The UK government is exploring a proposal that would allow individuals receiving sickness benefits to exchange cash payments for job coaching, mental health therapy, and other forms of support aimed at helping them return to work. This initiative forms part of ongoing welfare reform discussions intended to improve support for the long-term sick while controlling public spending.

Under the concept, claimants would be assessed to identify their specific needs and offered a combination of financial aid and tailored support services, ranging from physiotherapy to skills training. One senior government official indicated there is “definite interest” in enabling benefit recipients to spend payments on a mix of employment, skills, and health interventions rather than receiving cash alone. The idea remains at an early stage and has yet to be formally proposed to ministers. Officials are deliberating whether the changes would apply to incapacity benefits, which are paid to those judged unfit to work, to disability benefits aimed at helping with the additional costs of health conditions, or both.

This policy discussion marks the first major welfare reform consideration since the government abandoned plans last year to cut disability benefits following strong opposition from Labour backbenchers. Ministers maintain that many people on sickness benefits desire to work but currently receive insufficient help under the existing system. The proposed model aims to attract claimants by offering low-cost, promptly delivered personalized coaching or treatment designed to facilitate their return to employment.

Should the initiative prove effective, it is expected to produce long-term savings by reducing reliance on benefits and increasing the number of people paying taxes. However, these reforms would not be tied to immediate fiscal targets.

Labour MPs have expressed openness to welfare reform, guided in part by a government-commissioned review from former cabinet minister Alan Milburn. His report highlighted concerns about a “lost generation” of young people aged 16 to 24 who are neither in education, employment, or training (NiETs), many of whom are affected by long-term sickness, particularly mental health conditions.

Pat McFadden, the work and pensions secretary, has been laying groundwork for renewed welfare reform efforts targeting youth employment. Meanwhile, Labour leadership contenders, including Andy Burnham and Wes Streeting, have emphasized the importance of reducing the welfare bill by creating employment opportunities rather than imposing arbitrary benefit cuts. Burnham has advocated for cutting welfare spending through increased employment, describing such measures as alternatives to “crude cuts.” Streeting, having recently resigned from the cabinet, echoed this approach, calling work the best way to reduce benefit expenditure.

The Department for Work and Pensions stated that policy direction is shifting “from a welfare state to a working state,” with a focus on helping individuals move out of poverty through employment while protecting those unable to work.