‘Austerity chancellor’ plans to cut billions from welfare

Rachel Reeves is planning billions of pounds of cuts to benefits and other public spending ahead of this month’s spring statement, it has emerged.

- ARCHIE MITCHELL DAVID MADDOX

The chancellor will present major changes to the government’s spending watchdog yesterday amid fears her fiscal wiggle room after October’s Budget has been wiped out.

Treasury sources said “the world has changed” since Ms Reeves delivered Labour’s first Budget in power, when she had a £9.9bn buffer in her spending plans.

Since then, economic growth has flatlined, while inflation and borrowing costs in the UK have risen. Donald Trump’s looming tariff wars also threaten to hit the British economy, even if Britain is exempt, Ms Reeves warned on Tuesday. Yesterday, Sir Keir Starmer confirmed talks have begun with Mr Trump’s administration on a trade deal which would let Britain avoid a tariff war with the US.

But a Treasury source told The Independent that, given the rate at which the welfare bill is spiralling, “this is something we would need to do” anyway.

Speaking to the BBC, Treasury sources outlined plans for “major measures” to be presented to the Office for Budget Responsibility yesterday, with deep spending cuts expected to meet the chancellor’s self-imposed fiscal rules.

The rules state that borrowing can not be used to fund day-today spending, and that debt must be falling as a percentage of Britain’s GDP.

Insiders said the welfare cuts would be “politically painful” and would target the huge rise in health-related benefit payments, with a speech expected on the measures from work and pensions secretary Liz Kendall.

An insider told the broadcaster: “Clearly the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes.

“The Office for Budget Responsibility will reflect that changing world in its forecasts later this month and a changing world will be a core feature of the chancellor’s response later this month.”