UK pledges to reduce welfare spending before next election

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UK pledges welfare cuts

Highlights

John Healey announces a tougher welfare approach with benefits spending reductions before the election, targeting young claimants and after reviews of youth employment and disability benefits.
Office for Budget Responsibility projects UK welfare spending will rise from £334 billion last year to £431 billion by 2030, with sickness and disability benefits reaching £100 billion annually before decade's end.
Budget raises taxes on banks and landlords to fund limited household support, but Resolution Foundation criticizes the measures as inadequate with annual energy bills set to hit £1,750 by 2026-27.

Budget stance and welfare overhaul plans

As reported by The Guardian, John Healey says there will be a reduction in the benefits bill before the next election, with a tougher approach for young people who do not accept support to move into work or training.

In post-budget interviews, the chancellor says the welfare system is unsustainable and indicates the government will set out changes after two reviews, the Milburn review of young people and work and the Timms review of the disability benefit system. He says the aim is to bring down costs "in a Labour way", while avoiding what allies describe as crude cuts to disability support.

Healey also links the approach to earlier Labour policies from the late 1990s, saying tougher conditions for some younger claimants would be paired with support and advice. His comments come after Wednesday's budget offered limited help for households, including energy bill support, but left unresolved how higher defence spending and future welfare changes will be funded.

Spending pressure and criticism of the budget

The Office for Budget Responsibility says total welfare spending is set to rise from £334 billion last year to £431 billion by 2030, with about a quarter of that total going to sickness and disability benefits. The fiscal watchdog's projections suggest those benefits will cost £100 billion a year before the end of the decade, while the overall welfare forecast is £8 billion higher than in March.

Healey says the budget is designed to give households some breathing space, funded by higher taxes on banks and landlords. Measures on energy costs include removing standing charges on gas bills and providing £100 payments for as many as 20 million households in council tax bands A to D.

However, the Resolution Foundation says the package does little to address the UK's broader economic challenges. Its analysis says typical annual energy bills are expected to reach £1,750 after government support in 2026-27, above the £1,685 paid during the 2022-23 energy price shock, and chief executive Ruth Curtice describes the budget as scattergun and too limited to shield families from higher costs.

In our earlier article, we covered Chancellor John Healey’s commitment to stay on a deficit-reduction path ahead of the October Budget, while still aiming to offer households and businesses some “breathing space.” We also noted the UK’s modest 0.1% GDP growth in August and the intensifying political debate over how far the government can tighten fiscal policy without undermining growth and cost-of-living support.

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