More DWP benefits cuts will be needed to balance the books, the budget watchdog has warned. Rachel Reeves will be forced to make further welfare cuts as she seeks to balance the books after the budget watchdog said the Government’s plans will not save as much as ministers hoped.

The Chancellor will set out the measures as she delivers her spring statement in response to a gloomy economic assessment by the Office for Budget Responsibility (OBR).

The watchdog’s assessment is that changes to disability and incapacity benefits will save £3.4 billion in 2029/30 rather than the more than £5 billion claimed by ministers.

Asked about the shortfall Cabinet minister John Healey told Times Radio: “That’s a calculation we may see confirmed by the Office for Budget Responsibility about the longer-term savings that our plans to change the welfare system may bring.”

Defence Secretary Mr Healey said: “You can’t have a benefits system that is failing people and out of control in this way.

“That’s why the plans that (Work and Pensions Secretary) Liz Kendall laid out last week, and that you’ll hear more from the Chancellor this afternoon in the spring statement, are so important.”

With mounting unease on the Labour benches about the scale of the welfare cuts, The Times reported that Ms Reeves will not attempt to make up the entirety of the £1.6 billion shortfall but will instead set out plans to save a further £500 million.

Universal credit incapacity benefits for new claimants will now be frozen until 2030 rather than increased in line with inflation and there will also be a small reduction in the basic rate in 2029, the newspaper reported.

Alongside the statement, the Government will release an impact assessment indicating how many people will be hit by the previously announced plans to cut the welfare bill.

There was some good news for Ms Reeves ahead of her statement as official figures showed inflation fell in February.

The rate of Consumer Prices Index (CPI) inflation fell to 2.8% in February from 3% in January, the Office for National Statistics (ONS) said.

But Ms Reeves will be judged on her ability to deliver sustained economic growth, something which has so far proved elusive.

The OBR is widely expected to slash its forecast for economic growth, following similar recent revisions by the Bank of England and the Organisation for Economic Co-operation and Development (OECD).

The Government has also borrowed more than previously expected, with the cost of those loans rising – in part due to global turbulence.

In her spring statement, the Chancellor will tell MPs that a “more insecure world” requires a greater focus on national security, with a promise to increase defence spending by £2.2 billion from April as part of the previously announced plan for the biggest boost in military funding since the Cold War funded by cutting the aid budget.

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She will say: “This moment demands an active government stepping up to secure Britain’s future. A government on the side of working people.

“To grasp the opportunities that we now have and help Britain reach its full potential, we need to go further and faster to kickstart growth, protect national security and make people better off through our plan for change.”

Ms Reeves will tell MPs she is “proud” of her record in office – despite the sluggish economic growth figures which have heaped pressure on her.

In its October forecast, the OBR expected gross domestic product – a measure of the economy’s size – to grow by 2% in 2025 and 1.8% in 2026 but that is widely expected to be downgraded.

The Bank of England halved its growth forecast for the UK economy in 2025 to 0.75% in February, and earlier this month the OECD cut its 2025 forecast from 1.7% to 1.4%.

Lower-than-expected growth will lead to smaller tax receipts than had previously been budgeted for.

The latest official borrowing figures, for February, were £4.2 billion higher than had been forecast by the OBR.

Ms Reeves’ self-imposed rule to meet day-to-day spending at the end of the five-year forecast through receipts rather than borrowing was forecast to be met with £9.9 billion of headroom to spare in the OBR’s October assessment.

But the lack of growth and the increased cost of borrowing will eat into that headroom, forcing the Chancellor to take action to ensure she continues to meet the rule – which is designed to show that Labour can be trusted with the public finances.

Ahead of the statement, the Chancellor has:

  • Said the UK has “not been immune” from “increases globally in the cost of government borrowing”.
  • Insisted that “economic stability is non-negotiable” and she will “never play fast and loose with the public finances”.
  • Promised that she would not use the spring statement to raise taxes.
  • Confirmed plans to tell Whitehall departments to cut administrative budgets by 15%, expected to save £2.2 billion a year by 2029-30.
  • Announced £2 billion of funding for social and affordable homes in England.
  • Promised to train tens of thousands of construction workers to help deliver the promised 1.5 million new homes in England before the next election.

Charities and health experts warn welfare cuts could cost lives

Charities and health experts have warned welfare cuts could risk lives, as the Government prepared to publish an official impact assessment into how many people will be affected by its plans.

Prime Minister Sir Keir Starmer has described the current welfare system as “morally indefensible”, insisting Labour’s reforms will help those who can work to get jobs.

But the plans, announced last week, to cut £5 billion off the welfare bill have been met with criticism from charities as well as some of his own MPs.

Changes to Pip are expected to account for the largest proportion of savings, with the Resolution Foundation think tank estimating this could see between 800,000 and 1.2 million people in England and Wales losing support of between £4,200 and £6,300 per year by the end of the decade.

Charities have reported a surge in calls and visits to their advice pages following last week’s announcement, which came after lengthy speculation about what might be in store.

Mental health charity Mind said its helpline advisers had reported that some people had indicated their level of worry was such that they felt they had “no choice but to end their own life”.

The charity’s welfare advice line saw calls rise from 90 the previous week to 182 last week, while other information and support lines received more than 2,540 calls, which was a 10% rise on the previous week.

Disability charity Scope said calls to its helpline on the day of the announcement had more than doubled to 344 from 118 the week earlier, while its online community saw 20,000 interactions on the day compared to 15,000 seven days before.

Citizens Advice saw views of its Pip advice pages rise to almost 80,000 views last week, which was a 44% rise from the week before.

Scope said people feel “abandoned by the Government”.

Meanwhile, a group of public health experts said further cuts to social security could lead to deaths.

Writing in the British Medical Journal (BMJ), they said the reforms, coming after years of austerity, would have a detrimental effect on already-vulnerable people.

One of the group, Professor Gerry McCartney – a specialist in wellbeing economy at the University of Glasgow, said: “There is now substantial evidence that cuts to social security since 2010 have fundamentally harmed the health of the UK population.

“Implementing yet more cuts will therefore result in more premature deaths. It is vital that the UK Government understands this evidence and takes a different policy approach.”