Reeves to Announce Increase in Benefit Spending as Welfare Costs Rise in Budget

Rachel Reeves, the Chancellor, is set to announce a significant increase in benefit spending in the upcoming Budget, with a proposed rise of £6 billion allocated to working age benefits. The move comes amid growing debate over the sustainability of welfare expenditures and concerns from critics regarding the fiscal impact.

From next April, payments for working age benefits are expected to rise by 3.8 per cent, matching the September rate of inflation. This policy aims to prevent the erosion of benefit values amid inflationary pressures. Key components of working age benefits include Universal Credit, the Personal Independence Payment which assists disabled people with additional costs, and Child Benefit.

The increase means that an average Personal Independence Payment recipient, currently receiving £7,400 annually, will see a rise of approximately £281. Analysis from the Institute for Fiscal Studies suggests this inflation-matching uprating will require an estimated £6 billion in additional annual spending. Of this, £2 billion is projected for disability benefits, £3 billion for Universal Credit and £1 billion for other, smaller benefit programmes.

Labour is expected to lift the two-child benefit cap as part of this Budget, imposing further costs on the Treasury. The policy trajectory, however, departs from previous Conservative decisions to freeze working age benefits, excluding disability payments, during the period from 2015 to 2019. While similar freezes were considered under Liz Truss and Rishi Sunak, these measures were ultimately not implemented.

Kemi Badenoch, the Conservative leader, has warned that the escalating welfare bill risks undermining the nation’s financial stability, characterising the government’s prioritisation of increased welfare spending as a threat to taxpayers. The shadow chancellor, Sir Mel Stride, contends that Labour’s spending choices, which are set to be funded largely via tax increases, penalise working families and lack substantive reform to encourage workforce participation.

Ministers emphasise that the planned £6 billion increase has already been integrated into financial forecasts, alleviating concerns about an immediate fiscal shortfall. However, by maintaining the inflation-indexed uprating of benefits rather than opting for a smaller increase, the government foregoes the opportunity to reduce projected expenditure.

Rachel Reeves has also called upon the Competition and Markets Authority to examine pricing within private dentistry, citing the impact of hidden costs on household budgets as part of broader efforts to address the cost of living crisis. The upcoming Budget will set out the government’s strategic priorities, including reducing NHS waiting lists, cutting national debt, and easing the financial burden on families.