Elon Musk in the Oval Office with President Trump (Image: Getty)
Rachel Reeves is set to trigger civil war among Labour MPs with massive welfare cuts in a desperate bid to save billions of pounds. There will also be a cull of Whitehall with thousands of civil service jobs under threat, while Sir will launch an efficiency drive modelled on the controversial Department of Government Efficiency (DOGE) led by ’s ally in Washington.
Despite the savings, Ms Reeves is expected to admit Labour cannot meet all its manifesto promises when an analysis of the public finances is published on March 26. She will address Parliament after Treasury watchdog the Office for Budget Responsibility releases its findings. This statement will be followed on June 11 by the Spending Review, when the Government produces spending plans for the years ahead.
In October the watchdog said Ms Reeves had £9.9 billion of headroom against her self-imposed rule to fund day-to-day spending through tax revenues rather than extra borrowing but it is now expected to say that headroom has gone, forcing huge savings to be found. Justice Secretary Shabana Mahmood, a close political ally of the Prime Minister, last night said there was “a moral case” for cutting welfare spending.
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It comes as the Treasury struggles with poor economic growth, persistent inflation and higher borrowing costs. Global factors including ’s trade tariffs have also hit business confidence and while the Chancellor will attempt to pin some of the blame on the previous Conservative government, she will also argue that the “world has changed”.
Measures to slash the ballooning benefits bill, set to reach £377.7billion every year by 2030 unless action is taken, will enrage left-wing Labour MPs already smarting from the Government’s refusal to axe the two-child benefits cap, which prevents parents from claiming child tax credit or universal credit for more than two children.
Half of welfare spending goes on pensioners but cuts are expected to focus on benefits for working-age people. Incapacity and disability benefits currently cost £64.7billion and this is predicted to rise to £100.7billion by 2030. There are 2.8 million people aged 16 to 64 who have dropped out of the workforce saying they have a long-term illness and Work and Pensions Secretary Liz Kendall will set out plans to force them into employment.
Ms Kendall told Cabinet colleagues on Tuesday that one in eight young people are not in education, training or employment. This is “holding back the economy” and is “bad for people’s wellbeing and health”, she said.
It follows Sir Keir’s decision to cut the aid Budget by around £6.1 billion, which has also angered the Labour left and led to the resignation of overseas development minister Anneliese Dodds.
In addition, there is disquiet among Labour Ministers at Sir Keir’s apparent determination to protect his Chancellor while Cabinet colleagues are expected to take the flak for cuts in their departments.
The Government is planning a series of high-profile announcements designed to take the sting out of the welfare cuts by presenting them as part of a wider plan. Sir Keir is believed to have spoken to Mr Trump about his efforts to rein in Washington’s spending and will set out plans to cut civil service numbers which have grown to 515,085 full-time equivalent staff, up from 384,590 in 2016. The figure is up by 3.8% in just 12 months.
An infrastructure bill to be introduced to Parliament next week will be presented as a measure to grow the economy by cutting red tape and allowing major infrastructure schemes to go ahead including nuclear power stations.
Ms Mahmood said there had been a “huge rise in the welfare budget” and said there were “too many” young people not in work, education or training.
She said: “There’s a moral case here for making sure that people who can work are able to work and there’s a practical point here as well, because our current situation is unsustainable.”
A Government insider told the : “Clearly the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes.
“The Office for Budget Responsibility will reflect that changing world in its forecasts later this month and a changing world will be a core feature of the Chancellor’s response later this month.”
More than three quarters of business leaders have “low” or “very low” confidence in the economy according to a survey published last night. The Chancellor’s decision to increase the tax on jobs is a major concern, with businesses also worried about the high cost of energy.
The new Business Confidence Survey by the Adam Smith Institute found 77% of respondents reported “low” or “very low” confidence in the UK’s business environment. Just 4% had “high” or “very high” confidence