UK to cut £5bn in welfare benefits in bid to shrink budget

(CLO) The British government announced on Tuesday that it will cut more than £5 billion from the social welfare budget by 2029/30.

The cuts come ahead of the March 26 fiscal statement, when pre-election pledges to limit tax rises and bring public finances back into balance will be confronted by lower-than-expected economic growth, falling revenues and a worsening global economic backdrop.

British Prime Minister Keir Starmer. Photo: GOV.uk

The British government is pulling out all the stops to boost growth and control spending, with the goal of achieving self-imposed fiscal discipline: balancing the regular public spending budget with tax revenues by the end of the decade.

The social welfare budget, which includes support for people with disabilities and long-term health conditions, has become a focus. It now even exceeds the UK's defence budget.

Ministers argue that welfare reform would not only cut spending, but also boost the economy by putting more people into the workforce.

Without control, total welfare spending is forecast to exceed £100bn by 2030. Part of the reason is that the UK has the highest proportion of working-age people out of work for health reasons in Europe.

The Institute for Fiscal Studies (IFS) says the number of working-age people receiving health benefits in England and Wales has risen by 38% in the past four years to 3.9 million (10% of the workforce), while the figure has fallen or remained the same in Australia, Canada, France, Germany and the US.

“This is a major reform package, expected to save more than £5bn by 2029/30,” Work and Pensions Secretary Liz Kendall told the UK Parliament.

If the plan is successful, the £5bn savings would be a significant contribution to helping the government meet its fiscal targets.

According to a YouGov survey, 68% of British people think the current welfare system is ineffective and needs reform.

Prime Minister Keir Starmer said: "Millions of people, particularly young people, have the potential to work and live independently. But right now they are dependent on benefits. It is unethical to let them squander this opportunity in their lives."

Cao Phong (according to CNBC, Reuters)