UK welfare costs could rise £5.5bn in 2027, IFS estimates

The Institute for Fiscal Studies estimates that UK welfare spending will rise by about £5.5 billion in 2027, up to £2.2 billion more than the Treasury had budgeted. The projected increase adds pressure to public finances as the Government prepares welfare reforms, while Andy Burnham says he wants to reduce the bill but opposes what he calls crude benefit cuts.

Many benefits are uprated each April using the previous September’s inflation rate. September inflation was 3.5 per cent, compared with the OBR’s forecast of 2.3 per cent for 2026; the article attributes the rise partly to fuel costs linked to the Iran war. The benefits bill is estimated at around £160 billion, and planned spending to address youth inactivity may initially outweigh benefit savings. The IFS notes that higher inflation can also increase tax revenues, while people whose benefits are capped or means-tested may lose purchasing power.