Britain must tackle welfare spending or endure endless tax rises JP Morgan warns

Britain faces a bleak fiscal outlook unless urgent action is taken to rein in welfare expenditures, according to a warning from the world’s largest bank ahead of the November Budget. JP Morgan has advised Chancellor Rachel Reeves to confront escalating costs tied to the rapidly increasing numbers of pensioners and workless young people, describing repeated tax hikes as a “miserable” solution to the nation’s budgetary woes.

Speaking for JP Morgan Asset Management, Karen Ward criticised current political debate around the Budget, arguing that entrenched structural spending issues—rather than tax tinkering—are the real threat to the UK’s economic health. She highlighted the state pension triple lock, which has required the government to raise pension payments by at least 2.5 percent annually, as a major factor driving spending up. According to the Office for Budget Responsibility, the triple lock has cost three times more than initially estimated, with pensioner support consuming half of Britain’s £342bn welfare budget.

Ward, a former adviser to chancellors Philip Hammond and Jeremy Hunt, also pointed to rising unemployment among the young as a significant challenge, noting that the number of young people not in work, education, or training is set to breach one million for the first time in over a decade. She contends that failure to control welfare costs has made borrowing more expensive for the UK, as investors demand a premium in recognition of persistent political inaction.

Similar warnings from other financial institutions, such as Barclays and the Institute for Fiscal Studies, underscore the urgency of welfare reform if the UK is to restore gilt market confidence. Ward warned that without a frank national conversation about spending, the government risks merely “fiddling around with all the different tax rates,” while avoiding the true underlying problem.

Rachel Reeves now faces a fraught Budget, with expectations that she may be pushed to announce tax rises exceeding £30bn, close to the record £40bn increase set last year. Recent fiscal debate has been overshadowed by concerns about a potential financial crisis driven by artificial intelligence bubbles. However, John Bilton of JP Morgan Asset Management played down these fears, expressing confidence in the underlying health of equity markets and current investment trends, provided risks are assessed realistically.

The message from the City is clear: without bold action on welfare spending, Britain’s taxpayers face an unpalatable cycle of annual tax rises, with lasting consequences for economic resilience and fairness.