Benefits reform and jobs cuts: The political headaches for Labour in Reeves' spring statement

Independent

25-03-2025

Rachel Reeves is set to unveil billions of pounds worth of cuts in her spring statement, in what could be one of the most pivotal moments in her career.
The chancellor had hoped her speech might be simply a straightforward update on the state of the country's finances.
But faltering economic growth and higher than expected borrowing figures, combined with her pledge not to raise taxes after her multi-billion pound raid in last year's Budget, have raised the stakes.
Here, we take a look at what she is expected to announce – and the political fault lines it could trigger.
Benefits cuts
Ms Reeves is set to cut the benefits bill by £5bn, as she scrambles to find savings to meet her own strict borrowing rules. Documents published alongside the spring statement will also for the first time reveal how many people are set to be affected, potentially reigniting a sharp backlash among Labour MPs. There is speculation that the expected one million people set to lose out will actually be closer to two million.
That risks triggering an another outcry from Labour MPs, many of whom are already concerned that the party will be accused of balancing the books on the back of some of the poorest in society.
There will also be scrutiny of the how much the axe will fall on Personal Independence Payments (PIP), which are not linked to work, but designed to help with extra costs incurred due to a disability.
Others, however, have complained that the cuts do not go far enough, given the country's spiralling welfare bill.
Deep departmental cuts
The chancellor is expected to squeeze billions of pounds worth of savings from sweeping cuts of up to 7 per cent to unprotected government departments.
Some departments will not have to make the same reductions, such as health. But the pressure that will come on others has already led to speculation about the effect on parts of the public sector, like schools. Earlier this week the government denied that one idea that had been offered up was cuts to free school meals. Even if they are spared, other services will not be.
Cabinet ministers have already made clear their unhappiness about the situation, at a tense cabinet meeting two weeks ago, in which the chancellor was challenged on her fiscal rules - and the cuts she was demanding because of them.
Prisons crisis
Another unprotected department is the Ministry of Justice, which is already struggling with a crisis of overcrowding in the nation's prisons. Just last week, ministers announced that prisoners will be temporarily held in police cells to deal a lack of jail space under emergency measures, named Operation Safeguard, which are triggered when the system comes dangerously close to capacity.
Ministers have outlined plans to deliver 14,000 more prison places in England and Wales – but this target is not set to be met until 2031 at the earliest.
One of Labour's key themes in the run up to last year's general election was on crime – only heightening the political risk for the chancellor of deep cuts to departments amid warnings that some public services are too cut to the bone to withstand much more.
Up to 50,000 job cuts
Ministers plan to save £2bn a year by cutting up to 10,000 civil service jobs - but reports suggest the true number of roles to be slashed could be as many as 50,000.
The number of civil servants has increased since the outbreak of the Covid pandemic in 2020 and successive Tory governments have pledged to shave the numbers.
But unions have warned that previous attempts to reduce the headcount by an 'arbitrary' number failed to deliver the promised savings and led to 'chaos'. And they warned that the government risked facing the ire of taxpayers - who would see the cuts in the decline in public services.
Fran Heathcote, the general secretary of the Public and Commercial Services (PCS), has warned that after 15 years of underfunding under successive Tory governments 'any cuts will have an impact on frontline services'.
The government is preparing to slash its international aid spending by 40 per cent and instead funnel the money into the defence budget. The unprecedented move prompted the chair of the Commons International Development Committee Sarah Champion, a Labour MP, to warn it will 'have terrible consequences abroad while also making our own country less safe and less influential in the world'.
But she has also called on Ms Reeves not to inflict a 'double whammy' though more cuts to the departmental budget.
Ms Reeves is expected to emphasise that the hike in defence spending is urgently needed because the 'world has changed' and in the wake of Russia's war on Ukraine.