John Healey has backed away from cutting the cost of welfare this parliament, amid dire warnings his first budget could lead to brutal spending cuts because of a £28bn shortfall in public finances.
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budget → back → finances
Experts rounded on Healey’s steady-as-she-goes budget on Thursday, with the Institute for Fiscal Studies saying he had left himself a mountain to climb by ducking big tax and spending decisions.
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he → round → decisions
In a damning analysis, the IFS said Healey would need to have set aside an additional £28bn a year, to offset the impact of inflation on future spending plans and hit the target of spending 3% of GDP in defence by 2030.
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Healey → say → 2030
Instead Helen Miller, the IFS director, said Healey had opened the way to “a spending review that looks pretty brutal for some departments” – including real-term budget cuts.
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that → say → cuts
“Public service spending plans look extremely tight.
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plans → look → ?
They don’t look to me like plans that this government would want to deliver,” she said, adding that meant Healey could face, “another season of damaging speculation about tax rises”.
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Healey → look → rises
The welfare bill will not be part of the spending review, which focuses on departmental budgets.
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which → focus → budgets
But in a bid to underline his determination to balance the books, the chancellor pointed to plans for reform, telling BBC Radio 4’s Today: “We have to bring the benefits bill down.”
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We → underline → bill
He had earlier appeared to say cuts would be made in this parliament, when asked if there would be a reduction in the bill before the next election.
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cuts → appear → election
There will be a reduction in the benefits bill,” said Healey.
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Healey → say → bill
“We’ll do that in a Labour way and we will do that because it is simply not good for Britain or progress to have a bigger and bigger benefits bill.”
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it → do → bill
However, Treasury officials clarified that he had not meant to give a timeline and Healey later told Channel 4: “It’s not correct to say that we are going to bring this welfare bill down in this parliament because we’ve not set a timetable for that.
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we → clarify → that
Instead, he pointed to forthcoming reviews from Alan Milburn on employment support for young people, and from Stephen Timms, on disability benefits.
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he → point → benefits
Milburn is expected to recommend additional spending upfront, aimed at bringing down costs over the longer term by helping more young people into employment.
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Milburn → expect → employment
The Office for Budget Responsibility has said total welfare spending will grow from £334bn last year to £431bn by 2030 – with about half of that being spent on pensioners and a quarter on sickness and disability benefits.
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spending → say → benefits
The overall forecast spending has risen by £8bn since March.
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spending → rise → March
With a tough global economic backdrop, Healey has said the single biggest driver of better prospects for the UK would be for an end to the Iran and Ukraine wars.
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driver → say → wars
But in his interviews, Healey appeared to take a more cautious view on the potential for growth from rejoining Europe or the single market than the prime minister.
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Healey → appear → minister
Asked by LBC if growth would be stronger if the UK were in the EU or the single market, Healey replied: “Well, I don’t actually accept that.
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I → ask → that
Brexit has certainly hit our level of growth.
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Brexit → hit → growth
It’s certainly hit our level of trade.
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It → hit → trade
But we had a referendum.
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we → have → referendum
We’re out of the European Union.
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We → ’re → Union
The challenge for me now is how do we make the best of an economy which this year has proved remarkably resilient.”
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which → make → economy
Asked later by Channel 4 if he, like Andy Burnham, hoped for the UK to reenter the bloc in his lifetime, Healey said: “I’m older than Andy Burnham.
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I → ask → Burnham
I don’t expect to see that.”
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I → expect → that
The chancellor put measures to ease the cost of living at the heart of his first budget, including a £100 winter cost of living payment for most households.
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chancellor → put → households
However, critics lined up on Thursday to accuse him of taking a “scattergun” approach – and of not hitting Britain’s banks hard enough to fund the package.
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critics → line → package
The Resolution Foundation thinktank said Healey had failed to target energy support to the households that need it most ahead of a difficult winter, with bills expected to rise sharply in January and the Bank of England to raise interest rates next week.
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Bank → say → rates
Ruth Curtice, Resolution’s chief executive, said: “Faced with a tough backdrop amid global economic turmoil, the chancellor delivered a scattergun budget that did little to address the sharp challenges facing Britain.
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that → say → Britain
“Cost of living support is being spread far too thinly and will leave even those families receiving help facing higher energy bills than they did during the last energy price shock.”
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they → spread → shock
Paul Nowak, the TUC’s general secretary, has strongly advocated for a bank windfall tax to fund energy support.
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Nowak → advocate → support
He said he welcomed Healey’s approach, but would be pushing for him to go further.
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him → say → approach
The chancellor has doubled the surcharge banks pay on their profits from 3% to 6% for 15 months.
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banks → double → months
Novak said: “It was right to tax banks to help people with their energy bills, but I think banks could have been asked to pay a fairer share.
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banks → say → share
He’s going to review it in 15 months.
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He → go → months
We’re going to be looking as part of that review – if banks are still making windfall profits – for him to extend and increase the bank tax.”
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him → go → tax
As well as casting doubt on whether Healey’s future spending plans are realistic, the IFS said the £15bn headroom, or buffer, he has left himself against Labour’s fiscal rules could easily be eroded by higher than expected energy costs.
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he → cast → costs
The chancellor allowed the buffer to absorb some of the impact of the Iran war, which has driven up the government’s cost of borrowing.
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which → allow → borrowing
At the time of the spring statement, Rachel Reeves had built up headroom of £24bn.
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Reeves → build → 24bn
…and 1 more, not listed.
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