Analysts call for billions in welfare cuts to placate markets

Tax and spending experts yesterday urged Rachel Reeves to consider billions of pounds in welfare cuts at next month’s budget to help placate jittery financial markets.

- Richard Partington Senior economics correspondent

After the chancellor gave her strongest hint yet that spending cuts were on the table, the Institute for Fiscal Studies called for “bold” action to plug a potential £22bn shortfall in the government's finances.

The thinktank warned Reeves against “doing the bare minimum” to build a financial buffer against her self-imposed fiscal rules and said she could be forced to look again at welfare savings alongside tax rises.

The IFS said options could include scrapping the pensions triple lock, a fresh drive to cut health-related and disability benefits, and limiting growth in spending on special educational needs.

However, such steps could reignite tensions with backbench Labour MPs who forced ministers to abandon an attempt to push through billions of pounds in welfare cuts.

Ben Zaranko, associate director at the IFS, said any changes in the budget would need to be presented as reforms that would improve outcomes for individuals. “Trying to do it to chase particular savings isn’t a recipe for success,” he added.