Chancellor Rachel Reeves (Image: Getty)
Chancellor has confirmed tough changes to the benefits system are coming to end the “travesty” of a million young people not in education, employment or training. She admitted Government borrowing was on course to be higher than planned, saying: “There’s lots of reasons for that, lots of global developments that have caused that increase in borrowing costs.”
Signaling that measures to cut the welfare bill are planned before a financial statement on March 26, she told Sky News: “There are a million young people not in education, employment or training. That is a travesty. Many of those people, I would say the majority of those people should be working.”
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The Chancellor said: “We’ve got to reform our welfare system, because at the moment it’s letting down taxpayers because it’s costing too much, letting down our economy because there’s too many people trapped on out of work benefits.”
Ms Reeves also pledged not to increase certain taxes, but did not entirely rule out other tax hikes. She said: “I don’t think it is the right thing to do to increase income tax, National Insurance or VAT on working people.”
Experts warned last night that the Chancellor faces humiliation if poor economic growth forces her to break her borrowing promise. Ms Reeves has set herself a target of ensuring day-to-day spending is funded by tax revenues rather than borrowing by the 2029-30 financial year and a paper by the Institute for Fiscal Studies(IFS) said: “The Chancellor has been so clear in her commitment to be meeting her fiscal rules that it could be seen as humiliating to be missing them at the first time of asking. It could dent her credibility in the markets.“
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It will become clear whether the Treasury is set to meet its target when Ms Reeves presents a statement known as the Spring Forecast to Parliament on March 26. If they are due to be broken then the Chancellor “may decide that she needs to raise taxes or cut spending”, IFS economists said.
Ms Reeves is expected to slash billions from welfare and government departments as she battles to balance the books. Incapacity and disability benefits currently cost £64.7billion and this is predicted to rise to £100.7billion by 2030.
In addition, there is expected to be a cull of Whitehall with thousands of civil service jobs under threat, and Prime Minister Sir will launch an efficiency drive similar to the US government’s effort to identify and end wasteful spending.
Economists suggested that the UK’s sluggish economic growth could be partly down to the gloomy tone adopted by Ms Reeves after last year’s general election, when she said the UK faced a financial “black hole”.
Simon French, the chief economist at Panmure Liberum, said there “was a very negative tone around the inheritance, the black hole.”