Chancellor Rachel Reeves is facing increasing pressure to reduce the welfare bill instead of raising taxes, as concerns mount over the costs associated with what is being termed “benefits Britain”, reports BritPanorama.
Reeves is set to break her manifesto pledge by raising income tax during her highly anticipated Budget on November 26. This decision comes in the wake of a backlash from Labour MPs who oppose welfare reforms aimed at cutting the sickness benefits expenditure.
Recent analysis by the TaxPayers’ Alliance highlights a significant rise in welfare spending, which has escalated from £236 billion in the 2015/16 fiscal year to £285 billion in 2023/24. Projections estimate it could surge to £324 billion by the end of the decade.
A concerning trend has been observed in the number of working-age Britons either signed off sick or unemployed, with some statistics indicating a dramatic increase. Additionally, £9.5 billion of taxpayers’ money was reported to be lost to benefit fraud and errors last year, according to the Department for Work and Pensions.
Amid these developments, MPs have expressed alarm over what they characterize as a “grotesque gaming” of the benefits system, calling for the Chancellor to act decisively to control escalating welfare costs.
The number of Britons unable to work due to health issues has surged post-COVID, with nearly two million individuals currently classified as having a “limited capability” for work, a stark increase from just over 170,000 reported in 2019. This uptick is mirrored by a substantial growth in claims for enhanced mobility assistance through the Personal Independence Payment, which has more than doubled since early 2019.
Further analysis by the Centre for Social Justice predicts that without reforms, the burden of increased welfare spending will require each taxpayer to contribute an additional £700 annually by the end of the decade, based on the number of income tax payers in the UK.
Neil O’Brien, the Tories’ Shadow Minister for Policy, criticized the government’s management of the welfare bill as “ludicrous” and highlighted the significant financial impact on working individuals.
Weak leadership
In a piece published in a Sunday newspaper, O’Brien remarked on the extraordinary financial weight of the benefits system on taxpayers, indicating that some individuals are exploiting the welfare rules for their gain.
Shadow Chancellor Mel Stride also condemned the Labour Government’s decision to forgo potential savings from welfare reforms, characterizing the imminent tax increases as a direct consequence of poor leadership.
Richard Tice, the deputy leader of Reform UK, emphasized the need for significant cuts within the public sector and voiced concerns over the manipulation of the welfare system by some claimants.
Labour backbenchers are reportedly apprehensive that failure to address the welfare bill could jeopardize their electoral prospects. One unnamed MP conveyed a personal belief in the necessity of cutting welfare, albeit with careful execution.
John O’Connell of the TaxPayers’ Alliance expressed frustration at the unchecked expansion of welfare spending, advocating for decisive action rather than tax hikes.
In response, a Government spokesperson confirmed plans to shift attention from welfare to employment. This includes a commitment of £1 billion annually to employment support for disabled individuals and an additional 8,500 mental health professionals to address growing mental health issues impacting work capability.
The increasing costs associated with welfare are indicative of broader challenges the UK faces, necessitating a reevaluation of current spending practices. The government’s response will be crucial not only for public finances but for the perception of its ability to manage essential services effectively.
