UK to cut welfare payments in bid to address spiralling costs

The cuts are a prelude to a Mar 26 fiscal statement which is set to be the moment when pre-election promises to limit tax rises and tightly control borrowing meet reality

Prime Minister Keir Starmer holds a meeting with Prime Minister of Canada Mark Carney (not seen) in 10 Downing Street, London, Britain Mar 17, 2025. Jordan Pettitt/Pool via REUTERS

Britain's Labour government will announce plans on Tuesday to cut the amount spent on supporting people with disabilities and long-term health conditions, seeking to tame a sharply rising welfare bill despite unrest among some of the party's lawmakers.

The cuts are a prelude to a Mar 26 fiscal statement which is set to be the moment when pre-election promises to limit tax rises and tightly control borrowing meet the reality of lower-than-expected growth and tax revenues.

Ministers are pulling every lever they can to boost growth and reduce spending, seeking to stay on track to meet a self-imposed fiscal constraint of balancing day-to-day public spending with tax revenues by the end of the decade.

The welfare budget, which already exceeds the country's defence budget and is set to top 100 billion pounds ($129 billion) by 2030, is expected to bear a significant part of those cuts.

"I don't think anyone believes that the current system is working," finance minister Rachel Reeves told Reuters on Monday.

"It's not working for people on benefits, who are often trapped on benefits rather than getting the support they need to get back into work ... and at the same time, it's not working for taxpayers."

The changes are due to be announced in parliament later in the day.

Media reports setting out where 6 billion pounds ($7.79 billion) of cuts could fall have prompted concern among some in the Labour Party, which was elected by a landslide last year on a manifesto promising a decade of renewal.

Last year, a decision to cut winter fuel payments for some pension-age Britons provoked a bitter internal party dispute.

Prime Minister Keir Starmer's government has rejected any suggestion it is repeating an austerity drive that was overseen by a Conservative-led government after the global financial crash, which Labour blames for many of Britain's long-term economic problems.

($1 = 0.7704 pounds)