Not even six months on from Labour's first budget, and the world is a much-changed place. Geopolitical tensions and uncertainties, already high last year, have risen further, and with them the cost of the UK's debt, while economic growth has stalled. As such, Chancellor Rachel Reeves has confronted an array of unpalatable choices - notably cutting disability benefits - to enable her to increase defence spending and stabilise the public finances. Here's what our panel of experts made of the statement:
Authors
- Shampa Roy-Mukherjee
Vice Dean and Professor in Economics, University of East London
- Jamie Gaskarth
Professor of Foreign Policy and International Relations, The Open University
- Linda Yueh
Fellow in Economics/Adjunct Professor of Economics, University of Oxford
- Nicky Shaw
Senior Lecturer in Operations Management. Leeds University Business School, University of Leeds
- Simon Williams
Associate Faculty, Leeds University Business School, University of Leeds
- Steve Schifferes
Honorary Research Fellow, City Political Economy Research Centre, City St George's, University of London
- William E. Donald
Associate Professor of Sustainable Careers and Human Resource Management, University of Southampton
Falling inflation wasn't enough to prevent further disability cuts
Shampa Roy-Mukherjee, Vice Dean and Professor in Economics, University of East London
The independent Office for Budget Responsibility (OBR) has halved the UK's 2025 growth forecast to 1%, down from the previously projected 2%. This sluggish growth, coupled with increased borrowing costs, has effectively eliminated the government's £9.9 billion "fiscal headroom" - its financial buffer - resulting in a £4.1 billion shortfall by 2029-30.
There was some short-term relief in the latest inflation figures. These showed a slowdown in price rises in February (2.8% against 3% in January). The dip was caused by discounting of items like clothing. But given around half of businesses are considering price rises to combat tax hikes and the national living wage increase coming in April, this relief is likely to be short-lived. The OBR forecasts that inflation will climb back up to 3.2% this year.
The government had previously set out its controversial plans for £5 billion in welfare cuts. But the OBR rejected the claim that the reforms would save that much, estimating the savings at £3.4 billion , leaving Reeves with a £1.6 billion shortfall. As such, she has had to announce additional welfare reforms.
These include freezing the universal credit health element until 2030 and reducing it to £50 a week for new claimants. This is aimed at saving an additional £500 million by 2030 - and combined with other planned welfare reforms could affect more than three million people . But the standard allowance for universal credit will see an above-inflation increase from 2026-27 and the incomes of those with the most severe lifelong conditions will be protected.
Civil service administrative budgets are also to be reduced - by 15% by 2029-30. This, along with other efficiency and productivity improvements, will lead to annual savings of £3.5 billion. These cuts will focus on areas like human resources, policy advice, and office management, rather than frontline services.
More reaction to follow shortly.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
