Labour's cuts gamble: ‘No one knows how many people will get off benefits and into work’
Rachel Reeves has announced a new wave of cuts to benefits spending, which it has been suggested could push 250,000 people into poverty. Why have Labour done this, and what has been the response from its MPs?
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In brief…
- New cuts to benefits are being introduced in order to “balance the books” after a miscalculation left the government needing to find £500 million to meet its savings targets.
- Darren Jones, chief secretary to The Treasury, tells The News Agents the situation will leave people better off, as money will be invested to get more people into work, onto salaries and off benefits.
- The News Agents say there is “no guarantee” any of this will work, and suggest Labour scrap some of its self-imposed rules on borrowing to help the country out.
What's the story?
Less money for benefits, more money for defence.
That's the top line of Chancellor Rachel Reeves' Spring Statement, as Labour introduces another round of cuts on support given to some of the poorest people in British society.
Her goal, and that of the government, is to save £5 billion a year on benefit spending, but a miscalculation on the first round of cuts to the tune of an additional £500 million, identified by the Office for Budget Responsibility (OBR), has resulted in additional cutbacks.
The government has already faced criticism for measures which have been compared to Conservative austerity measures. Labour has repeatedly told voters it found a £22 billion "black hole" left by the former government when it came to power in June 2024, and has since worked to fill that deficit.
Defence spending will be increased by £2.2 billion, which Reeves says is due to ensuring the UK's security in a "changing world".
The spring statement was delivered on the same day it was announced UK inflation had fallen by more than had been predicted, dropping from 3% in January, to 2.8% in March.
The new cuts, according to the government’s own assessment, are set to leave 3.2 million families in the UK £1,700 worse off per year, with people who were previously on PIP payments losing £420 a year.
It has been estimated that what has been proposed will push 250,000 people (including 50,000 children) into poverty, which Labour denies, saying parents will be returning to work and so families will be earning more than they did on benefits.
Jon Sopel describes Reeves' speech in the House of Commons as a "blizzard of numbers", saying it is "not a budget, but it quacks like a budget, so maybe we should call it a budget."
What is the Labour government saying?
While Labour insists its cuts are all about motivating people to get back into the workforce, there have been suggestions that they are simply to "balance the books".
This has been denied by Darren Jones, chief secretary to The Treasury, and who sat behind Reeves in the House of Commons as she delivered her financial plan.
"The cost was unsustainable in the long term, and that's failing everybody – the taxpayer, as well as people who are in receipt of those payments," he tells The News Agents.
"And so that's why the moral case is true, but also legitimate, because we want to help people seek the benefit of a successful economy for their own family finances."
He stresses those with significant disabilities, who cannot work, will be protected from the incoming cuts, while people who want to be in work will be empowered through new investments into employment, skills and mental health support.
Additionally, Labour is providing new breakfast clubs for children, introducing a new child poverty strategy and promising to build more council housing – all of which are intended to give families the support they need to ideally have both parents able to work.
He says the estimates of tens of thousands of people being pushed into poverty do not take into account those who are able to take advantage of these new schemes, who will be earning money through salaries instead of benefits.
"We know that the main driver of child poverty in our country is larger families with two parents, when one parent is not able to work," Jones says.
"If we can create the circumstances through breakfast clubs, through additional child care support, through helping people get into work, to help that second parent – where they want to be in work – we know that those families will be lifted out of child poverty.
"This impact assessment, by design, does not factor in the positive gain of those additional measures that we're taking."
He denies suggestions that Labour is taking a "gamble" with these promises, and says the situation the UK finds itself in today is a "good news story".
"The economy is growing. People's incomes are growing. We've got more money for public services," he adds.
"We're making our country stronger and more secure in the face of a changing world that is as a direct consequence of good Labour decisions that this Government has been taking and is in clear contrast to the economic and political instability we had under the Conservatives."
What’s The News Agents’ take?
There’s one potential problem with everything Labour has said about its cuts and how people losing benefits will, in fact, be better off because they will be back in work: There’s no guarantee this will be the case.
“All this is predicated on the fact that the ideal thing will happen,” says Emily.
“In an ideal world, they're going to be in work.
“This is great, but there is no model yet to tell us how many of the people who are going to have their benefits cut will actually be in work and what they'll be earning. It is a gamble.”
But while some of these numbers may strike fear into the hearts of many, the government itself can take some comfort in the fact that the market response to what has been announced has been positive, while the OBR has reported the economy is growing, and wages are rising faster than prices.
All this could change next week, however, when Donald Trump's tariffs take effect, and while the UK is not a direct part of this new system, it will inevitably be affected by the global impact of the president's drastic economic action.
Rachel Reeves, early on in her role as chancellor, set strict rules on how much Labour could borrow to dig itself out of the holes it found itself in after coming to power – hence the cuts made to recoup money instead.
Now, even members of her own party are starting to believe this may not be wise.
"There are plenty in her party who say they think maybe now is the time to throw all that out the window," says Emily.
"Stop being so hard and fast about everything. Stop saying no tax cuts or no change to the fiscal rules, if the world has really changed, lean into it."