Further cuts will be made to Britain’s welfare bill – but only save the government £3.4bn rather than the £5bn originally thought – Rachel Reeves has announced in the Spring Statement.
The Chancellor has confirmed there will be further reductions to the cost of benefits, and to government spending, after the Office for Budget Responsibility (OBR) found last week’s initial round of welfare savings would not save the £5bn ministers had posited.
Reeves has now widened those cuts by freezing an additional Universal Credit (UC) payment made to those least able to work until 2030, following an initial cut.
Speaking in the House of Commons, she told MPs: “The Labour Party is the party of work. We believe that if you can work, you should work and if you can’t, you should be properly supported.
“One in eight young people are not in employment, education or training. If we do nothing, we are writing off an entire generation… a waste of their potential and a waste of their futures.”
Welfare changes
Following work and pensions secretary Liz Kendall’s initial announcement on welfare cuts last week, Reeves said the UC health element would be “cut by 50 per cent and then frozen for new claimants”.
The overall package of savings is worth £3.4bn, down from the £5bn the government said last week.
The Chancellor told MPs the statement did “not contain any further tax increases”, but continued “investment in cutting-edge technology” to “crack down on tax avoidance” which she said would “raise a further £1bn”.
Reeves said her statement meant she had “restored in full our headroom against the ‘stability rule’” leaving the government a £9.9bn surplus in 2029-30.
She argued: “The UK, alongside its international peers like France and Germany has seen the cost of borrowing rise during this period of heightened uncertainty in financial markets.”
Changing world
Reeves began her speech stressing that the world was “changing before our eyes” and that the “threat facing our continent” from Putin’s invasion of Ukraine has “escalated further and continues to evolve rapidly”.
In a nod to the impact of US President Donald Trump’s trade tariffs, she said: “The global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.”
The Chancellor argued that the situation “demands an active government” and for the UK to “act quickly and decisively in a more uncertain world”.
She pledged to deliver a Budget in the autumn following a full spending review in June, “in line with our commitment to deliver just one major fiscal event a year”.
