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Chancellor Rachel Reeves is facing significant criticism for her recent spring statement, as new data indicates that three million households may experience a loss of £1,720 annually in benefits. Critics argue that her approach to managing the country’s financial situation is disproportionately affecting the most vulnerable.
During the statement, Reeves announced welfare cuts totaling £4.8 billion, emphasizing her administration’s focus on restoring stability to public finances amid rising global borrowing rates.
Analysts have suggested that additional tax increases may be necessary as early as this autumn, especially following warnings from the Office for Budget Responsibility (OBR) about potential disruptions linked to tariffs from Donald Trump, which could undermine current economic forecasts.
Paul Johnson, director of the Institute for Fiscal Studies, noted that the political and economic uncertainties surrounding potential tax hikes could create a prolonged period of speculation and concern among the populace.
Ministers are preparing for possible dissent from their own ranks regarding the benefit reductions, with indications that around thirty MPs might challenge the cuts during an upcoming May vote. While the Labour Party has a strong majority, internal opposition could complicate the vote.
Impact assessments released with the spring statement revealed that the cuts to personal independence payments (PIP) and incapacity benefits would push an additional 250,000 individuals into relative poverty.
Paul Kissack, CEO of the Joseph Rowntree Foundation, criticized Reeves, alleging that the burden of adjustment to economic realities is unfairly falling on those least equipped to cope. He urged the government to prioritize the protection of vulnerable populations as it strives for fiscal balance.
In defense of her measures, Reeves pointed to the chaotic aftermath of Liz Truss’s previous budget, asserting that it is unjust for working individuals to bear the consequences of previous fiscal irresponsibility.
She also highlighted commitments of £2.2 billion towards defense spending, asserting that the government is making strides toward revitalizing economic growth.
Bar chart showing forecast annual real GDP growth by year
Though the OBR downgraded its GDP growth forecast for 2025, Reeves noted an improvement in projections for subsequent years, crediting Labour’s strategic reforms in planning and housing as beneficial for long-term growth.
The welfare reforms form part of a broader £14 billion strategy aimed at creating £10 billion of fiscal headroom against Reeves’s self-imposed rules, which are set to be evaluated over the next five years. These strategies are likely to incite contentious discussions in an upcoming spending review scheduled for June.
Ruth Curtice, director of the Resolution Foundation, expressed concerns that while stabilizing the economy is critical, prioritizing fiscal health at the expense of low- and middle-income families, who will bear the brunt of welfare cuts, is fundamentally flawed.
Helen Barnard from the Trussell Trust highlighted the seriousness of the cuts to social security for disabled individuals, describing the government’s approach as shocking and emphasizing the fear among food bank users regarding their ability to make ends meet.
In her autumn budget, Reeves previously raised £40 billion in taxes, including a disputed rise in employer national insurance contributions. She asserted that further large-scale tax increases might not be needed moving forward, claiming that “we’ve now wiped the slate clean.”
Bar chart showing fiscal headroom in the past 15 years
While discussing worsening fiscal projections, Reeves attributed much of the volatility to global economic conditions, emphasizing that increased uncertainty and climbing borrowing costs reflect broader instability in trade patterns.
During a press briefing, when confronted about the implications of the welfare cuts, Reeves pointed out that the impact assessments overlook an additional £1 billion earmarked for employment assistance, designed to help individuals transition back into work.
She expressed confidence that their initiatives would ultimately create more opportunities for people to secure meaningful employment, thereby alleviating poverty rather than exacerbating it.
The OBR projected that these changes could facilitate the construction of an additional 1.3 million homes, putting Labour on track to meet its goal of 1.5 million by 2029, with expected GDP growth contributing an additional £3.4 billion in tax revenues.
However, the OBR warned that a potential trade conflict initiated by Trump could severely undermine fiscal stability, noting that a scenario where economic aggression leads to a trade standoff could eliminate much of the fiscal leeway projected under Reeves’s plan.
Reeves cautioned against a trade war, noting its detrimental effects on both the UK and US economies and reiterated her commitment to advocating for free trade.
As the government prepares for the impending vote on welfare reforms, Reeves and her team are on alert for backlash from dissenting Labour members.
Labour MP Neil Duncan-Jordan criticized the last-minute adjustments to the welfare cuts, arguing that they have erased any moral justification for the changes.
He emphasized the real-world implications of these policies on individuals’ lives, stating that his constituents are genuinely fearful about their futures. He warned that such policies could exacerbate the very cycles of poverty that the government is trying to mitigate.
Connor Naismith, MP for Crewe and Nantwich, pledged to vote against the welfare cuts, stating that he came into politics to help rather than harm vulnerable members of society.
Following a meeting with backbench Labour MPs, several expressed their dissatisfaction with the cuts, with some already indicating they would oppose the measures during the parliamentary vote. Others raised concerns that ministers were not fully aware of the impact of the changes to PIP on those in critical need.
Lib Dem welfare spokesperson Steve Darling criticized the government’s lack of understanding regarding the difficulties faced by disabled individuals, labeling the cuts as highly disrespectful.
Mel Stride, shadow chancellor, accused the administration of betraying its commitments to the public, asserting that the nation is now suffering an economic downturn as a direct consequence of these policies.
Source
www.theguardian.com