Healey leaves timing of welfare cuts unclear as markets question fiscal plans
Chancellor John Healey again declined to set a date for reducing welfare spending, after a series of remarks this week appeared to give conflicting timelines. The uncertainty matters because the UK’s public finances and the Government’s plans for controlling spending are under scrutiny from debt markets.
Healey said changes would begin next year, following two reviews due this month, but distinguished the timetable for reforms from when savings would be made. The Office for Budget Responsibility forecast sickness and disability benefits could cost £100 billion a year before the end of the decade. Former Bank of England chief economist Andy Haldane said the Budget had done little to ease market concerns about the Government’s fiscal approach.
In short
- Healey gave no timetable for welfare savings.
- Reforms are due to begin next year.
- Sickness and disability benefits could reach £100bn annually.
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The case for
Leaving the date open may give the Government room to consider the two reviews and design reforms that are workable and fair to people who rely on sickness and disability support. Separating the start of reforms from when savings appear also avoids promising quick reductions before their effects are known.
The case against
Without a clear timetable, markets and the public may struggle to judge whether the Government has a credible plan to contain rising welfare costs and meet its fiscal commitments. Given the scale of the forecast spending and the scrutiny of public finances, prolonged uncertainty could weaken confidence in the Government’s approach.
Explained simply
Welfare spending includes payments to people who are out of work or need support because of illness or disability. The Government can change the rules for these benefits, but reforms and the savings they produce may happen at different times.
John Healey is the Chancellor, responsible for the Government’s tax and spending plans. The Office for Budget Responsibility independently forecasts the public finances, while investors in government debt watch whether spending and borrowing plans appear credible.
The issue matters because rising benefit costs can affect how much the Government needs to borrow. The timing and scale of any savings are therefore relevant to the wider debate over public spending and the UK’s public finances.
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Originally published by Daily Mail as “Chancellor is STILL floundering on when Labour will cut benefits spending – as Burnham’s ex-adviser warns Budget did nothing to reassure markets that books will be balanced”.