UK chancellor Healey backs away from welfare cuts as warnings mount over a fiscal gap that could squeeze public services
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Chancellor John Healey says welfare will not be cut this parliament, after earlier hinting at reductions, while the Institute for Fiscal Studies warns that the budget leaves a £28 billion annual hole that could trigger a harsh spending squeeze and fresh pressure for tax rises.
John Healey said the welfare bill will not be part of the upcoming spending review, stressing that his priority is reform rather than immediate cuts to support for people who rely on the safety net. Earlier in the week he had floated the idea of trimming the benefits bill, but Treasury officials later clarified that no timetable had been set, underscoring the government's confusion over how to balance the books without hitting the vulnerable.
The Institute for Fiscal Studies warned that the budget leaves a £28 billion annual shortfall that must be filled to meet the government's defence spending target and to offset inflationary pressures. That gap, the IFS suggested, is the price of a budget that still fails to protect public services from austerity-style trade-offs.
"Public service spending plans look extremely tight. They don’t look to me like plans that this government would want to deliver," IFS director Helen Miller said, adding that the shortfall could lead to "another season of damaging speculation about tax rises."
The Office for Budget Responsibility projects total welfare spending to rise from £334 billion last year to £431 billion by 2030, with pensions and sickness/disability benefits accounting for most of the increase. The figures point to a system under growing strain as living costs remain high and demand for support continues to rise.
Healey highlighted measures to ease the cost of living, including a £100 winter payment for most households, and noted that the end of the Iran and Ukraine wars would be the biggest boost to the UK economy. When asked about the potential growth benefits of re-joining the EU or the single market, he said, "Brexit has certainly hit our level of growth and trade, but we had a referendum. We’re out of the European Union. The challenge for me now is how do we make the best of an economy which this year has proved remarkably resilient." His remarks amounted to little more than an acknowledgement that the country is stuck with Brexit’s drag on growth.
Critics described the budget as a "scattergun" approach. The Resolution Foundation said the energy-support measures were not sufficiently targeted, warning that thinly spread help is unlikely to shield families from the next bill shock.
"Cost of living support is being spread far too thinly and will leave even those families receiving help facing higher energy bills than they did during the last energy price shock," Ruth Curtice, chief executive of the Resolution Foundation, said.
The Trades Union Congress welcomed the bank surcharge increase but called for a higher levy if banks continue to earn windfall profits. The unions argued that banks and other winners should pay more, rather than ordinary households being expected to absorb the cost.
"It was right to tax banks to help people with their energy bills, but I think banks could have been asked to pay a fairer share," TUC general secretary Paul Nowak said.
The IFS noted that the £15 billion fiscal buffer left by Healey could be eroded by higher energy costs or other adverse developments, making the budget vulnerable to future shocks and exposing how little room the government really has for error.