People 'terrified' by benefit reforms
A Labour politician has said people in his constituency are "terrified" about the chancellor's decision to tighten the criteria for claiming sickness and disability benefits.
Alun Davies, Member of the Senedd for Blaenau Gwent, said residents affected by disability and poverty were already struggling "in making ends meet".
In Wednesday's Spring Statement, Rachel Reeves announced a number of benefit changes, including tightening qualification rules for Personal Independence Payments (Pips) - the main disability benefit - claimed by more than 250,000 people in Wales.
"It scares the most vulnerable people in our society, and that's deeply distressing to see," said Davies.
First minister refuses to back welfare cuts
Reeves criticised by Labour MP on benefits cuts
Spring Statement 2025: Key points at a glance
"What we need to do as a Labour Party is to address the fundamentals in the economy," he told BBC Radio Wales' Sunday Supplement.
"We're seeing at the moment taxation increasing because the economy is failing.
"People want to work and people want to live decent lives and it's the role of government, surely, to help people do that," said Davies whose Blaenau Gwent constituency has the joint highest proportion of disabled people in Wales, according to census data.
Labour MP Kanishka Narayan, who represents constituents in the Vale of Glamorgan, told TV programme BBC Politics Wales that "change needs to happen" even though he had received emails from people "feeling uncertainty and anxiety".
He said the welfare system is "not getting enough people the support they need to get into work".
"A quarter of people in Wales are working age, not in work or not looking for work – surely that is not a context that anyone can accept," he said.
Speaking on the same programme, Sam Rowlands, Conservative MS for North Wales, said the Spring Statement had been "rushed through".
"We're going to see those people impacted by it not being treated fairly, and we're not going to see the efficiencies that reform in this area would deliver."
Ben Lake, Plaid Cymru MP for Ceredigion Preseli, said it was alarming that "the most vulnerable in society" were being asked to "shoulder the burden" of economic difficulties.
In her address to MPs on Wednesday, Reeves said "it can't be right" to "write off" an entire generation who are out of work and improperly using Pips.
There are two elements to Pips – a daily living and a mobility component – and under the government's proposals, assessments for the daily living part will be tightened, a move the official forecaster – the Office for Budget Responsibility (OBR) – says will affect around 800,000 people.
The chancellor also confirmed health-related universal credit for new claimants - which was already due to be halved from April 2026 under a package announced last week - would be frozen at its new lower level of £50 per week until 2030.
A Department for Work and Pensions assessment found 3.2 million families across England and Wales would be worse off as a result of the changes, with 250,000 more people pushed into relative poverty.
The UK government has said the reforms are aimed at modernising the welfare system, and getting many of those reliant on assistance back into work.
On Friday, Wales' First Minister Eluned Morgan refused to back the chancellor's welfare cuts, telling the Senedd she wanted to "reserve my position" until she knew what the impact would be on Wales.
Morgan also confirmed she was waiting for a response from Work and Pensions Secretary Liz Kendall to her request for a Wales-specific impact assessment and said she was now seeking a meeting with her.
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When is the spending review and what might Rachel Reeves announce?
All eyes are on the Treasury this week as Rachel Reeves is set to lay out her spending review to Parliament on Wednesday. She'll announce the Government's day-to-day spending commitments up to 2028-29, and investment spending plans to 2029-30 – but there have been varying reports of what we can expect. Here, Telegraph Money takes you through what we know and what the plans could mean for you. Spending reviews take place every few years, and it is when the Government lays out all spending that can be reasonably planned. The plans account for around 40pc of all public spending, according to the House of Commons Library, with the rest dependent on demands such as the benefits bill. The last multi-year spending review was in 2021 under Boris Johnson's Conservative administration. In the run-up to the review, government departments have been in negotiations with the Treasury to try to secure as much funding as they can. The current review process was launched in December last year, and the Institute for Fiscal Studies has said it could be 'one of the most significant domestic policy events of this parliament'. However, Ms Reeves has warned that 'not every department will get everything that they want', as she has had to 'say no' to things that she would support in an ideal world. Many departments are expecting a real-terms cut in their funding. The Government previously said that the review is 'zero-based', meaning that decisions will be made based on an assessment of spending line by line, rather than an overall increase or decrease to the current budget. The Chancellor will stand up in the House of Commons on Wednesday June 11 after Prime Minister's Questions, at roughly 12.30pm. Once Ms Reeves has finished speaking the review will be published on the government website, along with any accompanying documents. Some government spending plans have already been announced. Last week, Reeves announced £15.6bn of funding for regional transport, and the Government has confirmed a partial U-turn on the decision to remove winter fuel payments from all but the poorest pensioners. The Treasury has today announced that nine million pensioners will receive winter fuel payments this winter as a result. It has also been reported that the Chancellor will focus on three priorities in the spending review: health, security and the economy. This means spending on the NHS, defence and infrastructure, with Home Secretary Yvette Cooper understood to be putting in a final plea for more police funding. There are also suggestions that the two-child benefit cap may be lifted, and schools are understood to be in line for £4.5bn uplift. Funding these plans may be tricky, however. Ms Reeves has confirmed she will be sticking to the Government's non-negotiable fiscal rules on borrowing. At the same time, the Organisation for Economic Co-operation and Development (OECD) said 'momentum is weakening' in the economy, as they told Ms Reeves that efforts to cut government borrowing must be 'stepped up'. If more borrowing is off the table, it may mean cuts for some departments. The IFS has warned that 'because headline real growth rates [over the period] are relatively modest, sharp trade-offs are unavoidable. Achieving stated objectives in some areas will likely require real-terms cuts elsewhere.' Deutsche Bank is a little more optimistic. In a recent analyst note Sanjay Raja, senior economist, said the bank is seeing more 'resilience than expected' in the UK economy, and their forecasts for growth until the end of 2027 currently sit above the consensus. But, in short, Reeves still needs to find more money. No, there will be no tax rises in the spending review on Wednesday. As tax increases demand new legislation through a finance bill, we won't hear about any changes until the Budget in the autumn – but there is already speculation that any additional spending will necessitate a higher tax burden unless a spur in economic growth helps to boost the Treasury's coffers. Tom Selby, director of public policy at AJ Bell, said: 'Of course, a lot can happen between now and the Budget and we have a number of economic data points that could influence the Chancellor's decisions come the autumn, but speculation about what may be on the table is naturally already rife. 'Perhaps the most drastic decision the Government could make would be to walk back on its manifesto commitment not to tax 'working people' and consider increasing income tax, national insurance or VAT.' Mr Selby added that ideas for a wealth tax may also be considered, along with speculation of further pensions reform. Another option Ms Reeves could be weighing up is extending the current freeze on income tax thresholds. The Finance Act 2025 extended the freeze on inheritance tax thresholds until 2030 – and the Chancellor will be under pressure to do the same to other allowances and thresholds, too. The latest forecasts suggest eight million workers will be pulled into higher rates of tax by 2028, raising an extra £38bn per year for the Treasury. Extending the threshold would also allow the Chancellor to keep to Labour's manifesto commitment not to raise taxes on working people. Lindsay James, investment strategist at Quilter, said as there were no tax rises in the Spring Statement, investors are expecting to see rises in the autumn Budget if growth continues to 'lag'. Angela Rayner, the Deputy Prime Minister, made a series of suggestions in a leaked memo – including reinstating the pensions lifetime allowance and removing more inheritance tax reliefs, which were calculated to raise approximately £3bn in total. Chris Etherington, tax partner at RSM UK, added: 'It may already feel pretty claustrophobic at the Treasury, with limited headroom below the fiscal ceiling. The hope will be that economic growth will ease this pressure, and the next few months could be crucial to the Chancellor's plans. 'As it stands, the foundations may need further stabilisation and another sizeable rise in tax receipts to fund that.' Sign in to access your portfolio
CNBC
2 hours ago
- CNBC
CNBC's UK Exchange newsletter: No easy answers for Reeves
It says much about the current state of U.K. politics that today's spending review has taken on such importance. What should be a relatively straightforward event, in which Rachel Reeves, the chancellor of the Exchequer, sets out the government's spending plans for the next three financial years, has even been billed by some commentators as the defining moment of this parliament. This is because, little under a year after being handed a landslide majority by the U.K. electorate, Prime Minister Keir Starmer's government is deeply unpopular and thrashing around for ways to appease a surly and resentful public. It is important, at the outset, to make clear what won't happen today. This is not a fiscal event — Reeves is committed to just one of these a year and the next will be her Autumn Budget. So there will be no forecasts from the Office for Budget Responsibility and no details on how the government plans to raise money during the next financial year. There will also be no changes to tax policy announced; nor, unless something remarkable happens, will there be any changes to the overall sums the government expects to spend. That is because those figures are already in the public domain: Reeves set out last October the "spending envelope" for the next three financial years, with day-to-day spending (such as salaries for public sector workers) set to rise by an average of 1.2% in real terms over the next three years and capital spending (such as transport infrastructure) set to rise by an average of 1.3% in real terms over the next four years. That spending envelope, the tightest for many years, has been dictated by Reeves' much-vaunted fiscal rules — that day-to-day spending must be covered by tax revenues, not borrowing, and that debt, as a proportion of GDP, should be falling by the end of this parliament. Most economists think she is in severe danger of breaking those rules, though, having set herself wiggle room of just £9.9 billion ($13.4 billion) in her last Budget — since when the economic outlook has deteriorated and yields on gilts (U.K. government bonds) have risen, implying higher-than-expected government borrowing costs in the coming years. All of which adds to the significance of today's spending review which is, as the independent Institute for Fiscal Studies (IFS) points out, "the first multi-year spending review since 2021 and the first to happen outside of a pandemic since 2015." And, despite it not being a fiscal event, the bond markets will be watching for hints on what to expect regarding taxation and borrowing in the autumn. We received one such hint when, on Monday, the Treasury announced a humiliating U-turn on one of the government's first big decisions. Shortly after being elected in July last year, Reeves announced that the winter fuel allowance — a bung to pensioners of either £200 or £300 a year introduced in 1997 by one of her Labour predecessors Gordon Brown — would henceforth be means-tested, effectively stripping it from 10 million pensioners. However, after a political backlash, the Treasury said on Monday the benefit would be restored to all but the wealthiest 2 million pensioners in a move that will cost the government £1.5 billion annually. No indication was given on where that money will come from. There have also been plenty of other leaks concerning the spending review. The Times reported on Saturday that the National Health Service (NHS) will receive a 2.8% increase in real terms to its day-to-day budget over the three-year period, roughly equivalent to an extra £30 billion in cash terms by 2028. The question here (with leaders of the doctors union already agitating for industrial action) is how much of that will actually go toward improving patient services and how much will be handed to doctors in pay awards to stave off strikes. The other big winner looks to be defense which, as the IFS has noted, seems to have been implicitly allocated all of the increase in capital spending over the spending review period. The government has already set out plans to raise defense spending from the present 2.3% of GDP to 2.5% of GDP by 2027 and to 3% by the early 2030s — and it is under pressure to go further. The Trump administration has made clear it thinks NATO members should be spending 5% of GDP on defense and, in a speech on Monday, Mark Rutte, the NATO secretary-general, said the same. Reeves would need to find an extra £24 billion to take defense spending to just 3% of GDP. These big spending commitments — particularly for the NHS, which already consumes £2 in every £5 of day-to-day government spending — will mean real-term cuts in other departments. Many of these have already been stretched by years of austerity following the global financial crisis, from which the U.K. emerged with a deficit-to-GDP ratio of 10%. Britain's justice system, from courts to prisons, is under huge pressure. So is local government which, at a time of rising costs due to an ageing population, must pick up the tab for a lot of social care. The country's schools also face a squeeze; while some new money has been allocated, schools have been told to fund around a quarter of the 4% pay rise awarded to teachers this year from existing budgets. Anecdotally, stories abound of teaching assistants — many of whom work part-time — being laid off or having their hours reduced. Elsewhere, newspaper reports have prominently covered rows within the cabinet. Ed Miliband, the energy secretary, faces cuts in his department in order to protect his cherished home insulation program, while Angela Rayner, the deputy prime minister and housing secretary, is said to have clashed with Treasury officials as she sought to protect her plan to build more affordable homes. The biggest arguments, though, are said to have been between the Treasury and Yvette Cooper, the experienced home secretary and a veteran of the last Labour government, over the policing budget. At the center of all this is the urgent need for great swathes of the British state to do more with less. As Sanjay Raja, senior U.K. economist at Deutsche Bank, said in a note to clients last week: "Markets will be keeping an eye on any fallout from the spending review, while we will also be looking at the sustainability of spending policy. What do we mean by sustainability? For one, sustainability in maintaining such tight spending envelopes, via ambitious cost-saving measures. And two, sustainability in sticking to existing spending envelopes despite diminishing headroom from higher interest rates, potential downgrades to productivity growth, global trade tensions, and a looser labour market." And this speaks to the heart of the U.K.'s problem: the dreadful productivity record of its public sector and particularly the NHS. As an example, it emerged at the weekend that the NHS spent at least £102 million sending letters by post last year — causing countless missed appointments due to slow deliveries — despite promising to go digital in an era in which nearly every patient now has email access. Poor NHS productivity is not a new phenomenon. As long ago as March 2010, during the dying days of Brown's government, the Office for National Statistics reported that, from 1995 to 2008, NHS productivity fell by an average of 0.3% per year, with the decline accelerating after 2001 when Brown, as chancellor, unleashed a huge increase in spending on the service. In the absence of productivity improvements or economic growth, future spending increases will have to be met by increased borrowing or taxation. Given Reeves' devotion to her fiscal rules, she is unlikely to opt for the former. Strikingly, during interviews on Monday to discuss the winter fuel climbdown, she conspicuously failed to rule out tax increases come the autumn. Many economists now think that is almost inevitable, among them Raja, who wrote: "Perhaps even more difficult decisions lie ahead for the Chancellor. On our estimates, we see a fiscal hole of near £10-15 billion emerging ahead of the Autumn Budget. Tax rises, we think, are inevitable as spending cuts are pushed to their political limits. It could be a noisy few quarters as we move closer to the Chancellor's second budget." Another reason to expect tax increases come the autumn is the government's seeming inability to make even modest spending cuts, as shown by the winter fuel U-turn. As Simon French, the chief economist and head of research at stockbroker Panmure Liberum, put it: "Whilst not macroeconomically significant, it speaks to a problem that if Chancellors/PMs can't find it politically intolerable to find a saving of £1.5 billion (1% of this year's PSBR) then bond markets are going to be unconvinced on the decisions (regarding the cost of aging, supply-side reforms) necessary to keep public sector debt on a sustainable path." This being a political event, Reeves is bound to try and produce at least one rabbit from her hat, even though most spending decisions have already been announced or leaked. Labour MPs would love her to abolish the cap that restricts child benefit to the first two children in a family — a move that would cost £3.5 billion. The biggest surprise of all would be an increase in the overall spending envelope, perhaps justified by the fact that the economic outlook has been altered by unforeseen events, chiefly U.S. President Donald Trump's tariffs. But an announcement of that type — unaccompanied by how the extra spending would be paid for — would likely spark a violent reaction not just in gilts, but also from government CEO Jensen Huang praises UK AI scene Nvidia CEO Jensen Huang spoke at London Tech Week, heaping praise on Britain's artificial intelligence sector. CNBC's Arjun Kharpal reports on the buzz around Huang's speech. British fintech Wise deals fresh blow to the London stock exchange Shares of Wise popped in early Thursday trade after the firm announced plans to move its primary listing to the U.S., in a fresh blow to the London Stock Exchange. 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Yahoo
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Reeves to say spending review will reflect ‘priorities of working people'
Rachel Reeves will unveil her spending review on Wednesday, arguing that her priorities are 'the priorities of working people'. The Chancellor is expected to focus on 'Britain's renewal' as she sets out her spending plans for the coming years, with big increases for the NHS, defence and schools. Arguing that the Government is 'renewing Britain', she will acknowledge that 'too many people in too many parts of the country are yet to feel it'. She will say: 'This Government's task – my task – and the purpose of this spending review is to change that, to ensure that renewal is felt in people's everyday lives, their jobs, their communities.' Among the main announcements is expected to be a £30 billion increase in NHS funding, a rise of around 2.8% in real terms, along with an extra £4.5 billion for schools and a rise in defence spending to 2.5% of GDP. But Wednesday could present a tough prospect for other government as the Chancellor seeks to balance Labour's commitments on spending with her fiscal rules. The Institute for Fiscal Studies has already warned that any increase in NHS funding above 2.5% is likely to mean real-terms cuts for other departments, or further tax rises to come in the budget this autumn. This could mean a budgetary squeeze for areas such as local government, the justice system and the Home Office, despite reports that policing would receive an above-inflation settlement. The Chancellor has already insisted that her fiscal rules remain in place, along with Labour's manifesto commitment not to increase income tax, national insurance or VAT. She will say on Wednesday: 'I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal. 'These are my choices. These are this Government's choices. These are the British people's choices.' Other announcements expected on Wednesday include £39 billion for social and affordable housing over the next decade as the Government aims to meet its target of building 1.5 million new homes by the next election. The Treasury said this would see annual investment in affordable housing rise to £4 billion by 2029/30, almost double the average of £2.3 billion between 2021 and 2026. The additional spending has been welcomed by homelessness charities, with Crisis calling it 'a determined political signal that housing really matters' and Shelter describing the move as 'a watershed moment in tackling the housing emergency'. The Chancellor has also already announced some £15.6 billion of spending on public transport in England's city regions, and £16.7 billion for nuclear power projects, the bulk of which will fund the new Sizewell C plant in Suffolk. There is also expected to be an extension of the £3 bus fare cap until March 2027 and an extra £445 million for upgrading Welsh railways. But one of the big losers from the spending review could be London, which is not expected to receive funding for any significant infrastructure projects or powers to introduce a tourist levy – both key requests from Mayor Sir Sadiq Khan.
