The UK government is preparing billions in spending cuts across welfare and other departments ahead of the Spring Statement. Chancellor Rachel Reeves is set to present the proposals to the Office for Budget Responsibility (OBR) as her financial buffer has reportedly been wiped out due to rising borrowing costs, inflation, and global economic pressures.
Why the UK Government Is Cutting Spending
In October’s Budget, the OBR estimated that Reeves had £9.9bn in headroom within her self-imposed borrowing limits. However, sources say “the world has changed”, with economic shifts—including trade tariffs and a weaker UK economy—forcing the Treasury to reassess its fiscal plans.
The government has pledged to reduce national debt as a share of the economy while only borrowing for investment rather than daily spending. Reeves has emphasized that these borrowing rules are “non-negotiable”, reinforcing the need for immediate spending cuts.
Welfare Budget Faces Significant Cuts
Among the most controversial budget reductions will be cuts to welfare spending, particularly targeting the sharp rise in health-related benefits. Work and Pensions Secretary Liz Kendall is expected to outline new policies aimed at reducing welfare dependency and encouraging more people into work.
Justice Secretary Shabana Mahmood signaled the government’s stance on BBC Radio 4, stating:
“There’s a moral case here for making sure that people who can work are able to work. Our current situation is unsustainable.”
Government data shows that the UK spent £65bn on sickness benefits in 2023, a 25% increase from pre-pandemic levels. That figure is projected to reach £100bn before the next general election, prompting concerns that the system incentivizes long-term unemployment.
Economic Challenges and Global Factors Impacting the Budget
The OBR’s upcoming forecast is expected to reflect broader economic challenges, including:
• Rising inflation driven by higher energy, water, and council tax bills.
• Slower UK economic growth due to declining productivity.
• Global trade disruptions, including potential tariffs imposed by the US, China, Canada, and Mexico.
Although US President Donald Trump has suggested the UK could avoid new tariffs, Reeves warned that a global trade war would still weaken economic growth and drive up inflation.
Efficiency Drive and Civil Service Budget Reductions
In addition to welfare cuts, government departments face a major efficiency drive aimed at reducing costs. Cabinet Office Minister Pat McFadden and Health Secretary Wes Streeting will soon announce a plan to streamline the civil service and achieve significant cost savings.
An insider confirmed that Reeves is committed to “fixing welfare and making the NHS more productive”, despite financial pressures.
“Headroom or no headroom, the chancellor is determined to push through the change we need to make Britain more secure and prosperous.”
With the Spring Statement set for March 26, all eyes are on the government’s next steps to balance economic stability with political challenges.
