Andy Burnham stepped into No 10 on Thursday inheriting a set of formidable problems that have defeated his predecessors – none more immediate than the soaring cost of disability benefits, which is projected to reach £78bn a year by 2030.
The welfare bill for working-age sickness and disability benefits already stands at around £58bn a year, driven by a surge in Personal Independence Payments (Pip). The number of Pip claimants is forecast to rise from four million today to five million by 2030, with younger people claiming for mental health problems and neurodevelopmental disorders such as ADHD accounting for a fast-growing share.
“Burnham inherits £58bn welfare bill set to soar to £78bn and pressure for £24bn defence spending rise”
Attempts to rein in the cost have failed. The previous Conservative government tried but saw spending continue to rise. Last year, Sir Keir Starmer’s government attempted to cut the Pip bill by £5bn a year by 2030 through tighter eligibility, only to U-turn after a revolt by Labour MPs. An interim report by the disability minister, Sir Stephen Timms, co-produced with disability groups, concluded that Pip is “not fit for purpose”. His final report, expected later this year, may propose offering young people therapy or other support instead of cash – a move that risks backlash from disability groups and Labour MPs.
Burnham has said he wants to reduce the welfare bill by encouraging people into work, not through “crude cuts”.
At the same time, he faces intense pressure over defence spending. Starmer’s Defence Investment Plan, published in June after a near year-long delay, set a target of 2.7% of GDP by 2030 – but it was not fully funded, requiring savings from other Whitehall departments. The former defence secretary John Healey resigned over the issue and is pushing for 3% of GDP by 2030, which would cost an extra £9bn a year relative to current plans. A new Nato target of 3.5% of GDP by 2035 would cost an additional £24bn a year.
On the economy, Burnham has pledged to deliver “good growth in every postcode” by transferring power from Westminster to local communities. He has signalled a strengthened industrial strategy to safeguard sovereign manufacturing in critical sectors such as steel, defence, energy and food. Britain’s industrial base has shrunk from about 30% of the economy in 1979 to around a tenth today, though pockets of strength remain. Some experts warn that fetishising the industrial past is not the route to modern prosperity, given the UK’s comparative advantages in services. Burnham’s own political philosophy – “Manchesterism” – relies on the city’s revival, driven by private investment in knowledge-intensive business services rather than reopening cotton mills.
Britain is the most centralised G7 country for tax and spending policy and is among the most economically unequal in the developed world. With public finances under pressure and time running out before the next general election, Burnham’s to-do list is daunting.