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UK Chancellor Rachel Reeves Prepares Billions in Welfare Cuts for Spring Statement

Facing economic pressures and reduced fiscal headroom, Reeves is expected to propose welfare and departmental spending cuts to meet borrowing rules.

Chancellor of the Exchequer Rachel Reeves hosting a roundtable with the defence sector at RAF Waddington in Lincolnshire. Picture date: Friday February 28, 2025. Yui Mok/Pool via REUTERS/File Photo
Rachel Reeves has shared spending cut plans with the Office for Budget Responsibility
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Overview

  • Chancellor Rachel Reeves is set to announce billions of pounds in spending cuts, including welfare reductions, in her March 26 Spring Statement.
  • The Office for Budget Responsibility is expected to report that Reeves has lost her £9.9 billion fiscal buffer due to inflation, higher borrowing costs, and global trade challenges.
  • Labour officials have defended the focus on welfare cuts, citing a 'moral case' for encouraging workforce participation and addressing unsustainable spending levels.
  • Economic pressures, including Donald Trump’s new U.S. trade tariffs and weaker-than-expected UK growth, have strained Labour's fiscal targets.
  • Analysts predict Reeves may combine immediate welfare cuts with deferred departmental reductions, while potential tax adjustments could follow in a future budget.