A leading financial expert has sounded the alarm over Rachel Reeves’ plans to make deep cuts to the welfare system in a bid to balance the books.
The government plans to announce about £5billion worth of cuts to sickness and disability benefits next week in an attempt to overhaul the “broken” system.
The Chancellor has insisted the Labour Government must “get a grip” on the welfare system amid concerns from the party’s MPs about potential benefit cuts.
The benefits system is “broken” and is “not working for anyone”, she declared during a visit to Scotland earlier this week. The comments come after Office for National Statistics (ONS) figures revealed gross domestic product (GDP) slipped by 0.1 per cent in January.
The cost of incapacity benefits is set to skyrocket over the next five years
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Ahead of the announcement next week, Sir Keir Starmer has also warned that Britain’s benefits system is the “worst of all worlds”.
Spending on health-related benefits for working-age adults has surged in recent years, particularly following the Covid pandemic.
In 2023-24, the cost of incapacity benefits—also known as sickness benefits, which are means-tested—and disability benefits, which are not, amounted to approximately £48 billion. This figure is projected to rise significantly, reaching nearly £76billion by 2030 (see graph above).
Meanwhile, Reeves is struggling to plug the estimated £20billion blackhole in government finances after sluggish growth and rising debt interest costs wiped out her headroom.
Reeves is adamant that taking an axe to the welfare system is necessary reform that will help get Britain back on track.
Others vehemently disagree. Weighing in on the planned cuts, Steven Kibbel, a financial planner, entrepreneur, and Chief Editorial Advisor at Gold IRA Companies, tells GB News that cutting health-related benefits will needlessly punish the vulnerable while having knock-on effects throughout the wider economy.
He explained: “Many recipients have chronic conditions, disabilities, or mental health struggles that make working difficult or impossible. Cutting their support won’t push them into jobs. It’ll push them deeper into crisis.
“Some won’t be able to afford medication. Others may lose access to treatments that keep them stable. That puts more pressure on the NHS, which is already stretched thin. Short-term savings on welfare will lead to long-term costs elsewhere.”
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Reeves is adamant that taking an axe to the welfare system is necessary reform that will help get Britain back on track
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In Kibbel’s estimation, this kind of policy isn’t just tough on individuals, “it affects the entire economy”.
He explained: “If payments shrink, consumer spending takes a hit, and the effects ripple through local economies. Cutting benefits to balance the budget might look good on paper, but in reality, it can drag down economic growth instead of strengthening it.”
The industry giant is not alone in thinking Reeves’ planned cuts will hurt those already struggling.
New data from Opinium, commissioned by leading debt charity CAP, found that 11.6million people in the UK reported having a deficit budget – that’s one in every five UK adults who do not have sufficient income to cover the costs of essentials.
With 38 per cent of those who are facing financial hardship saying it is due to the cost of essentials, and more than 2.7 million people in the UK saying they have borrowed money to pay for their energy bills, a five per cent increase in bills is likely to push even more families into debt.
“We’ve seen it before,” Kibbel told GB News, adding: “The last round of benefit cuts led to a spike in food bank usage and higher poverty rates.
“If history repeats itself, the backlash will be strong. The Government may be looking for ways to trim spending, but this approach could come with consequences they aren’t prepared for.”
