Rachel Reeves has announced fresh benefit cuts after the spending watchdog said her reforms would save less than planned.
It follows last week’s controversial decision to slash £5billion from sickness and disability benefits – with major changes to Personal Independence Payments (PIP).
But in a blow to the Chancellor, the Office for Budget Responsibility (OBR) said ministers have overstated the savings. Delivering the Spring Statement today, Ms Reeves responded by announcing additional savings clawed back from Universal Credit (UC).
Under the new measures UC incapacity benefits for new claimants will now be frozen until 2030 rather than increased in line with inflation. Last week it was announced they would also be cut by 50% for new claimants.
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She said: “The OBR (Office for Budget Responsibility) have said that they estimate the package will save £4.8 billion in the welfare budget, reflecting their judgments on behavioural effects and wider factors.
“This also reflects final adjustments to the overall package, consistent with the Secretary of State’s statement last week and the Government’s Pathways to Work Green Paper.
“The universal credit standard allowance will increase from £92 per week in 2025-26 to £106 per week by 2029-30, while the universal credit health element will be cut by 50% and then frozen for new claimants.”
The move is likely to cause further anger among Labour MPs who voiced concerns over the scale of the cuts facing sick and disabled people last week. Later today the DWP is expected to release an impact assessment of the cuts.
Earlier on Wednesday charities and health experts warned the ministers the cuts to sickness and disability benefits could cost lives.
Mental health charity Mind said its helpline had reported that some people had indicated their level of worry was such that they felt they had “no choice but to end their own life”.
Charles Gillies, Senior Policy Officer at the MS Society and Policy Co-Chair at the Disability Benefits Consortium, added: “The Chancellor has chosen to double down on harmful benefits cuts, despite warnings this approach will push more disabled people into poverty and worsen people’s health.
“Since the cuts were announced last week, we’ve seen an outpouring of fear and dread from disabled people, including many with MS. And the extra cuts announced today will heighten alarm even further, largely hitting those who are unable to work and rely on these benefits to survive. People are wondering how they’ll continue to cover their basic living expenses and the extra costs of their disability – like visits from carers to help with things like washing, cooking and going to the toilet. The government has a moral obligation to scrap these cuts before the real damage is done.”
Speaking on Wednesday the Chancellor also blamed “increased global uncertainty” as the budget watchdog slashed its forecast for economic growth. The OBR halved its forecast for growth in gross domestic product in 2025 from 2% to just 1%.
The watchdog’s assessment also indicated the Chancellor would have missed her goal of balancing the nation’s books without action.
Ms Reeves told MPs: “The increased global uncertainty has had two consequences. First, on our public finances. And second, on the economy.”
At her budget in October she set out plans which met that goal with £9.9 billion to spare in 2029/30. But she said the updated forecast from the Office for Budget Responsibility indicated she would have missed the target by £4.1 billion without taking action to restore the £9.9 billion of headroom.
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