Rebuilding Britain
Rachel Reeves, the Chancellor, has highlighted the urgent need to address Britain’s escalating £306 billion welfare expenditure. During her visit to North America, Reeves announced a new employment strategy aimed at curbing the “out of control” welfare costs. She stressed the importance of a “mindset shift” at Jobcentres to make welfare spending more sustainable, aligning with broader initiatives to “rebuild Britain.”
A Burden on the Economy: The Current Welfare Spend
In 24, the UK government plans to allocate £305.6 billion to the social security system, which will account for 11% of the country’s GDP and 25% of the Whitehall budget. Of this amount, 55% will be dedicated to supporting pensioners, while £138 billion will be earmarked for benefits aimed at working-age individuals and children.
The Growing Challenge of Inactivity
A record 7% of the working-age population in Britain is currently classified as inactive due to long-term illness, a troubling statistic that has surged since the onset of the COVID-19 pandemic in 2020. Addressing this issue is critical, according to Ms. Reeves, who criticized the previous government's handling of welfare, stating, "For too long, millions of people have been told they can't work and have been forgotten about."
Labour's Commitment to Economic Renewal
Ms. Reeves outlined Labour’s plan to empower local leaders with greater authority to help people secure and keep jobs. She stressed the need to address barriers like health, childcare, and transportation, and called for a shift in Jobcentres from simply meeting quotas to genuinely supporting jobseekers.
The Autumn Budget and Tax Hikes
In a bold move, the Chancellor also hinted at tax hikes in her upcoming Autumn Budget to address a £22 billion deficit in public finances. Although Ms. Reeves has promised not to increase income tax, national insurance, or VAT, there is growing speculation that other taxes, such as capital gains tax, inheritance tax, and fuel duties, might be targeted, along with potential cuts to pension tax relief.
Key Areas of Focus for the Treasury
The Treasury will focus on key issues like health and childcare that keep many out of work. Addressing these challenges is essential for reducing welfare costs and boosting the economy by enabling more people to join the workforce.
