What does the 2026 Budget mean for Home Affairs, Justice, Welfare & Equalities? Mia-Terra explores the main takeaways, the gaps in the Government’s approach, and the implications for future policy.
What are the key takeaways for your sector?
Mia Terra St. Hill: The Chancellor faced pressure going into the Budget to announce further measures to ease the growing cost-of-living challenges experienced by UK households. With food, fuel, and energy prices rising alongside inflation, people are feeling the pinch. The Chancellor announced several measures to give the public breathing space, including extending the removal of VAT from electricity bills until July 2027, a £100 energy payment for households in council tax bands A to D, and a temporary tariff reduction on over 100 food and drink products.
Healey also announced further details on the trailed commitment targeting welfare fraud, expected to save the taxpayer a further £1.4bn between 2027 and 2032.
These included the DWP investing in 2,000 specialist fraud staff, strengthening the department’s ability to identify cases where customers remain abroad longer than benefit rules allow, and prompting those claiming Pension Credit to redeclare the correct amount of capital they hold.
He also confirmed he would remove the cliff edge earnings limit on Carer’s Allowance, replacing it with a 100 percent taper on earnings in excess of the Weekly Earning Limit, and that he would maintain the surplus earnings threshold at £2,500 for Universal Credit claimants until the end of March 2028.
There was some focus on other equalities issues, like extending parental pay to eligible self-employed fathers and same-sex partners, allowing them to claim two weeks’ statutory paid paternity leave from April 2029. £15m worth of funding was also announced for the misogyny prevention fund, which aims to root out misogynistic attitudes and support women and girls.
What has the Government not sufficiently addressed in the Budget for your sector?
Mia Terra St. Hill: While the announcement of cost-saving measures targeting DWP fraud and error will reduce the welfare bill by £1.4bn by 2032, along with serious offenders in hospital having their benefit entitlement removed – saving a further £5m in 2031/32 – the Government will have to go much further to bring welfare spending down, as they have stated they plan to do.
Major welfare reform was not expected at this Budget, given that both the Milburn and Timms Reviews are due to be published imminently. The Chancellor confirmed that the Timms and Millburn Reviews will be published in November 2026, with the Government response due by the end of the year, followed by a welfare White Paper and accompanying legislation in 2027.
Burnham upheld a commitment Keir Starmer made not to change PIP before the Timms Review concluded, after the Starmer administration’s unsuccessful attempts to introduce significant welfare system changes in 2025.
The final publication of these reviews, especially the Timms Review, will be particularly significant for informing the Government’s approach to new legislation in this area.
The Chancellor began laying the foundations for what a reformed welfare system would look like, aligning with the Prime Minister’s commitment to reduce the welfare bill in a Labour way. Their approach focuses on rebuilding the welfare system so it can supports people from youth into old age, rather than making “crude cuts” that could exacerbate cost-of-living pressures and shift the financial burden to other parts of the system.
Have the Government’s priorities changed in your sector? Why?
Mia Terra St. Hill: The Government has been consistent in its rhetoric about reducing the welfare bill and tackling NEETs, with Andy Burnham confirming that his Government would work within the 2024 manifesto framework when he took over in July 2026.
However, Labour’s approach to these reforms has shifted since it came to power. The Government’s initial vision for reforming the welfare system and getting people into work was outlined in the ‘Pathways to Work’ green paper, but this approach backfired when Starmer attempted to introduce reforms to PIP and faced a rebellion from his backbenchers. In response, the Government established the Timms Review and committed to a ‘co-production’ approach that would include the lived experience of disabled people.
Alongside the Timms Review, the Government also commissioned the Milburn Review. Both of these reviews have published interim reports. In the interim, the Timms Review found that PIP was “not working” and committed to making bold and radical proposals to overhaul the benefit to ensure it continued to support disabled people “both now and into the future”.
Meanwhile, the Milburn Review found that health was a central factor in youth disengagement from the world of work and concluded that the disability benefits system contributed to the problem.
Both reports agree that radical welfare reform is needed to improve support for those in need and rein in spending. The publication of the final reports will provide much-needed detail on what changes the Government could make.
Any additional reflections?
Mia Terra St. Hill: The Timms and Milburn reviews will play a vital role in informing the Government’s approach to reducing the welfare bill.
Milburn has advocated reprioritising spending, moving away from welfare and putting more into employment support to tackle the NEET crisis facing young people. At the same time, the recommendations from the Timms review will need to balance reforming a dysfunctional system with the political pressure the Government faces to curb social security spending.