfare Trends Report.


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