Chancellor Rachel Reeves is reportedly considering cuts to the welfare budget as part of a plan to increase public spending on long-term investment projects, ahead of next month’s Budget. The proposed reforms aim to reduce the state’s spending on income-related sickness benefits and the unemployment element of universal credit by helping more people return to work.
A source close to the Chancellor said, “If there are savings to be realised in the welfare budget, she does want to find them.” This could lead to significant changes in how job centres and welfare operate, with the focus shifting towards careers support rather than policing benefits, according to Work and Pensions Secretary Liz Kendall.
At a conference fringe event, Kendall hinted at “really big reforms” to welfare and job centres, aimed at reducing the number of young people out of work due to mental health issues. She stated, “You have to be earning or learning if you are young,” suggesting Labour’s new approach will focus on providing skills and support for younger generations to help them back into work.
Any potential savings from welfare cuts would likely be redirected toward capital investments in areas such as green energy and rail projects, which Labour argues could yield longer-term economic benefits. Speaking at the Labour Party conference, Reeves assured that while tax and spending would be tightened, the long-term reward would be economic growth.
However, Reeves also faced pressure over her decision to cut winter fuel payments for most pensioners, a move that has been widely criticised by trade unions. Despite the backlash, she stood firm, stating, “I made the choice to means test the winter fuel payment, so that it is only targeted at those most in need. I will not duck those decisions.”
Reeves argued that tackling the welfare budget and focusing on long-term investments would ensure stability for the UK economy, contrasting her approach with the chaos of Liz Truss’s economic policies. “The Liz Truss experiment showed us that any plan for growth without stability leads to ruin. So we will make the choices necessary to secure our public finances and fix the foundations for lasting growth,” she said.
As Labour prepares for the Budget, Reeves is likely to face growing pressure from MPs, charities, and Labour’s union supporters who oppose cuts to welfare. Nonetheless, she is committed to pushing forward with reforms aimed at boosting investment while maintaining fiscal discipline.
The Chancellor’s speech has sparked a broader debate about the future of public spending, with many questioning whether cuts to welfare are the best way to balance the books and promote growth.
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