Spring Statement 2025: Reeves makes further cuts to Universal Credit
Further cuts will be made to Britain’s welfare bill – but only save the government £3.4bn rather than the £5bn originally thought – Rachel Reeves has announced in the Spring Statement.
The Chancellor has confirmed there will be further reductions to the cost of benefits, and to government spending, after the Office for Budget Responsibility (OBR) found last week’s initial round of welfare savings would not save the £5bn ministers had posited.
Reeves has now widened those cuts by freezing an additional Universal Credit (UC) payment made to those least able to work until 2030, following an initial cut.
It came as the Chancellor blamed “increased global uncertainty” as the budget watchdog warned she would have missed her goal of balancing the books without taking action, as it slashed growth forecasts from two per cent to one per cent for 2025.
GDP forecasts
Responding to the growth forecast, Reeves also highlighted that the OBR boosted its forecasts for subsequent years, up to GDP growth of 1.8 per cent in 2029, and said the government’s planning reforms would increase it permanently by 0.2 per cent in 2029-30, by some £6.8bn.
But the Chancellor insisted: “I am not satisfied with these numbers. That is why we on this side of the house are serious about taking the action needed to grow our economy. Backing the builders, not the blockers.”
She had to set out savings of some £14bn to ensure she met her “non-negotiable” fiscal rules.
At her budget in October she set out plans which met that goal with £9.9 billion to spare in 2029-30, but the OBR’s updated forecast would have had her miss the target by £4.1bn if not for action.
Reeves also signalled cuts in Whitehall, including “voluntary exit schemes to reduce the size of the civil service”, and technology use to “make government leaner, more productive and more efficient”, saving £3.5bn by 2029-30.
Overall, day-to-day spending, she said, would be reduced by £6.1bn by 2029-30 and it will now grow by an average of 1.2 per cent a year above inflation, down from the 1.3 per cent forecast at the time of the Budget.
Welfare changes
Speaking in the House of Commons, she told MPs: “The Labour Party is the party of work. We believe that if you can work, you should work and if you can’t, you should be properly supported.
“One in eight young people are not in employment, education or training. If we do nothing, we are writing off an entire generation… a waste of their potential and a waste of their futures.”
Following work and pensions secretary Liz Kendall’s initial announcement on welfare cuts last week, Reeves said the UC health element would be “cut by 50 per cent and then frozen for new claimants”.
The overall package of savings is worth £3.4bn, down from the £5bn the government said last week.
Seperately, the Chancellor told MPs the statement did “not contain any further tax increases”, but continued “investment in cutting-edge technology” to “crack down on tax avoidance” which she said would “raise a further £1bn”.
Reeves said her statement meant she had “restored in full our headroom against the ‘stability rule’” leaving the government a £9.9bn surplus in 2029-30.
She argued: “The UK, alongside its international peers like France and Germany has seen the cost of borrowing rise during this period of heightened uncertainty in financial markets.”
Changing world
Reeves began her speech stressing that the world was “changing before our eyes” and that the “threat facing our continent” from Putin’s invasion of Ukraine has “escalated further and continues to evolve rapidly”.
In a nod to the impact of US President Donald Trump’s trade tariffs, she said: “The global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies.”
The Chancellor argued that the situation “demands an active government” and for the UK to “act quickly and decisively in a more uncertain world”.
She pledged to deliver a Budget in the autumn following a full spending review in June, “in line with our commitment to deliver just one major fiscal event a year”.
Shadow chancellor Mel Stride said the country is “weaker and poorer” as a result of Reeves’ decisions.
He told MPs: “The result is the worst of all worlds, a wholly inadequate level of savings on welfare, with welfare costs still spiralling ever higher, and changes that are likely to harm many vulnerable people.”
He added: “The right response is not to duck responsibility, but to build a resilient economy. She would have us believe that that is what she is doing. But how can we believe this Chancellor? How can we trust this Chancellor?”
Stride continued: “Today’s numbers confirm it. We are poorer and we are weaker. To govern is to choose, and this Chancellor has made all the wrong choices.”