Government spending on benefits is set to be £8.6 billion over budget, DWP boss Liz Kendall has said, as she promises ‘radical reforms’ to cut the welfare bill.
Speaking in Commons, the work and pensions secretary said that the overspend was “unavoidable” due to “the inheritance from the last government.” The dire economic forecast highlights the need for Labour’s plans to reform the welfare system, she added.
The latest government data shows that the number of people claiming Universal Credit has more than doubled since 2020, from around three million to more than six million.
There are also now 2.8 million people not seeking employment due to ill health, with both figures skyrocketing during the Covid pandemic.
Writing to MPs, Ms Kendall said: “The likely scale of the eventual breach has been known since March 2023. No action was taken by the previous administration to avoid it.
“Whilst this Government has already shown that it will not shy away from difficult decisions, this breach could only have been addressed through implementing immediate and severe cuts to welfare spending. This would not have been the right course of action.”
The welfare cap is a limit set by the Treasury on how much the government can spend on most benefits, excluding the state pension. At Labour’s Autumn Budget, Rachel Reeves lifted the welfare cap set by the Conservatives for the 2024/25 from £146 billion to £162.5 billion after taking into account the OBR’s forecast overspend. This is set to rise to £204.2 billion by 2029/30 following her changes.
Responding to Ms Kendall’s statement in parliament, shadow work and pensions secretary Helen Whately said: “Through the 2010s, in government, we broadly kept to that cap; it was part of the discipline we applied to the welfare system to make it fair for the taxpayer and to put into practice the strongly held Conservative principle that if you can work, you should work.
“But in the years during and since the pandemic—I will not shy away from telling the truth—things changed. While the number of jobs kept going up, the number of people economically inactive also started to go up, and with that, the welfare bill, and that is a big problem.
“We as a country have a moral and financial imperative to turn this around and in government we were working flat out to tackle it.”
The debate comes as the Department for Work and Pensions (DWP) is set to release a paper outlining its plans to reform health and disability benefits in the coming months.
Changes to how people are assessed for health-related benefits are widely expected, with Labour pledging to match the previous Conservative government’s spending targets and shave £3 billion from the welfare bill.
The government has said it will re-consult on the detail of the plans, however, after the high court found that the previous administration’s consultation was unlawful.
Labour has said its coming reforms are necessary to balance government spending, but several leading charities have warned that the new consultation for the changes “must not be a sham.”
Anela Anwar, chief executive of anti-poverty charity Z2K, who co-ordinated the letter, said: “It is deeply disappointing to learn that this government wants to revive the previous government’s discredited and dangerous plans to remove vital financial support for seriously ill and disabled people.
“The government should abandon these cruel and poorly thought-out plans. And when it comes to consulting on hugely important changes to the benefits system, this government must not repeat the mistakes of the previous one. We need to a see a genuine consultation that gives disabled people a proper chance to respond to plans which could see them plunged into deep poverty.”
