Chancellor Rachel Reeves to announce additional £500m in welfare benefit cuts as UK government seeks to shore up finances amidst growing pressure on defence spending.
The UK government is facing a growing backlash over its decision to cut welfare benefits, with Chancellor Rachel Reeves set to announce an additional £500m in cuts in her spring statement on Wednesday.
Reeves had hoped to shift the focus away from the benefits cuts, which have appalled some Labour backbenchers, by promising to increase defence spending. However, final estimates from the ‘Office for Budget Responsibility (OBR)’ suggested that the changes announced last week would not save the £5bn needed to meet Reeves’s self-imposed fiscal rules.
The chancellor will now announce an additional £500m in benefits cuts to make up part of the £1.6bn shortfall, with the rest of the gap filled by spending cuts elsewhere. The measures are expected to include freezing the extra universal credit payment made to those people least able to work until 2030, after an initial cut.
Reeves will argue that the move is necessary to secure Britain’s future in a world that is changing rapidly. She will tell MPs that the government was elected to change the country and provide security for working people, and that this decision is part of that plan.
However, analysts warn that these historic shifts mean that even after promising spending cuts, Reeves may still have to increase taxes to meet rapidly growing pressure for higher defence spending. ‘Paul Johnson, director of the Institute for Fiscal Studies,’ said that the bigger risk is that speculation about which taxes will rise in the autumn could be politically risky and economically damaging.
The additional £2.2bn increase in defence spending from April will bring the country’s military spending up to 2.36% in 2025-26, with ministers promising to hit the 2.5% target in two years’ time. The move is seen as a down payment against the government’s long-term goal of spending 3% of GDP on defence.
Reeves will also announce details of a government transformation fund that Whitehall departments will be able to bid into, to pay for productivity-boosting projects such as overhauling out-of-date IT. Treasury ministers claim this will allow them to do more with less in future years, easing the impact of tighter budgets on public services.
Despite the backlash over welfare cuts, Reeves is expected to strike a robust note when she addresses MPs, facing down growing speculation that she will be forced to raise taxes.
Rachel Reeves is a British politician serving as the Member of Parliament (MP) for Leeds West since 2005.
She was appointed Chancellor of the Duchy of Lancaster in 2022, making her one of the most senior female politicians in the UK government.
Reeves has held various roles within the Labour Party and has been a vocal advocate for economic growth, social justice, and women's rights.
