Rachel Reeves under pressure to find money to ease welfare squeeze

Yahoo

26-05-2025

Labour's Rachel Reeves is facing increasing pressure to secure funding for the reversal of the winter fuel payment cuts and address child poverty, amidst mounting demands from within the party.
Reeves will present her spending review next month, outlining departmental funding for the upcoming years, which includes £113 billion for infrastructure projects aimed at transforming the UK's housing and transport systems.
However, Reeves is being urged to explain how she plans to finance Labour leader Sir Keir Starmer's pledge to reinstate winter fuel payments for pensioners. Additionally, she is facing calls to scrap the two-child benefit cap, estimated to cost around £3.5 billion.
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Proposed measures aimed at reducing the welfare bill and encouraging people on benefits to find work may also be scaled back due to opposition from Labour backbenchers, adding to Reeves' challenges.
Health minister Karin Smyth described the Prime Minister's announcement to expand winter fuel payments to more pensioners as evidence of a "the sign of a government that is listening".
In an interview with BBC Radio 5 Live, Smyth stated: "The Chancellor and the Treasury will have to review all of these in light of the key mission, which is to grow the economy and maintain economic stability."
She added that policymakers must weigh the costs and benefits of their decisions, saying: "We know government is hard, and I think listening, looking at policies, how they impact, weighing up those costs and benefits, is exactly the right thing to do."
In a separate interview with LBC Radio, Smyth emphasized that addressing child poverty requires a comprehensive approach, saying measures must be considered "in the round". Officials have maintained that there isn't a single "silver bullet" to tackle child poverty.
Ms Smyth commented: "We are looking at all measures to improve money in people's pockets and to reduce poverty, in the round, as part of the spending review. That's important, that we take a long-term look at this issue.
"The last Labour government lifted those children out of poverty. Of course it's a central mission, that opportunity for children and for their families, of course it's a central mission of this Labour Government."
The current policy restricts parents to receiving support for a maximum of two children within the universal credit framework.
Labour MP Stella Creasy, known for her campaigning efforts, has stated that abolishing the two-child limit could "take 350,000 children out of poverty overnight".
She further noted: "It's worth reflecting on the fact that 60% of those kids are in households where somebody is in work,".
The Government's strategy to address child poverty, initially expected in spring, has been postponed to autumn to coincide with the Chancellor's budget announcement.
Ms Creasy remarked: "What really matters is that child poverty strategy, because none of us want to be dependent on the welfare system as a way of helping every family make ends meet.
"And I am painfully aware of how many people in my local community still have too much month at the end of their money."
The Prime Minister is reportedly mulling over "tweaks" to the planned welfare cuts as he confronts the possibility of a backbench rebellion against the measures, which are intended to save £5 billion a year for the public coffers.
It's understood from The Times that benefit recipients might be granted extended "transitional periods" to find alternative support if they are adversely affected by the changes.
Concerns are growing among MPs, with speculation that more than 100 could defy the party line over the proposed tightening of criteria for the personal independence payment (Pip), aimed at encouraging more working-age benefit claimants into employment.
Peter Lamb, Labour MP for Crawley, expressed his opposition on BBC Radio 4's Westminster Hour, stating, "I will be voting against anything which is going to restrict access to Pip further than it's currently restricted."
He also voiced that many within the Labour Party are "deeply uncomfortable" with the Government's plans.
In another development, Nigel Farage, leader of Reform UK, is poised to pledge the full reinstatement of the winter fuel payment and the abolition of the two-child benefit limit this week.
Reform insiders suggest this strategy is designed to win over Labour's traditional working-class base.
As Ms Reeves prepares a multi-year spending review amid both financial and political strain, which is anticipated to heighten disputes within the Cabinet over cuts to certain departmental budgets, she faces an intricate balancing act. Speaking to the Guardian, she emphasised, "We are building homes, building infrastructure, whether that's transport or energy. I do want to make sure that we're spending government money to create jobs, apprenticeships, and build supply chains in this country."
She outlined forthcoming plans: "At the spending review coming up in June, we will invest more in capital, and we're going to invest £113 billion more in capital spending than the plans we inherited from the previous government. I do want to make sure that every penny of that money works for the British economy and creates jobs."
Meanwhile, Sir Mel Stride, the Shadow Chancellor, criticised Labour, saying, "Labour have already lost control of the public finances and abandoned any pretence of fiscal responsibility."
He continued pointing out potential issues: "Now they are looking at loading up billions more in welfare spending, paid for either by higher taxes for working families or through yet more borrowing."
Stride brought attention to additional fiscal concerns: "When added to the likely cost of their panicked climbdown on winter fuel payments, the Chancellor faces a potential £5 billion black hole."
He did not mince words regarding her performance: "Rachel Reeves's credibility is having new holes torn in it by the day."