Chancellor Rachel Reeves plans significant cuts to disability benefits, aiming to address Britain’s debt crisis as government borrowing costs escalate. After the pound’s decline against the dollar and rising mortgage rates, Reeves committed to stringent spending measures instead of new tax increases. The annual disability support cost is projected to rise from £22 billion to £35 billion by 2029. Critics, including Harriet Baldwin and Ed Davey, urge Reeves to focus on fiscal responsibility rather than foreign trips. Amid market turmoil, Treasury officials assured that financial rules will be upheld, signaling possible emergency spending cuts if debt rules are breached.
Chancellor Rachel Reeves plans to cut disability benefits by billions of pounds in a bid to quell Britain’s debt crisis.
Downing Street is said to believe that significant cuts to the welfare budget, or Personal Independence Payment (PIP), are needed.
Yesterday, the pound fell sharply against the dollar and government borrowing rates rose to a 27-year high.
There were also warnings that mortgage rates could be hit if the crisis continues to escalate.
Now, Reeves says: He has made it clear to the Treasury that he wants to get “tough” on spending, meaning cuts to unprotected sector areas. Rather than considering new tax increases, the Telegraph reported.
The annual cost of support for people with disabilities and health conditions is expected to rise from £22bn to £35bn by 2029.
Meanwhile, Harriet Baldwin, former chair of the Treasury Select Committee, said that after the prime minister traveled to Beijing to meet communist leaders amid rising UK borrowing costs, Reeves had “fled to China”. ” he criticized.
“The Chancellor needs to take responsibility for the ongoing impact of his budget choices and return to Parliament,” she told the Mail.
Labor plans to cut billions of pounds worth of disability benefits to quell debt crisis
Prime Minister Rachel Reeves meets with Chinese Finance Minister Lan Fou’an at Diaoyutai State Guest House in Beijing, China
Liberal Democrat leader Ed Davey added: “Instead of flying off to China, the Prime Minister should urgently come to the House of Commons to abolish counterproductive employment taxes and set out a real plan for growth.” Ta.
In a highly unusual move, the Treasury issued a public statement on Wednesday reassuring markets that the chancellor’s commitment to financial rules was “non-negotiable” and that it would maintain an “iron grip” on the public finances. .
Treasury officials say he will develop an emergency plan for emergency spending cuts if new estimates released by the Office for Budget Responsibility in March indicate he is on track to breach his debt rules. He said he is doing so.
Treasury Secretary Darren Jones, who replaced the MP yesterday, reiterated his commitment to fiscal rules and suggested spending would be squeezed if borrowing costs did not throw the public finances off track.
Mr Jones downplayed the significance of the recent market turmoil, saying: “It is normal for gold prices and yields to fluctuate when there are broader movements in global financial markets.”
Prime Minister Keir Starmer answers questions from the media during a visit to the Select Orthopedic Center in Epsom, Surrey
Yields on 10-year gold government bonds (pictured) soared today in response to strong U.S. employment data. This rise means the UK government will have to pay more money to finance its borrowings.
Sterling is losing ground against the dollar, with new worrying signs emerging
He defended the Prime Minister’s visit to China, saying it was an “important visit for trade and investment in the UK economy”.
On Wednesday, the pound fell to nearly $1.22 against the US dollar, its lowest level since November 2023, adding to the previous day’s steep decline.
One Citi analyst joked that the pound’s fall suggested it was becoming the “Great British Peso”.
The yield on UK 10-year bonds rose to more than 4.9%, the highest level in 17 years, while the yield on 30-year bonds rose to more than 5.4%, the highest level since 1998.
“The worrying thing is that investors are losing confidence in the UK as a place to put their money,” said Eva Sunwai, a fund manager at M&G Investments.