LONDON — Rachel Reeves was already facing a hard sell on welfare reform. Her job just got a whole lot more difficult.
Britain’s top finance minister was on Wednesday forced to set out social security cuts which will go further, and ultimately save less, than billed just a week ago, after the U.K.’s independent spending watchdog cast a skeptical eye over the government’s initial plans.
It means fresh agonizing for already-spooked Labour MPs — who spent the afternoon digesting stark new analysis showing almost all Reeves’ savings will come from cutting working-age sick and disability benefits.
An extra 250,000 people, including 50,000 children, will be living in “relative poverty” by 2030 as a result of the plans, the Department for Work and Pensions’ own impact assessment said — although it stressed the figures don’t take into account the effect of the government’s proposed initiatives to get people back into work.
“If we do nothing, that means we are writing off an entire generation,” Reeves told MPs in defense of the plans, as she insisted Labour had “inherited a broken system” from the Conservatives.
But plenty on her own side will need more convincing than that — even if Labour’s thumping House of Commons majority makes a major legislative upset only a remote possibility.
“I want a society that looks after our most vulnerable people and the statement I’ve just listened to has some appalling cuts that disabled people will be the victims of,” Scottish Labour MP Brian Leishman said. He would, he said, be voting against the “horrendous cuts” when the moment comes.
Grim toll
Reeves’ Treasury has in recent days been left scrambling to find fresh cuts after Britain’s spending watchdog, the Office for Budget Responsibility (OBR), judged that the blueprint outlined in a welfare paper unveiled only last week would in fact save less than expected.
Reeves’ team hastily drew up a plan for a£500 million of extra savings. That plan includes freezing incapacity benefits for new claimants of Universal Credit (instead of allowing payments to rise with inflation) until 2030, and cutting the basic rate of the benefit in 2029 from £107 to £106 per week.
And it’s still not enough to fill the gap. Forecasters estimate the net savings will only amount to £3.4 billion, compared to the £5 billion previously billed. The OBR even threw shade the government’s way Wednesday, saying information for some of the welfare measures “was received late and without sufficient detail.”
The verdict from the independent watchdog is a grim irony for Reeves, who made great political play of giving the OBR new powers to judge any major tax and spending announcements after short-lived Conservative Prime Minister Liz Truss sidelined the watchdog, spooked the markets, and then blamed it for her ousting.
In a rare moment of schadenfreude, Truss offered up a gloating X post. “I wonder who they could have listened to?” she wrote, followed by a thinking emoji.
Government insiders are, for now, being careful to avoid going full Truss. “Who am I to question the OBR?” one sanguine government official asked.
But the misfire on calculating savings has hardly done Reeves any favors.
“It is fundamentally ridiculous as a way of making policy to be scrambling around for extra welfare cuts so you’re just on the right side of a line, days before the statement,” said Duncan Weldon, an economist and former Labour aide.
Rubber hits the road
For most Labour MPs, however, it is the real world impact of the cuts that will matter.
Controversial eligibility changes to the Personal Independence Payment (PIP) — a benefit which helps with extra care or mobility needs arising from disability — will see 370,000 current claimants lose their entitlement to it. An estimated 430,000 potential future claimants will no longer be entitled to claim, the same government analysis published Wednesday suggests.
Liberal Democrat leader Ed Davey, a carer for his disabled son, also highlighted the 150,000 people who will lose their carer’s allowance under the plans, warning it will be a “double whammy to the most vulnerable, hitting disabled people who cannot work while slashing support for the loved ones who care for them.”
The overall government calculation is that 3.2 million families — totting up current and future claimants — will lose an average of £1,720 per year by the end of the decade under the changes.
On the other side of the ledger, the reform package means some 3.8 million families will gain an average of £420 a year in the same period.
Not in my name
Anger is mounting on the Labour benches, where MPs fear the impact of the cuts on their own constituents — and question why an ostensibly center-left government is heading in this direction.
MPs have already been receiving regular briefings from campaign groups highlighting the impact of the reforms.
“Cutting people’s welfare will not create growth,” a skeptical backbench MP, speaking on condition of anonymity to voice their views more freely, said. “It’s as simple as that. People who argue otherwise are morons.”
They added: “There’s a nervousness from large parts of the party, and people are very worried about what is happening. And this is from people who are super loyal, people who say they would die for the party. They’re saying, you know what, I’m a bit queasy about this.”
Even Conservatives — not known for their love of welfare — see potential pitfalls ahead for Reeves.
Rupert Harrison, adviser to former Conservative chancellor George Osborne (who also slashed welfare payments) described the benefit changes as “a real unexploded bomb.”
He warned: “It’s got all the hallmarks of a money-saving reform cobbled together at the last minute. There are going to be big losers, and it could be a real slow burn over the next year.”
No plan B?
In the House of Commons on Wednesday, Reeves was not for turning, telling MPs her fiscal rules, which mean she must only borrow for investment rather than day-to-day spending by the end of the decade, are “non-negotiable.”
There are loyalists to the cause too, and recent polling suggests there is a public appetite for welfare reform.
YouGov polling published last week found that of six areas proposed, Britons thought that there was most likely to be capacity for spending cuts in welfare, with 51 percent saying so.
But only 19 percent thought welfare cuts could be made without having any adverse effects.
“If you see the f***ing state of the country, genuinely think that there’s just some magic wealth tax money sitting at the bottom of the garden, you are completely kidding yourself,” one Labour backbench MP loyal to the Labour leadership said.
That doesn’t mean supporters of the project are blind to the danger ahead. The welfare cuts will be “f***ing tough,” the same MP acknowledged.
“There are going to be people who need support, who are going to find it more difficult to get it, but that is just completely unavoidable when you’re trying to save a system that is currently on a trajectory that’s completely unsustainable,” they added.
Some supportive MPs are even gung-ho about the extra savings needed.
“Some of us thought there was room to go harder after the announcement last week. So this gap allows us to do more,” a second loyalist said.
Emilio Casalicchio and Dan Bloom contributed reporting.
Labour’s welfare reform headache is now a migraine
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