British Chancellor John Healy has been forced to backtrack on his promise to cut welfare before the next general election. In an interview with BBC Radio 4, he initially said: “There will be cuts to the benefits bill. We will do it the Labour way.“
However, the Treasury later clarified that the government had not given a specific deadline for spending to start falling. Healy himself told Channel 4 News: “We are committed to reducing welfare spending, but we have not set a timetable or deadline for that.“
The divergence has drawn criticism from the opposition. Conservative Party leader Kemmy Badenoch described the situation as "shocking" and said the government should have presented a concrete plan instead of correcting the Chancellor's words hours later.
Benefits continue to rise
According to forecasts from the Office for Budget Responsibility, total spending on social benefits will rise from £334 billion last year to £431 billion in 2030. Around half of the amount is allocated to pensioners, and around a quarter - to sickness and disability benefits.
The cost of sickness and disability benefits alone is expected to reach £100 billion a year before the end of the decade. Healy described the system as “unsustainable” but rejected the approach of direct cuts.
The government is awaiting reports by Alan Milburn on youth unemployment and Stephen Timms on the disability benefits system in November. These are planned to be followed by a white paper next year and legislative changes. Prime Minister Andy Burnham said the cabinet was working “full steam ahead” to reduce the bill, but also did not give a specific date.
Defence promise remains unfunded
The other big problem in the budget is the commitment to increase defence spending to 3% of gross domestic product by 2030. The Institute for Fiscal Studies estimates that this target will require around £11 billion extra per year in 2030-2031, compared to maintaining the current trajectory of 2.7%.
The budget provides for the immediate shortfall of £4.7 billion in the Defence Investment Plan. The funds will be found by reallocating capital budgets across departments. The government plans to cut these budgets by 1% between 2027-2028 and 2029-2030, which should provide around £3 billion.
However, this does not resolve the larger question of how the transition to 3% of GDP itself will be financed. Healy postponed the details of the government spending review until next year, when the roadmap to the NATO target of 3.5% by 2035 is also due to be presented.
Sources: theguardian.com, defensenews.com