Healey commits to set out benefits cuts this year

Chancellor responds to criticism that Wednesday's Budget rests on unrealistic spending assumptions

Chancellor John Healey has pledged to set out a benefit-cutting plan this year, as he sought to respond to criticism that his first Budget had swerved Britain's most pressing fiscal issues.

Benefits spending is on course to rise by an average of £16bn every year until 2031-32, driven by the rising cost of sickness support and pensions, the fiscal watchdog, the Office for Budget Responsibility, forecast.

"This system is unsustainable. I've been clear about that," Healey told the BBC on Thursday.

However, Downing Street was forced to clarify that the government was not committing to reducing spending before the next election, which must be held by August 2029. "We are not setting an arbitrary target or timetable," a spokesperson said.

Prime Minister Andy Burnham told reporters that he wanted "to get the welfare bill down as quickly as possible", saying the government was "working flat out to that end".

But he argued: "If we just went and made crude cuts, in the end, that leaves people in crisis, and you spend more public money somewhere else."

Healey's modest maiden Budget on Wednesday used tax increases on banks, savers and property owners to fund a relatively small cost of living package, including £100 handouts to 20mn households to help with rising energy bills.

Opposition parties have questioned how the government will achieve its promised increase in defence spending, with existing plans assuming deep cuts to other public services that non-partisan experts say are implausible.

Healey insisted he was ready to take "tough" action to reduce spending, telling ITV's Good Morning Britain: "Instead of just saying to people 'How much do we pay you? And then putting them on to one side, we'll say 'What support do you need? We'll get you into work. We'll expect you and require you to take up the opportunities that we offer.'"

Allies of the chancellor said he was attracted to the plan shortly to be put forward by Alan Milburn, the former cabinet minister, which would see cash benefits cut for young people to help fund more intensive employment-focused support.

"Of course there will need to be some reprioritisation -- the chancellor has been clear that will have to happen in all departments and that could free up money we can use for more preventative things like youth support and apprenticeships," said one person familiar with Healey's thinking.

The person pointed to Burnham's decision to adjust the pensions triple lock as showing the government was "ready to take a big decision" but said ministers were not "rushing headlong" into welfare changes.

"Taking the parliamentary party with us is crucial to doing this in a way that's sustainable," they said.

Reforms to special education provision are seen by some as a model for welfare, after Labour MPs were largely won over by a plan to increase short-term spending as part of a longer-term plan to reduce costs.

Britain's £353bn estimated welfare spending this year is projected by the OBR to increase to £431bn by 2031-32.

To bring that down below current levels implies future cuts of tens of billions of pounds. That would dwarf the £5bn cut that Sir Keir Starmer attempted last year and which provoked a backbench rebellion that helped bring down his premiership.

Conservative leader Kemi Badenoch said it was "astounding" that Healey was not setting a date to cut costs.

Healey's spending plans are under scrutiny, after the OBR estimated that unprotected departments, not covered by specific spending pledges on health, education and defence, were on course for real-terms spending cuts of 2.6 per cent in the three years starting from 2029-30.

The watchdog added that £11bn of new cash would otherwise be needed to plug the gap.

Helen Miller, director of the Institute for Fiscal Studies think-tank, said "extremely tight" spending figures were "the key story" of the Budget.

"They don't look to me like plans that this government would want to deliver. Whether or not they are delivered matters because the spending plans underpin the plan to bring down borrowing," she said.

Greg Thwaites, chief economist at the Resolution Foundation, said plans to cut borrowing in later years "don't seem credible to me", said , adding: "I've heard that one before".